Responsive Document - CREW: Department of Education: Regarding For-Profit Education: 8/16/2011 - OUS 11-00026 - 1

From:
Sent:
To:
Subject:
Annie Strang lflii.R8J
Thursday, September 30, 01 o 2:22 PM
Kanter, Martha
Education dept.'s lax oversight on Kaplan
On recently searching Twitter under the for-profit higher education sector, I have come across a couple of
articles regarding the for profit behemoth Kaplan Higher Ed and how it is stealing money from the government
through misuse of Title IV funds and lying to students to get them to sign for these profitable loans so that
Kaplan benefits. Below is one of the links to one of the articles:
http:!/sjlendman.blogspot.com/2010/09/kaplan-university-ripping-off-poor.html
1 think this is terrible- on many different levels. However I believe my most pressing question is not so much
with Kaplan as it is with the Department of Justice for are you not given the task of overseeing and regulating
such schools as this and, in that case, where were you when this went on for so many years? Do you really not
care about students being "ripped off'' as the articles say? Do you really think it is aboveboard for Kaplan to
enrich itself and its owners at the expense of students who can barely afford to make the loan payments? And do
you think it is right, in the case of CHI in Broomall , for there to be a course where a part of it is required for
graduation and that part is not available to students but they still have to pay their student loans even though
they don't finish?
Why are you letting this happen? What do you plan to do to put an immediate end to it?
Many thanks for your time,
Annie Strang
From:
Sent:
To:
Subj ect:
Kate Tromble [KTromble@edtrust.org]
Wednesday, September 29, 2010 1:13 PM
Kate Tromble
FW: Test Message - HTML Format:Gainful Employment Regulations
FYI, the following message will go out this afternoon.
0 -----
Last week Senator Jim Risch introduced the Education for All Act, which would bar the U.S. Department of
Education from enacting any regulations or guidance on the term "gainful employment. " Aside from the fact
that this bill would keep the department from even defining the term in a way the for-profit sector would like,
the proposed regulations are necessary. Aimed at protecting students from aggressive and misleading recruiting
practices, the regulations would help ensure equitable access to high-quality higher education for all students.
Low-income and minority students are increasingly concentrated in for-profit institutions. The for-profits
represent about 9 percent of all student enrollments, but 16 percent of black students and 24 percent ofPell
recipients attend these schools. In the 2008-2009 school year, the federal government invested $4.31 billion in
grant aid at for-profit institutions, quadruple what it had invested just a decade earlier. This past academic year,
one for-profit school-the University of Phoenix-became the first institution to receive $1 billion in federal
Pell Grant funds.
Despite this increased federal assistance, tuition at for-profit institutions continues to far outpace other schools.
Attendance at a two-year for-profit costs more than five times as much as a community college, forcing students
to take out more loans, including risky private loans. The percent of bachelor' s degree recipients from for-
profits who carry debt in excess of $30,000 is more than four times that of their peers at public institutions. Not
surprisingly, nearly one in five students who attend for-profits default on their loans within three years.
Meanwhile, the owners of these institutions are recording profits at the level of such corporate giants as Apple
and Procter & Gamble.
Record profit levels might be acceptable if students were succeeding at record rates. But they are not. Four-year,
for-profit institutions have an average graduation rate of22 percent while public institutions have a rate of 55
percent and private institutions 65 percent. For black and Hispanic students, the graduation rates are similarly
low at for-profits-16 percent and 28 percent, respective.ly-far below the rates for such students at public and
non-profit colleges. Two-year for-profits report higher graduation rates than community colleges (60 percent
versus 22 percent). But less-than-two-year certificate programs largely account for those higher rates, some of
which have questionable market value.
2
Given this, is the for-profit story really a story about choice, access, and corporate efficiency as the industry
would have us believe? Or is the sector marketing a false sense of opportunity to the traditionally underserved
for the benefit of their stockholders-on the false premise that higher education is a cost to taxpayers, rather
than an investment in democracy.
Not only are the actions of many for-profit institutions reproducing social class and wealth disparities, they are
also accelerating the rate at which the socioeconomic divide widens. Underserved students that enroll in many
of these schools are statistically more likely to end up with no degree, loans they cannot repay, or both.
Pel! Grants and subsidized student loans are keys to our national strategy for providing people with a route to
the middle class. They should be a bridge to a better economic future, but in the hands of for-profit colleges
they have been deepening the socioeconomic chasm. Regulation is needed. Is Phoenjx really too big to fail?
Kate Tremble
Director of Legislative Affairs
202/293.1217 ext. 357
www .edtrust.org
This November, Take Charge of Change. Join us November 4-6 for our National Conference, "Taking
Charge of Change: Effective Practices to Close Gaps and Raise Achievement."
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3
From: Kvaal, James
Sent:
To:
Wednesday, September 29, 2010 3:32PM
Gomez, Gabriella; Hamilton, Justin
Subject:
Attachments:
FW: Test Message - HTML Format:Gainful Employment Regulations
-WRD193.jpg; image001.jpg
From: Kate Tromble [mailto:KTromble@edtrust.org]
Sent: Wednesday, September 29, 2010 1:13PM
To: Kate Tramble
Subject: FW: Test Message- HTML Format:Gainful Employment Regulations
Education from enacting any regulations or guidance on the term "gainful employment." Aside from the fact
represent about 9 percent of all student enrollments, but 16 percent of black students and 24 percent of Pell
Pell Grant funds.
profits who carry debt in excess of$30,000 is more than four times that of their peers at public institutions. Not
for-profit institutions have an average graduation rate of 22 percent while public institutions have a rate of 55
4
low at for-profits-16 percent and 28 percent, respectively-far below the rates for such students at public and
they have been deepening the socioeconomic chasm. Regulation is needed. Is Phoenix really too big to fail?
Kate Tremble
202/293.1217 ext. 357
www .edtrust.org
The Education Trust
1250 H Street, NW
Suite 700
5
From: Kvaal, James
Sent:
To:
Kate Tromble
Subject:
Attachments:
RE: Test Message- HTML Format:Gainful Employment Regulations
-WRD048.jpg; image001.jpg
Thanks for the heads up
From: Kate Tromble [mailto:KTromble@edtrust.org]
To: Kate Tramble
Subject: FW: Test Message- HTML Format:Gainful Employment Regulations
Education from enacting any regulations or guidance on the term "gainful employment." Aside from the fact
represent about 9 percent of all student enrollments, but 16 percent of black students and 24 percent of Pell
Pell Grant funds.
profits who carry debt in excess of$30,000 is more than four times that of their peers at public institutions. Not
for-profit institutions have an average graduation rate of 22 percent while public institutions have a rate of 55
6
low at for-profits-16 percent and 28 percent, respectively-far below the rates for such students at public and
they have been deepening the socioeconomic chasm. Regulation is needed. Is Phoenix really too big to fail?
Kate Tremble
202/293.1217 ext. 357
www .edtrust.org
The Education Trust
1250 H Street, NW
Suite 700
7
From: Minor, Robin
Sent:
To:
Tuesday, September 28, 2010 8:47PM
Kanter, Martha
Cc: Runcie, James; Yuan, Georgia; Kvaal , James
Subject: Re: Broomall school owned by Kaplan Higher Education under scrutiny
Got it. Thanks.
From: Kanter, Martha
To: Minor, Robin
Cc: Runcie, James; Yuan, Georgia; Kvaal, James
Sent: Tue Sep 28 19:44:41 2010
Subject: Fw: Broomall school owned by Kaplan Higher Education under scrutiny
Here's another. Thanks in advance for responding, Robin.
Sent using BlackBerry
From: Jeannie Mullen @gmail.com>
To: Kanter, Martha
Sent: Tue Sep 28 19:34:41 2010
Subject: Broomall school owned by Kaplan Higher Education under scrutiny
What does you department intend to do about the behavior of Kaplan-owned CID Institute in Broomall P A. I
saw a story on Twitter that said the school had been ripping off poor students and stealing government funds
under the guise of Title 4 loans. If this is so, and I have no reason to believe it's not since I can' t find a denial
issued by the Washington Post or Kaplan, then can you explain how you and your department staff intend to
deal with this? How are you going to recoup stolen taxpayer dollars? And what are you going to do to help
these poor students who were lied to and, worse yet, left with a staggering debt?
I would like to hear what your department's game plan is to put an end to this behavior?
8
Sent:
To:
Minor, Robin
Cc: Yuan, Georgia
Subject: Re: Kaplan and CHI Institute fraud being ignored by Dept of Ed
Thank you.
From: Minor, Robin
To: Kanter, Martha
Cc: Runcie, James
Sent: Tue Sep 28 17:49:26 2010
Subject: Re: Kaplan and CHI Institute fraud being ignored by Dept of Ed
Ok, we'll respond. Thanks.
To: Minor, Robin
Cc: Runcie, James
Sent: Tue Sep 28 15:48:21 2010
Subject: FW: Kaplan and CHI Institute fraud being ignored by Dept of Ed
Would you respond to him on my behalf, saying I forwarded this to you? Thanks.
Martha
From: Jake Wiley [mailto SO@yahoo.com]
Sent: Monday, September 27, 2010 12:09 PM
To: Kanter, Martha
Subject: Kaplan and CHI Institute fraud being ignored by Dept of Ed
Ms. Kanter:
I would like to have you take a moment, please, and let me know why nothing was done about CID Institute's
(location is Broomall Pennsylvania) years of defrauding the government and taxpayers through the Title IV loan
program. I have read on the Internet at (Kaplan Ripping Off Poor Students)
http://baltimorechronicle.com/2010/092210Lendman.shtml that students at this school were enrolled in a
program called Surgical Technician whereby Kaplan knew in advance that the program was a sham - students
couldn't finish the course and graduate because there was no 500 hour extemship for them and this was a
graduation requirement.
If you tell people that this is what you must do to graduate and that an externship will be provided to you and
then the company does not provide it and ends up dropping the students who cannot then repay the student loan
- that is fraud. Pure and simple. It's also stealing. And I for one, who has worked for 28 years and paid my taxes
religiously, am angry and want an explanation. The Dept of Ed's job is to oversee schools, is it not? Well where
was your department's oversight here? Apparentl y nowhere because this went on for almost 10 years. How
much taxpayer money does that equal?
9
Now, Ms. Kanter, the question becomes, what will you instruct your staff to do to right this wrong both for the
taxpayers of America as well as the students who got stuck with un-repayable loans? I'm afraid that you think
that Kapaln which is owned by the Washington Post should be given a free pass because the Post has long
tentacles and could maybe makes things (like your department's lack of oversight) look bad for you. But I urge
you to do what's right. As a taxpayer, I want a refund. If I were a student, I would want my loan forgiven or
repaid and some type of credit repair offered.
Thank you,
Jake Wiley
10
From:
Sent:
To:
Subject:
Attachments:
Kvaal, James
Gomez, Gabriella; Bergeron, David
FW: RSC Policy Brief: Proposed Gainful Employment Regulation
RSC Policy Brief Gainful Employment Reg.pdf; RSC Policy Brief Gainful Employment
Reg.doc
From: Farr, Natalie
Sent: Tuesday, September 28, 2010 2:45 PM
To: RSC-ALL-GA06@1s2.house.gov
Subject: RSC Policy Brief: Proposed Gainful Employment Regulation
RSC Policy Brief:
Department of Education's "Gainful Employment" Regulation:
An Assault on Students
September 28, 201 o
Due to be finalized and published in early 2011, the proposed "gainful employment"
regulation promulgated by the Department of Education requires institutions to implement
the requirements of the proposed regulation by July 1, 2012. Many Democrats and
Republicans alike oppose the proposed rule which, among other things, attacks for-profit
education, will cause thousands of individuals to lose their jobs, and will prevent millions
of students from getting a good, quality education.
In response to the proposed regulation, the RSC has prepared the following brief.
Natalie V. Fan
Professional Staff
House RepubJjcan Study Conunjtt:ee
Congressman Tom Price (R-GA), Clwiman
(202) 226-0718
11
12
RSC
Republ ic<m Study Committee
REP. TOM PRICE, M.D. ( R ~ G A ) , CHAIRMAN
PAUL TELLER, EXECUTIVE DIRECTOR
424 CANNON HOUSE OFFJCE BUILDING
WASHI NGTON, DC 20515
rsc.price.house.gov ph {202} 226-9717 I fax (202} 22&-1633
RSC Policy Brief:
September 28, 2010
"It's bard not to conclude that the real driving political force here is hostility to private education comtlanies.
This is consistent with the Administration's decision to bar private companies from delivering student loans, its
near-takeover of the health-care industry, and its denunciations of high business pay and profits. By t>unisbing
for-profit colleges, the Administration willtmsb more students into their nonprofit competitors, which satisfies its
preference for equaJity of outcomes and more government control."
- " Scapegoating For-Profit Colleges," The WaLl Street.Iournaf, August 27, 2010
Summary and Background: Due to be finalized and published in early 2011, the proposed
"gainful employment" regulation promulgated by the Department ofEducat1on requires institutions
to implement the requirements of the proposed regulat1on by July 1, 2012. Many Democrats and
Republicans alike oppose the proposed rule which, among other things, attacks for-profit education,
will cause thousands of individuals to lose their jobs, and will prevent millions of students from
getting a good, quality education. For a letter to Secretary of Education Arne Duncan, from Ranking
Member Kline, along with RSC Chairman Price, and other members of the House Education and
Labor Committee, click here.
What is a "for-profit" college? Historically, "for-profit" coll eges, or proprietary colleges, were
vocational and technical schools that provided a shorter term certificate or degree in a trade or a
specific type of occupation. Now, many of the institutions offer bachelors degrees, masters degrees,
and even doctoral degrees. DeYry, Capella, and the University ofPhoenix are some of the better
known examples. Proprietary coll eges could also include a local cosmetology or culinary school.
Why are they calling this the "gainful employment" regulation? One of the minimum
requirements for these institutions to participate in the federal student aid programs is that they offer
programs that lead to gainful employment in a legally recognized occupation. "Gainful
employment," which has been a standard for over 40 years, is currently undefined in statute or
regulation. Many question the timing of this regulation and why the Administration all of a sudden
concludes that a definition needs to be placed on a standard that has been in place and working
effectively for so long. Furthermore, some have questioned whether the Department has the
authority to make such a broad-sweeping change in policy via regulation. This should be a matter
for legislation from Congress. The proposed regulation attempts to define the standard by
establishing tests for schools to establish whether a program leads to gainful employment. The tests
would determine the fol lowing:
Former students' loan repayment rate (a "successful" repayment only occurs when loan
principal is being reduced. Payments that just reduce the interest on a loan wi ll not count,
even if the borrower is in a federally-authorized repayment plan); and
The relationship between median annual student loan payment and average annual earnings
after leaving the program (debt-to-income ratio).
Based on the results of the tests, the program will be labeled fully eligible, ineligible, or on restricted
status. Programs are ineligible if they have:
A repayment rate less than 35% from former students; and
Annual debt payments over 12% of their annual earnings and over 30% of their discretionary
mcome.
Why are these regulations attacking "for-profit" schools? The Administration alleges that "some
students attending for-profit institutions have not been well served." However, the number of
schools that are not providing quality education is not enough to warrant such a massive overhaul of
the student loan system for for-profit schools. This regulation singles out for-profit schools at the
expense of millions of students that see these schools as their best option. We see this in enrollment
rates which, according to the regulation, tripled between 2000 and 2008 to 1.8 million. And a report
by the Center for College and Affordability and Productivity (page 10) shows that enrolled has
increased six fold since 1986.
The Administration alleges that this rule was proposed as a response to high default rates at
proprietary schools. As the Wall Street Journal reported on August 27, 2010, "It's true that students
at these so-called career colleges are more likely to take out larger loans than their nonprofit peers,
and that this can contribute to higher default rates. But their tuition is also more expensive, in part
because these schools don' t receive state aid and have to pay taxes." Furthennore, the rule does not
account for the fact that proprietary schools frequently serve at-risk populations, or those that receive
Pel! Grants. In fact, default rates at all institutions where 40% or more students receive Pell Grants
are higher than default rates at 4-year proprietary schools where 40% of more students receive Pell
Grant (10.3% vs. 10.2%). Default rates are only minimally lower in all institutions where 40%
receive Pell Grants (10.3%) vs. the default rate of2-year proprietary schools with greater than 40%
receiving Pell Grants (12.2%). And a recent study by the Imagine America Foundation found that
graduation rates among institutions that serve greater than 60% of low-income students had a higher
graduation rate than both 2 and 4-year public and non-profit institutions.* So all in all , for-profit
schools aren' t as bad off as the Administration makes them out to be.
*For charts relating to the above statistics, please click here.
What will be the effect of this regulation?
Low-income, minority students will sz(f/er. Students at for-profit institutions frequently draw low-
income and/or minority students that may not have high school degrees. According to the U.S.
Chamber of Commerce, "This rule is lethal to programs that enroll significant numbers of low
income students ... the Chamber is concerned that institutions would be forced to reject low-income
students in order to ensure compliance with the arbitrary debt-to-income ratio proposed in this rule."
Jobs and training lost. President Obama wants to have the highest percentage of college graduates
in the world in ten years. To do this, the number of college graduates needs to increase by 8 million
by 2020. The President has even said that he cannot reach hjs goal of graduating the highest
percentage of college graduates in the world by 2020 "without a healthy and productive higher
education for-profit sector." However, many for-profit schools and programs will be forced to shut
down due to this proposed regulation, thus decreasing the number of students who graduate and
2
enter the workforce resulting. In fact, the Parthenon Group estimates 100,000 jobs will be lost in
faculty, staff, administrators, and suppliers due to this regulation. It is a job killer during the middle
of an economic downturn.
The proposed rule is a one-size-fits-all approach and will result in over a million students losing the
option to go to a school of their choice and a school that best fits their personal needs. Many of
these students might not have the access to public or non-profit institutions and choose these schools
because they train them for the workforce. Without access to for-profit schools, these students will
be less likely to get the training needed for jobs they want.
Not just the bad actors are punished All for-profit schools will be affected, even those who provide
a good, quality education to its students. Members of Congress requested a study by the
Government Accountability Office (GAO) on the prevalence of bad actors in the for-profit school
industry. These Members of Congress believe that the Department should not rush to regulate until
we know the extent of the program and whether students are well-informed about their potential
education expenses.
The proposed gainful employment regulation would harm students and give them less of a choice in
achieving their educational goals. When unemployment levels are at 9.6% right now, we must help
students get the tools they need to enter the workforce. This proposed regulation does just the
opposite and does nothing to get Americans back on their feet. It merely punishes a part of the
education industry that receives a profit for the work they do. The Department of Education should
leave this matter alone.
RSC Staff Contact: Natalie Farr, natalie.farr@mail.house.gov, (202) 226-0718
3
RSC
Republ ic<m Study Committee
REP. TOM PRICE, M.D. ( R ~ G A ) , CHAIRMAN
PAUL TELLER, EXECUTIVE DIRECTOR
424 CANNON HOUSE OFFJCE BUILDING
WASHI NGTON, DC 20515
rsc.price.house.gov ph {202} 226-9717 I fax (202} 22&-1633
RSC Policy Brief:
September 28, 2010
"It's bard not to conclude that the real driving political force here is hostility to private education comtlanies.
This is consistent with the Administration's decision to bar private companies from delivering student loans, its
near-takeover of the health-care industry, and its denunciations of high business pay and profits. By t>unishing
for-profit colleges, the Administration willtmsb more students into their nonprofit competitos, which satisfies its
preference for equaJity of outcomes and more government control."
- "Scapegoating For-Profit Colleges," The Wall Street Journal, August 27, 2010
Summary and Background: Due to be finalized and published in early 2011, the proposed
"gainful employment" regulation promulgated by the Department ofEducat1on requires institutions
to implement the requirements of the proposed regulat1on by July 1, 2012. Many Democrats and
Republicans alike oppose the proposed rule which, among other things, attacks for-profit education,
will cause thousands of individuals to lose their jobs, and will prevent millions of students from
getting a good, quality education. For a letter to Secretary of Education Arne Duncan, from Ranking
Member Kline, along with RSC Chairman Price, and other members of the House Education and
Labor Committee, click here.
What is a "for-profit" college? Historically, "for-profit" coll eges, or proprietary colleges, were
vocational and technical schools that provided a shorter term certificate or degree in a trade or a
specific type of occupation. Now, many of the institutions offer bachelors degrees, masters degrees,
and even doctoral degrees. DeYry, Capella, and the University ofPhoenix are some of the better
known examples. Proprietary coll eges could also include a local cosmetology or culinary school.
Why are they calling this the "gainful employment" regulation? One of the minimum
requirements for these institutions to participate in the federal student aid programs is that they offer
programs that lead to gainful employment in a legally recognized occupation. "Gainful
employment," which has been a standard for over 40 years, is currently undefined in statute or
regulation. Many question the timing of this regulation and why the Administration all of a sudden
concludes that a definition needs to be placed on a standard that has been in place and working
effectively for so long. Furthermore, some have questioned whether the Department has the
authority to make such a broad-sweeping change in policy via regulation. This should be a matter
for legislation from Congress. The proposed regulation attempts to define the standard by
establishing tests for schools to establish whether a program leads to gainful employment. The tests
would determine the fol lowing:
Former students' loan repayment rate (a "successful" repayment only occurs when loan
principal is being reduced. Payments that just reduce the interest on a loan wi ll not count,
even if the borrower is in a federally-authorized repayment plan); and
The relationship between median annual student loan payment and average annual earnings
after leaving the program (debt-to-income ratio).
Based on the results of the tests, the program will be labeled fully eligible, ineligible, or on restricted
status. Programs are ineligible if they have:
A repayment rate less than 35% from former students; and
Annual debt payments over 12% of their annual earnings and over 30% of their discretionary
mcome.
Why are these regulations attacking "for-profit" schools? The Administration alleges that "some
students attending for-profit institutions have not been well served." However, the number of
schools that are not providing quality education is not enough to warrant such a massive overhaul of
the student loan system for for-profit schools. This regulation singles out for-profit schools at the
expense of millions of students that see these schools as their best option. We see this in enrollment
rates which, according to the regulation, tripled between 2000 and 2008 to 1.8 million. And a report
by the Center for College and Affordability and Productivity (page 10) shows that enrolled has
increased six fold since 1986.
The Administration alleges that this rule was proposed as a response to high default rates at
proprietary schools. As the Wall Street Journal reported on August 27, 2010, "It's true that students
at these so-called career colleges are more likely to take out larger loans than their nonprofit peers,
and that this can contribute to higher default rates. But their tuition is also more expensive, in part
because these schools don' t receive state aid and have to pay taxes." Furthennore, the rule does not
account for the fact that proprietary schools frequently serve at-risk populations, or those that receive
Pel! Grants. In fact, default rates at all institutions where 40% or more students receive Pell Grants
are higher than default rates at 4-year proprietary schools where 40% of more students receive Pell
Grant (10.3% vs. 10.2%). Default rates are only minimally lower in all institutions where 40%
receive Pell Grants (10.3%) vs. the default rate of2-year proprietary schools with greater than 40%
receiving Pell Grants (12.2%). And a recent study by the Imagine America Foundation found that
graduation rates among institutions that serve greater than 60% of low-income students had a higher
graduation rate than both 2 and 4-year public and non-profit institutions.* So all in all , for-profit
schools aren' t as bad off as the Administration makes them out to be.
*For charts relating to the above statistics, please click here.
What will be the effect of this regulation?
Low-income, minority students will suffer. Students at for-profit institutions frequently draw low-
income and/or minority students that may not have high school degrees. According to the U.S.
Chamber of Commerce, "This rule is lethal to programs that enroll significant numbers of low
income students ... the Chamber is concerned that institutions would be forced to reject low-income
students in order to ensure compliance with the arbitrary debt-to-income ratio proposed in this rule."
Jobs and training lost. President Obama wants to have the highest percentage of college graduates
in the world in ten years. To do this, the number of college graduates needs to increase by 8 million
by 2020. The President has even said that he cannot reach hjs goal of graduating the highest
percentage of college graduates in the world by 2020 "without a healthy and productive higher
education for-profit sector." However, many for-profit schools and programs will be forced to shut
down due to this proposed regulation, thus decreasing the number of students who graduate and
2
enter the workforce resulting. In fact, the Parthenon Group estimates 100,000 jobs will be lost in
faculty, staff, administrators, and suppliers due to this regulation. It is a job killer during the middle
of an economic downturn.
The proposed rule is a one-size-fits-all approach and will result in over a million students losing the
option to go to a school of their choice and a school that best fits their personal needs. Many of
these students might not have the access to public or non-profit institutions and choose these schools
because they train them for the workforce. Without access to for-profit schools, these students will
be less likely to get the training needed for jobs they want.
Not just the bad actors are punished All for-profit schools will be affected, even those who provide
a good, quality education to its students. Members of Congress requested a study by the
Government Accountability Office (GAO) on the prevalence of bad actors in the for-profit school
industry. These Members of Congress believe that the Department should not rush to regulate until
we know the extent of the program and whether students are well-informed about their potential
education expenses.
The proposed gainful employment regulation would harm students and give them less of a choice in
achieving their educational goals. When unemployment levels are at 9.6% right now, we must help
students get the tools they need to enter the workforce. This proposed regulation does just the
opposite and does nothing to get Americans back on their feet. It merely punishes a part of the
education industry that receives a profit for the work they do. The Department of Education should
leave this matter alone.
RSC Staff Contact: Natalie Farr, natalie.farr@mail.house.gov, (202) 226-0718
3
From:
Sent:
To:
Subject:
Kanter, Martha
Saturday, September 25, 201 o 8:4 7 PM
Yuan, Georgia
FW: Dept of Ed - WHat about the Kaplan CHI Institute Broomall scandal?
From: Tim Bronsen @202 )@yahoo.com]
Sent: September 2010 8:33 PM
To: Martha
Subject: Dept of Ed - WHat about the Kaplan CHI Institute Broomall scandal?
I refer to the egregious behavior by the Dept of Education in letting the students at Kaplan -
owned CHI Institute in Broomall PA be lied to and cheated by the staff of Kaplan/CHI in the
Surgical Technician program from 2001 to 2008.
http://www.countercurrents.org/lendman220910.htm
It's not bad enough that mostly low income and had their credit scores
and lives ruined by Kaplan's unchecked greed but then to have the Dept of Ed look the other
way for nearly 10 years - that is INEXCUSABLE.
Now officials from your Dept . wish to sweep this under the proverbial rug. I wonder?
Well let's see how this shoe fits - Duncan and his flunkies (of which you are one) are scared
to death of Kaplan's owner The Washington Post and you don't want to do anything to rattle
its cage. So if you all can just make this CHI scandal go away with as little embarrassement
and cost to the Post and Kaplan as well then - you have done them a great
have you not? One that you all can pull in for years (and careers) to come.
So how about it Ms. Kanter? Are you brave enough to do the right thing and levy a large fine
against Kaplan and the Post for their actions in scamming unsuspecting students at CHI
Institute in Broomall? After how would you feel if your son or daughter went to enroll
in the Surg Tech got took out your Title IV spent nearly a year in the
program and then found out that there was no way for him/her to complete the program because
there were no externship sites available? As an educated I think you'd be
especially once the student loan repayments started kicking in.
Tell Duncan and his flunkies that it's time to stop obfuscating the issue - Kaplan WAS wrong.
And they should be held accountable now for defrauding students and taxpayers while enriching
Donald Graham and his cronies.
Sent: Sunday, September 26, 2010 10:26 PM
To: Minor, Robin; Runcie, James; kathy.tighe@ed.gov; Rose, Charlie
Subject: FW: Dept of Ed - WHat about the Kaplan CHI Institute Broomall scandal?
Here's the second email I'm referring to Robin Minor.
Martha Kanter
From: Tim Bronsen ahoo.com]
To: Martha
Now officials from your Dept. wish to sweep this under the proverbial rug. I wonder?
2
Sent:
To:
Sunday, September 26, 2010 10:28 PM
Tighe, Kathleen S.
From: KanterJ Martha
Sent: SundayJ September 26J 2010 10:26 PM
To: MinorJ Robin; RuncieJ James; kathy.tighe@ed.gov; RoseJ Charlie
Martha Kanter
p)(6j lA
From: Tim Bronsen L
Sent: SaturdayJ September 25J 2010 8:33 PM
To: KanterJ Martha
It's not bad enough that studentsJ mostly low income and minorityJ had their credit scores
Now officials from your Dept. wish to sweep this under the proverbial rug. WhyJ I wonder?
and cost to the Post and Kaplan as possibleJ well then - you have done them a great favorJ
So how about it Ms . Kanter? Are you brave enough to do the right thing and levy a large fine
Institute in Broomall? After allJ how would you feel if your son or daughter went to enroll
in the Surg Tech programJ got inJ took out your Title IV loanJ spent nearly a year in the
there were no externship sites available? As an educated womanJ I think you'd be outragedJ
3
From: Runcie, James
To: Kanter, Martha; Minor, Robin; 'kathy.tighe@ed.gov' ; Rose, Charlie
Subject: Re: Dept of Ed - WHat about the Kaplan CHI Institute Broomall scandal?
We will diligence this ASAP. Thank you.
RegardsJ
James W. Runcie
Deputy Chief Operating Officer
U.S. Department of Education
Federal Student Aid
830 First Street
WashingtonJ D.C. 20202
----- Original Message
To: MinorJ Robin; RuncieJ James; kathy.tighe@ed.gov <kathy.tighe@ed. gov>; RoseJ Charlie
Sent: Sun Sep 26 21:26:30 2010
Martha Kanter
From: Tim Bronsen
Sent: SaturdayJ September
To: KanterJ Martha
I refer to the egregious behavior by the Dept of Education in letting the students at Kaplan-
http://www. countercurrents . org/lendman220910.ht m
It's not bad enough that studentsJ mostly low income and minorityJ had their credit scores
Now officials from your Dept. wish to sweep this under the proverbial rug. WhyJ I wonder?
and cost to the Post and Kaplan as possibleJ well then - you have done them a great favorJ
Institute in Broomall? After allJ how would you feel if your son or daughter went to enroll
in the Surg Tech programJ got inJ took out your Title IV loanJ spent nearly a year in the
4
5
From: Minor, Robin
Sent:
To:
Sunday, September 26, 2010 11 :04 PM
Kanter, Martha
Have it. Thanks.
----- Original Message -----
From: Martha
To: Robin; James; kathy.tighe@ed.gov <kathy.tighe@ed.gov>; Charlie
Sent: Sun Sep 26 21:26:30 2010
Martha Kanter
From: Tim Bronsen
To: Martha
Now officials from your Dept . wish to sweep this under the proverbial rug. I wonder?
Instit ute in Broomall? After how would you feel if your son or daughter went to enroll
6
Sent:
To:
Monday, September 27, 2010 7:53AM
Rose, Charlie; Tighe, Kathleen S.
Subject: Fw: Dept of Ed - WHat about the Kaplan CHI Institute Broomall scandal?
FSA follows up on these as required.
From: Robin
To: Martha
Sent: Sun Sep 26 22:03:41 2010
Have it. Thanks.
From: Martha
To: Robin; James; kathy.tighe@ed.gov <kathy.tighe@ed.gov>; Charlie
Sent: Sun Sep 26 21:26:30 2010
Martha Kanter
From: Tim Bronsen
Sent: September
To: Martha
7
8
Sent:
To:
Tighe, Kathleen S. ; Rose, Charlie
Cc: Kvaal, James; Miller, Tony; Weiss, Joanne; Yuan, Georgia; Taggart, Bill; Minor, Robin;
Runcie, James
Subject: RE: Scandal at Kaplan CHI Institute being swept under the rug by Dept of Ed
I also received two of these from two different individuals and am referring them to Robin
Minor with a copy to Jim Runcie who will follow up via Federal Student Aid.
Martha Kanter
From: Tighe, Kathleen S.
To: Rose, Charlie
Cc: Kanter, Martha; Kvaal, James; Miller, Tony; Weiss, Joanne; Yuan, Georgia; Taggart, Bill
Subject: Re: Scandal at Kaplan CHI Institute being swept under the rug by Dept of Ed
Hi, Charlie -- I got one of these too, personalized to me. I will have our Hotline folks
look at it tomorrow and will let you know what we do with it. (By the way, I get emails and
letters like this all the time!)
From: Rose, Charlie
To: Tighe, Kathleen S.
Cc: Kanter, Martha; Kvaal, James; Miller, Tony; Weiss, Joanne; Yuan, Georgia; Taggart, Bill
Sent: Sun Sep 26 18:30:08 2010
Subject: FW: Scandal at Kaplan CHI Institute being swept under the rug by Dept of Ed
Kathleen: I am not sure what to do with this email and would appreciate your guidance. I
don't know Joan Weston. Let me know when you can talk. Thank you, Charlie.
From: Joan Weston ~ ~ l @gmail.com]
Sent: Sunday, September 26, 2010 10:12 AM
To: Rose, Charlie
Subject: Scandal at Kaplan CHI Institute being swept under the rug by Dept of Ed
Surgical Technician program from 2001 to 2008. And I also resent the fact that my taxpayers
dollars were stolen from thegovernement through Titlte IV funds so that Kaplan and The
Washington Post could enrich themselves - doesn't Donald Graham have enough money already?
It's not bad enough that students, mostly low income and minority, had their credit scores
Now officials from your Dept . wish to sweep this under the proverbial rug. Why, I wonder?
its cage. So if you all can just make this CHI scandal go away with as little embarrassment
and cost to the Post and Kaplan as possible, well then - you have done them a great favor,
9
So how about it Mr. Rose? Are you brave enough to do the right thing and levy a large fine
Tell Duncan and his other flunkies that it's time to stop obfuscating the issue - Kaplan WAS
wrong. And they should be held accountable now for defrauding students and taxpayers while
enriching Donald Graham and his cronies.
10
Sent:
To:
Yuan, Georgia
Subject: RE: Dept of Ed -sweeping Kaplan-CHI Institute scandal under the rug?
Thanks. Will do.
Martha
From: Georgia
To: Martha
Subject: RE: Dept of Ed - sweeping Kaplan-CHI Institute scandal under the rug?
Martha
Refer both of these to FSA for internal review - Robin Minor cc Jim Runcie Georgia
From: Martha
Sent: September 2010 8:50PM
To: Georgia
Subject: FW: Dept of Ed - sweeping Kaplan-CHI Institute scandal under the rug?
here's another one - probably some other campaign
From: Joan Weston @gmail.com]
To: Martha
Subject: Dept of Ed - sweeping Kaplan-CHI Institute scandal under the rug?
So how about it Ms . Kanter? Are you brave enough to do the right thing and levy a large fine
11
From: Arsenault, Leigh
Sent:
To:
Martin, Phil
Subject: FW: For-profit education industry
Attachments: EismanSohnConference.doc; ED Presentation_SOHN.PPT; ED_GE MATRIX_2.xls
Here's the Eisman stuff again if it's helpful.
From: Shireman, Bob
Sent: Friday, May 28, 2010 3:21PM
To: Martin, Phil; Arsenault, Leigh; Manheimer, Ann; Dannenberg, Michael
From: Eisman, Steven [mailto:seisman@fppartners.coml
Subject: For-profit education industry
Hello,
My name is Steven Eisman and I am the Portfolio Manager at FrontPoint Partners Financial Services fund. I wanted to
inform you that I recently spoke at the Ira Sohn conference in New York and my topic was the for-profit education
industry. My presentation was very negative and I wanted to bring to your attention many of the unsaid or unknown
aspects of this industry. We have been researching for-profit schools for over a year now and are very familiar with every
part of these businesses. Attached are the speech I gave and the presentation that was shared.
I have also attached a recent analysis we completed on the gainful employment proposal being reviewed currently. Our
purpose in the analysis is merely to raise awareness on the how critically important choosing the right metrics is to enact
the intended outcomes. Our analysis highlights how changing the key metrics (specifically the debt service% and the
repayment period) drastically affects the intended results. For example, while many schools will have to lower tuition
(resulting in lower student debt levels) under the proposed 8% debt service ratio and 1 0-yr repayment, under a 10% ratio
and a 15-yr repayment period, many schools will actually be able to raise tuition by 5% or more. Moving to a 20-yr
repayment with 1 0% ratio provides a much larger opportunity for nearly every school we've followed to raise tuition
substantially (in some cases by 20% or more). While I don't claim to know the Administration's ultimate objectives, I don't
believe raising student debt levels through higher tuition is the intended outcome of the proposed regulation.
Let me be clear- the debate on gainful employment has nothing to do with "student access". It has everything to do with
revenue-per-student (and thus, profit-per-student) for these schools, and that is why the for-profit industry is fighting so
hard to loosen the metrics. I just want to ensure that the Administration is aware of how sensitive the outcomes are to
these metrics. In our opinion, if the Administration were to move substantially away from the initial combination (8% ratio
and a 1 0-yr repayment period), then it would be better off to have no gainful employment rule at all, since a diluted version
will likely result in no changes at the schools and no reduction in student's debt loads.
Should you have any questions on any of the information provided, I am available to discuss any of our findings or
assumptions.
Steven Eisman
FrontPoint Financial Services Fund
917-934-1770
seisman@fppartners.com
12
From: Martin, Carmel
To: Miller, Tony; Rogers, Margot; Cunningham, Peter; Rose, Charlie; Kanter, Martha; Gomez,
Gabriella; Shireman, Bob; Yuan, Georgia
Cc: Duran, Maribel
Attachments: EismanSohnConference.doc; ED Presentation_SOHN.PPT; ED_GE MATRIX_2.xls
From: Eisman/ Steven [mailto:seisman@fppartners.coml
Sent: Friday/ May 28
1
2010 3:14PM
Subject: For-profit education industry
Hello,
My name is Steven Eisman and I am the Portfolio Manager at FrontPoint Partners Financial Services fund. I wanted to
inform you that I recently spoke at the Ira Sohn conference in New York and my topic was the for-profit education
industry. My presentation was very negative and I wanted to bring to your attention many of the unsaid or unknown
aspects of this industry. We have been researching for-profit schools for over a year now and are very familiar with every
part of these businesses. Attached are the speech I gave and the presentation that was shared.
I have also attached a recent analysis we completed on the gainful employment proposal being reviewed currently. Our
purpose in the analysis is merely to raise awareness on the how critically important choosing the right metrics is to enact
the intended outcomes. Our analysis highlights how changing the key metrics (specifically the debt service % and the
repayment period) drastically affects the intended results. For example, while many schools will have to lower tuition
(resulting in lower student debt levels) under the proposed 8% debt service ratio and 1 0-yr repayment, under a 10% ratio
and a 15-yr repayment period, many schools will actually be able to raise tuition by 5% or more. Moving to a 20-yr
repayment with 1 0% ratio provides a much larger opportunity for nearly every school we've followed to raise tuition
substantially (in some cases by 20% or more). While I don't claim to know the Administration's ultimate objectives, I don't
believe raising student debt levels through higher tuition is the intended outcome of the proposed regulation.
Let me be clear- the debate on gainful employment has nothing to do with "student access". It has everything to do with
revenue-per-student (and thus, profit-per-student) for these schools, and that is why the for-profit industry is fighting so
hard to loosen the metrics. I just want to ensure that the Administration is aware of how sensitive the outcomes are to
these metrics. In our opinion, if the Administration were to move substantially away from the initial combination (8% ratio
and a 1 0-yr repayment period), then it would be better off to have no gainful employment rule at all, since a diluted version
will likely result in no changes at the schools and no reduction in student's debt loads.
Should you have any questions on any of the information provided, I am available to discuss any of our findings or
assumptions.
Steven Eisman
FrontPoint Financial Services Fund
917-934-1770
seisman@fppartners.com
13
IRA SOHN CONFERENCE
Presentation by Steve Eisman
SUBPRIME GOES TO COLLEGE
May 26,2010
Good Afternoon. I would like to thank the Ira Sohn Foundation for the honor of speaking
before this audience. My name is Steven Eisman and I am the portfolio manager of the
FrontPoint Financial Services Fund. Until recently, I thought that there would never
again be an opportunity to be involved with an industry as socially destructive and
morally bankrupt as the subprime mortgage industry. I was wrong. The For-Profit
Education Industry has proven equal to the task.
The title of my presentation is "Subprime goes to College". The for-profit industry has
grown at an extreme and unusual rate, driven by easy access to government sponsored
debt in the form of Title IV student loans, where the credit is guaranteed by the
government. Thus, the government, the students and the taxpayer bear all the risk and the
for-profit industry reaps all the rewards. This is similar to the subprime mortgage sector
in that the subprime originators bore far less risk than the investors in their mortgage
paper.
In the past 10 years, the for-profit education industry has grown 5-10 times the historical
rate of traditional post secondary education. As of 2009, the industry had almost 10% of
the enrolled students but claimed nearly 25% of the $89 billion ofFederal Title IV
student loans and grant disbursements. At the current pace of growth, for- profit schools
will draw 40% of all Title IV aid in 10 years.
How has this been allowed to happen?
The simple answer is that they've hired every lobbyist in Washington D.C. There has
been a revolving door between the people who work or lobby for this industry and the
halls of government. One example is Sally Stroup. She was the head lobbyist for the
Apollo Group- the largest for-profit company in 2001-2002. But from 2002-2006 she
became Assistant Secretary of Post-Secondary Education for the DOE under President
Bush. In other words, she was directly in charge of regulating the industry she had
previously lobbied for.
From 1987 through 2000, the amount of total Title IV dollars received by students of for-
profit schools fluctuated between $2 and $4 billion per annum. But then when the Bush
administration took over the reigns of government, the DOE gutted many of the rules that
governed the conduct of this industry. Once the floodgates were opened, the industry
embarked on 10 years of unrestricted massive growth.
[Federal dollars flowing to the industry exploded to over $21 billion, a 450% increase. ]
At many major-for profit institutions, federal Title IV loan and grant dollars now
comprise close to 90% of total revenues, up significantly vs. 2001. And this growth has
1
driven even more spectacular company profitability and wealth creation for industry
executives. For example, ITT Educational Services (ESI), one of the larger companies in
the industry, has a roughly 40% operating margin vs. the 7%-12% margins of other
companies that receive major government contracts. ESI is more profitable on a margin
basis than even Apple.
This growth is purely a function of government largesse, as Title IV has accounted for
more than 100% of revenue growth. Here is one of the more upsetting statistics. In fiscal
2009, Apollo, the largest company in the industry, grew total revenues by $833 million.
Of that amount, $1.1 billion came from Title IV federally-funded student loans and
grants. More than 100% of the revenue growth came from the federal government. But
of this incremental $1.1 billion in federal loan and grant dollars, the company only spent
an incremental $99 million on faculty compensation and instructional costs - that's 9
cents on every dollar received from the government going towards actual education. The
rest went to marketing and paying the executives.
But leaving politics aside for a moment, the other major reason why the industry has
taken an ever increasing share of government dollars is that it has turned the typical
education model on its head. And here is where the subprime analogy becomes very
clear.
There is a traditional relationship between matching means and cost in education.
Typically, families of lesser financial means seek lower cost institutions in order to
maximize the available Title IV loans and grants - thereby getting the most out of every
dollar and minimizing debt burdens. Families with greater financial resources often seek
higher cost institutions because they can afford it more easily.
The for-profit model seeks to recruit those with the greatest financial need and put them
in high cost institutions. This formula maximizes the amount of Title IV loans and grants
that these students receive.
With billboards lining the poorest neighborhoods in America and recruiters trolling
casinos and homeless shelters (and I mean that literally), the for-profits have become
increasingly adept at pitching the dream of a better life and higher earnings to the most
vulnerable of society.
But if the industry in fact educated its students and got them good jobs that enabled them
to receive higher incomes and to pay off their student loans, everything I've just said
would be irrelevant.
So the key question to ask is- what do these students get for their education? In many
cases, NOT much, not much at all.
Here is one of the many examples of an education promised and never delivered. This
article details a Corinthian Colleges-owned Everest College campus in California whose
students paid $16,000 for an 8-month course in medical assisting. Upon nearing
2
completion, the students learned that not only would their credits not transfer to any
community or four-year college, but also that their degree is not recognized by the
American Association for Medical Assistants. Hospitals refuse to even interview
graduates.
But let's leave aside the anecdotal evidence of this poor quality of education. After all
the industry constantly argues that there will always be a few bad apples. So let's put
aside the anecdotes and just look at the statistics. If the industry provided the right
services, drop out rates and default rates should be low.
Let's first look at drop out rates. Companies don't fully disclose graduation rates, but
using both DOE data, company-provided information and admittedly some of our own
assumptions regarding the level of transfer students, we calculate drop out rates of most
schools are 50%+ per year. As seen on this table, the annual drop out rates of Apollo,
ESI and COCO are 50%-100%
How good could the product be if drop out rates are so stratospheric? These statistics are
quite alarming, especially given the enormous amounts of debt most for-profit students
must borrow to attend school.
As a result of these high levels of debt, default rates at for profit schools have always
been significantly higher than community colleges or the more expensive private
institutions.
We have every expectation that the industry's default rates are about to explode.
Because of the growth in the industry and the increasing search for more students, we are
now back to late 1980s levels oflending to for profit students on a per student basis.
Back then defaults were off the charts and fraud was commonplace.
Default rates are already starting to skyrocket. It's just like sub prime- which grew at
any cost and kept weakening its underwriting standards to grow.
By the way, the default rates the industry reports are artificially low. There are ways the
industry can and does manipulate the data to make their default rates look better.
But don't take my word for it. The industry is quite clear what it thinks the default rates
truly are. ESI and COCO supplement Title IV loans with their own private loans. And
they provision 50%-60% up front for those loans. Believe me, when a student defaults
on his or her private loans, they are defaulting on their Title IV loans too.
[Let me just pause here for a second to discuss manipulation of statistics. There are two
key statistics. No school can get more than 90% of its revenue from the government and
2 year cohort default rates cannot exceed 25% for 3 consecutive years. Failure to comply
with either of these rules and you lose Title IV eligibility. Lose Title IV eligibility and
you' re company's a zero.
3
Isn' t it amazing that Apollo' s percentage of revenue from Title IV is 89% and not over
90%. How lucky can they be? We believe (and many recent lawsuits support) that
schools actively manipulate the receipt, disbursement and especially the return of Title IV
dollars to their students to remain under the 90/10 threshold.]
The bottom line is that as long as the government continues to flood the for profit
education industry with loan dollars AND the risk for these loans is borne solely by the
students and the government, THEN the industry has every incentive to grow at all costs,
compensate employees based on enrollment, influence key regulatory bodies and
manipulate reported statistics- ALL TO MAINTAIN ACCESS TO THE
GOVERNMENT'S MONEY.
In a sense, these companies are marketing machines masquerading as universities. And
when the Bush administration eliminated almost all the restrictions on how the industry is
allowed to market, the machine went into overdrive. [Let me quote a bit from a former
employee ofBPI.
"Ashford is a for profit school and makes a majority of its money on federal loans students take out. They conveniently
price tuition at the exact amount that a student can qualify for in federal loan money. There is no regard to whether a
student really belongs in school. the goal is to enroll as many as possible. They also go after Gl bill money and currently
have separate teams set up to specifically target military students. If a person has money available for school Ashford
finds a way to go alter them. Ashford is just the middle man. profiting off this money, like milking a cow and working the
system within the limits ofwhat"s technically legal, and paying huge salaries while the student suffers with debt that can't
even be forgiven by bankruptcy. We mention tuition prices as little as possible .. this may cause the student to change
their mind.
While it is illegal to pay commissions for student enrollment. Ashford does salary adjustments, basically the same thing.
We are given a matrix that shows the number of students we are expected to enroll. We a/so have to meet our quotas
and these are high quotas.
Because we are under so much pressure. we are forced to do anything necessary to get people to fill out an application-
our jobs depend on it.
It's a boiler room- selling education to people who really don't want it. ..
This former employee then gives an example of soliciting a sick old lady to sign up for Ashford to
meet his quota.
"The level of deception is disgusting- and wrong. When someone who can barely afford to live and feed kids as it is. and
doesn "t even have the time or education to be able to enroll, they drop out. Then what? Add $20,000 of debt to their
problems- what are they gonna do now. They are officially screwed. We know most of these people will drop out, but
again, we have quotas and we have no choice."]
How do such schools stay in business? The answer is to control the accreditation
process. The scandal here is exactly akin to the rating agency role in subprime
securitizations.
There are two kinds of accreditation -- national and regional. Accreditation bodies are
non-governmental, non-profit peer-reviewing groups. Schools must earn and maintain
proper accreditation to remain eligible for Title IV programs. In many instances, the for-
profit institutions sit on the boards of the accrediting body. The inmates run the asylum.
Historically, most for profit schools are nationally accredited but national accreditation
holds less value than regional accreditat1on. The latest trend of for profit institutions is to
4
acquire the dearly coveted Regional Accreditation through the outright purchase of small,
financially distressed non-profit institutions and then put that school on-line. In March
2005, BPI acquired the regionally accredited Franciscan University of the Prairies and
renamed it Ashford University. [Remember Ashford. The former employee I quoted
worked at Ashford.] On the date of purchase, Franciscan (now Ashford) had 312
students. BPI took that school online and at the end of2009 it had 54,000 students.
SOLUTIONS
While the conduct of the industry is egregious and similar to the sub prime mortgage
sector in just so many ways, for the investment case against the industry to work requires
the government to do something --whereas in subprime all you had to do was wait for
credit quality to deteriorate.
So what is the government going to do? It has already announced that it is exploring
ways to fix the accreditation process. It will probably eliminate the 12 safe harbor rules
on sales practices implemented by the Bush Administration. And I hope that it is looking
at everything and anything to deal with this industry.
Most importantly, the DOE has proposed a rule known as Gainful Employment. In a
few weeks the DOE will publish the rule. There is some controversy as to what the
proposed rule will entail but I hope that the DOE will not backtrack on gainful
employment. Once the rule is published in the federal registrar, the industry has until
November to try to get the DOE to back down.
The idea behind the gainful employment rule is to limit student debt to a certain level.
Specifically, the suggested rule is that the debt service-to-income-ratio not exceed 8%.
The industry has gotten hysterical over this rule because it knows that to comply, it will
probably have to reduce tuition.
[Before I turn to the impact of the rule, let me discuss what happened last week. There
was a news report out that Bob Shireman, the Under Secretary of Education in charge of
this process was leaving. This caused a massive rally in the stocks under the thesis that
this signaled that the DOE was backing down from gainful employment. This conclusion
is absurd. First, of all , inside D.C. it has been well known for a while that Shireman
always intended to go home to California after a period of time. Second, to draw a
conclusion about the DOE changing its policy because Shireman is leaving presupposes
that one government official, one man, drives the entire agenda of the U.S. government.]
I cannot emphasize enough that gainful employment changes the business model. To
date that model has been constant growth in the number of students coupled with
occasional increases in tuition. Gainful employment will cause enrollment levels to grow
less quickly. And the days of raising tuition would be over; in many cases, tuition will go
down.
5
To illustrate the impact of gainful employment, I've chosen 5 companies, Apollo, ESI,
COCO, EDMC and the Washington Post. Yes, the Washington Post, whose earnings are
all driven by this industry.
Assuming gainful employment goes through, the first year it would impact would
obviously be 2011. However, because the analysis is so sensitive to tuition levels per
school , it's best to have as much information as possible. So for analytical purposes, we
are going to show the impact on actual results in fiscal 2009 and this year' s estimates
under the assumption that gainful employment was already in effect.
We employ 2 scenarios. Scenario 1 is static. It takes actual results and then reduces
tuition costs to get down to the 8% level. Scenario 2 is dynamic. It assumes the same
thing as scenario 1 but then assumes the companies can reduce costs by 5%-15%.
Results for each company depend largely on the mix of students, the duration of each
degree and the price of tuition at each institution
For each company, I show the results under the two scenarios and the corresponding
PIEs. Needless to say, the P/E multiples look quite a bit different under either scenario.
Apollo - In fiscal2009, the company earned $4.22. The consensus estimate for fiscal
2010 is $5.07. Under scenario 1, fiscal2009 and the fiscal2010 estimate get cut by 69%
and 57%, respectively. Under scenario 2, it gets cut 50% and 41%, respectively.
ESI- In fiscal 2009, the company earned $7.91. The consensus estimate for fiscal 2010
is $11.05. Under scenario 1, fiscal 2009 turns slightly negative and the fiscal 2010
estimate gets cut by 74%. Under scenario 2, fiscal 2009 declines by 75% and the 20'10
estimate gets cut by 53%.
COCO - In fiscal 2009, the company earned $0. 81. The consensus estimate for fi seal
2010 is $1 .67. Under scenario 1, fiscal 2009 turns negative and the fiscal 2010 estimate
gets cut by 94%. Under scenario 2, fiscal 2009 declines by 79% and the 2010 estimate
gets cut by 38%.
EDMC --In .fiscal 2009, the company earned $0.87. The consensus estimate for fiscal
2010 is $1.51. Under scenario 1, fiscal2009 and the fiscal2010 estimate turns massively
negative. Under scenario 2, fiscal2009 and the fiscal 2010 estimate are also massively
negative, just less massively than scenario 1. The principal reason why the numbers are
so bad for EDMC is that they have a lot of debt and that debt has to be serviced and
cannot be cut.
Washington Post- The Post's disclosure of Kaplan metrics is slight. Thus, analyzing the
impact from gainful employment is much more difficult and we have confined our
analysis solely to fiscal 2009. In fiscal 2009, WPO earned $9.78. Under scenario I, a
loss of $33.25 per share occurs. Under scenario 2, there is still a loss of $6.19. The
6
principal reason why the numbers are so bad for the Post is that more than 100% of its
EBIDTA comes from this industry through its Kaplan division.
[Let me just add one caveat to our analysis. Implementation of gainful employment
could result in a cut in marketing budgets. Given the high drop out rates of this industry
any such cuts could turn a growth industry into a shrinking industry. The numbers that I
just showed do not assume that the industry shrinks but grows at a slower pace.]
Under gainful employment, most of the companies still have high operating margins
relative to other industries. They are just less profitable and significantly overvalued.
Downside risk could be as high as 50%. And let me add that I hope that gainful
employment is just the beginning. Hopefully, the DOE will be looking into ways of
improving accreditation and of ways to tighten rules on defaults.
Let me end by driving the subprime analogy to its ultimate conclusion. By late 2004, it
was clear to me and my partners that the mortgage industry had lost its mind and a
society-wide calamity was going to occur. It was like watching a train wreck with no
ability to stop it. Who could you complain to? -- The rating agencies? -they were part
of the machine. Alan Greenspan?- he was busy making speeches that every American
should take out an ARM mortgage loan. The OCC? -- its chairman, John Dugan, was
busy suing state attorney generals, preventing them from even investigating the subprime
mortgage industry.
Are we going to do this all over again? We just loaded up one generation of Americans
with mortgage debt they can' t afford to pay back. Are we going to load up a new
generation with student loan debt they can never afford to pay back. The industry is now
25% of Title IV money on its way to 40%. If its growth is stopped now and it is policed,
the problem can be stopped. It is my hope that this Administration sees the nature of the
problem and begins to act now. If the gainful employment rule goes through as is, then
this is only the beginning of the policing of this industry.
But if nothing is done, then we are on the cusp of a new social disaster. If present trends
continue, over the next ten years almost $500 billion of Title IV loans will have been
funneled to this industry. We estimate total defaults of$275 billion, and because of fees
associated with defaults, for profit students will owe $330 billion on defaulted loans over
the next 1 0 years.
[Bracketed Sections might be deleted during the verbal speech because of lack of time.]
7
Ira Sohn Conference
Presentation by Steven Eism.an
FrontPoint Partners
May 26,2010
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.

In the last 10 years, the for-profit education industry has grown at 5-10 times the
historical rate of traditional post-secondary education
Annual enrollment growth of Total U.S. postsecondary institutions vs. For profit institutions
I D Total industry enrollment growth II For-profit enrollment growth I
25% ~ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ,
20%
15%
10%
5%
0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: National Center for Education Statistics, 2009
5
Which has drastically accelerated the for-profit's share of total US post-secondary
enrollments and led to the rapid growth of for-profit institutions
< 1% of all students attended
for-profit colleges ...
For profit students as a % of total U.S. postsecondary students
In 1990 ...
< 10% of all schools
were for-profit. ..
For profit institutions as a % of total U.S. postsecondary institutions
.--------------------------------------------------------------, 30% ,-
8%
7%
6%
5%
4%
3%

25%
20%
15%
10'A
5% I I I I I I I I I I I
1
I I I I I I I I I I I I I I I I I I I I I I I ! I I I 1 1 I 1 1
1
I ! 1 1 :

f f f
In 2009 ...
almost 10% of students
attend for-profit colleges
Source: National Center for Education Statistics, 2009
6
25% of schools are
for-profit institutions
Despite being less than 10% of total enrollments, for-profits now claim nearly
25% of the $89 billion of Federal Title IV student loans and grant disbursements
For-profit share of Title IV disbursements (Pell grants and Federal stafford loans), 1998 - 2009
27o/o ~ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~
26%
26%
24%
23%
22%
21%
20%
19%
18%
17%
16%
16%
14%
13%
12%
11%
10%
9%
8%
7%
In 2009, For-Profit schools collected $4.4 billion of the $18.2 billion
in Federal Pell Grants, or about 24% of all Pell Grant funding -
double the proportion from ten years ago.
1998 1999 2000 2001 2002 2003 2004 2006 2006
0 Pell grants 1!1 Subsidized stafford loans 0 Unsubsidized stafford loans
Source: College Board. NCLC
7
2007 2008 2009
How is this possible?! The for-profit industry has bought almost every lobbyist
and has infiltrated the highest levels of government .. . a prime example
Sally Stroup was a pivotal player in the deregulation of the for-profit industry ...
because she worked for the for-profit industry
Sally Stroup Biography:
2001 - 2002: Director of Industry and Government Affairs for the Apollo Group
(top lobbyist for APOL)
2002- 2006: Assistant Secretary for Postsecondary Education, U.S. Dept of
Education (top postsecondary education position)
2006- 2008: GOP Deputy Staff Director, U.S. House of Representatives
Committee on Education and Labor (largest recipient of political contributions from
for-profit education industry)
2008- Present: GOP Staff Director, U.S. House of Representatives Committee on
Education and Labor
.. . and not surprisingly, her colleagues at the Dept of Education were all driven by similar goals
Name Former DOE position Current Lobbying Firm For-profit Education client
William Hansen Deputy Secretary of Eductaion, 2001 - 2003 Chartwell Education Group APOLLO GROUP
Jonathan Vogel Deputy Counsel to the Department of ED, 2002-2005 Sonnenschein, Nath & Rosenthal GRAND CANYON UNIVERSITY
Lauren Maddox DOE Asst Sec for Communications, 2006- 2008 Podesta Group CAREER EDUCATI ON CORP
Rebecca Campoverde DOE Asst Sec for Congressional & Legislative affairs, 2005- 2008 Kaplan, Inc. KAPLAN, INC
Victor F. Klatt Ill GOP Staff Director for House ED and labor, 2005- 2008 VanScoyoc Associates APOLLO GROUP
8
From 1987 through 2000,, the amount of total Title IV dollars given to for-profit
schools fluctuated between $2 billion and $4 billion dollars . ..
Total Federal disbursements of Title IV Stafford Loans and Pell Grants, 1987-2009
Dollars in billions
Total Total For profit For profit Total For profit share For profit share
Year Pell Grants Stafford Loans Pell Grants Stafford Loans For (!rofit Pell Grants Stafford Loans
1987 $3.5 $7.3 $0.9 $1 .8 $2.7 25% 25%
1988 $3.8 $8.0 $1.0 $2.1 $3.1 27% 27%
1989 $4.5 $8.2 $1 .1 $2.3 $3.4 24% 28%
1990 $4.8 $8.3 $1 .1 $1.9 $3.0 23% 23%
1991 $4.9 $8.8 $1 .1 $1.5 $2.6 22% 17%
1992 $5.8 $9.5 $1.2 $1 .3 $2.5 21% 14%
1993 $6.2 $9.9 $1 .1 $1 .0 $2.1 18% 10%
1994 $5.7 $14.1 $0.9 $1.4 $2.3 15% 10%
1995 $5.5 $19.9 $0.7 $2.0 $2.7 13% 10%
1996 $5.5 $22.8 $0.7 $1 .9 $2.6 13% 8%
1997 $5.8 $25.1 $0.7 $2.2 $2.9 12% 9%
1998 $6.3 $26.3 $0.8 $2.3 $3.0 12% 9%
1999 $7.2 $27.2 $2.6 $3.5 13% 10%
2000 $7.2 $28.4 $3.0 13% 10%
2001 $8.0
''''
$29.6
''''''''
$3.4 14%
''''''''
12%
2002 $10.0 $32.1 $4.1 14% 13%
2003 $11.6 $36.6 $6.2 16% 14%
2004 $12.7 $41.6 $6.6 16% 16%
2006 $13.1 $45.7 $7.9 18% 17%
2006 $12.7 $48.0 $8.8 19% 18%
2007 $12.8 $49.4 $9.6 19% 19%
2008 $14.7 $66.8 $12.4 21% 22%
2009 $18.2 $70.9 $17.0 24% 24%
Pel/ Grants
~
Total Title IV aid grew from
quadrupled from $1
under $4 billion in 2000 to over
billion to $4 billion
$21 billi on in 2009
... but with the leniency shown to the industry under the Bush Administration_, the
dollars that flowed to the industry exploded to over $21 billion, a 450% increase
Source: College Board
9
At the current pace of growth, For-profit schools will claim 20/o of enrollments,
represent 40/o of schools and draw over 40% of all Title IV aid in 10 years
For-profit share of enrollment, schools, Pell grants and Loans, 2009 - 2020
For-Qrofits % share of:
Total Total Pell Stafford
.
.
Year Enrollment Schools Grants
2007 7% 23% 19%
2008 8% 24% 21%
2009 8% 25% 24%
2010 9% 26% 25%
2011 10% 27% 26%
2012 10% 29% 27%
2013 11% 30% 28%
2014 12% 31% 30%
2015 13% 32% 31%
2016 14% 34% 32%
2017 16% 35% 33%
2018 17% 37% 35%
2019 18% 3911> :in%
2020
c::
20% 40% 38%
Key Assumptions for Projections
Total post-secondary enrollment grows at 1.5% per year
For-profit enrollment grows at 10% per year (1 0-yr avg is 14.4%
--- - 11. . \
Total post-secondary institutions grow at 1 .5% per year; For-profit
institutions grow at 6% per year (both long-term avg since 1990)
Avg grant and loan amounts per student grows at 5-yr historical avg
grow1h rates, by institution type
Source: College Board, US Dept of Education. industry estimates
Loans
19%
22%
24%
25%
27%
28%
30%
31%
33%
35%
36%
38%
40%
43%
Total
Title IV
19%
22%
24%
25%
27%
28%
29%
31%
32%
34%
36%
38%
40%
42%
10
Total Title IV billions}
Non-Qrofits For-Qrofits
$50.2 $12.0
$56.0 $15.5
$67.6 c $21.4
$71.9 $24.3
$76.5 $27.7
$81 .2 $31.5
$86.2 $35.8
$91.4 $40.8
$96.9 $46.4
$102.5 $52.8
$108.4 $60.1
$114.4 $68.5
$120.6 $77.9
=:>
$126.9 $88.8 .......
Based on current financials of For-profit
institutions, less than 30% of the
incremental billion (annuall'iJ. in
Title IV dollars will go towards
educating students ...
... nearl y $50 billion (annuall'iJ. will go
toward non-faculty and executive
compensation and company profits
-
At many major for-profit institutions, federal Title IV loan and grant dollars now
comprise close to 90o/o of total revenues
Apollo Group
ITT Technical
Institute
Other,
52%
2001
Title IV,
48%
65%
Note: Ti Ue IV figures include 2008 unsubsidized loan limit increases on a pro-forma basis
Source: Company-reporled financials
11
Other,
11%
2009
Tit le IV,
89%
85%
This growth has driven even more spectacular company profitability and wealth
creation for industry executives and shareholders
ITT Technical Institute (ESI) Profitability has grown 5-fold since 2006
ESI operating margin %, Q1 06 - Q409 ESI operating profit($ millions), Q106 -Q409
45%----- $165
$155
40%
$145
$135
$125
35%
$115
$105
30% $95
$65
25%
$75
$65

20%
: n
n
:: . n n
r;:,'<> r;:,'<> r;:,'<> s:." r;:,'\ r;:,'\ r;:,'O r;:,'O _<;>'0 r;:,'O r;:,"> r;:,"> r;:,"> r;:,">
...,0' '),0' ..,u-- ._.0' ...,0' '),0' o;O' ._.u-- ...,0' '),0' ..,u-- .fi ...,0' '),0' o;O' .fi

...,0' r? ..,0' ._.0' '),0' ..,0' .fi ...,0' '),0' ..,0' .fi ...,0' '),0' ..,0' .fi
The top 5 executives at ESI, Corinthian colleges (COCO) and Apollo Group (APOL)
collectively earned over $130 million from 2007-2009
To12 5 executives total com12ensation
ESI coco APOL Total
2007 $9,834,695 $4,938,982 $10,441 ,170 $25,214,847
2008 $8,923,791 $8,849,386 $26,766,979 $44,540,156
2009 $14,366,540 $1 1,222,377 $34,707,377 $60,296,294
3-yr total comp $33,125,026 $25,010,745 $71,915,526
Total comp =salary, bonus. stock awards, option awards, non-equity incentives
Source: Company-reported financials and proxy statements
12
Now many of the US for-profit education companies are among the most profitable
businesses in the world
Other industries of strategic importance to the U.S.
which are funded by taxpayer dollars are restricted
to lower operating margins on contracts ...
2009 Company Operating Margins

40%
37.4%
35%
30%
25%
20%
15%
12.1%
9.9% 9.8%
10%
7.4%
5%
0%
ITT Technical Lockheed Raytheon Corp Northrup Boeing
Institute Martin Grumman
Source: Company-reporled financials and proxy statements
13
Average Company Operating Margins, 2005-2009

30%
29.0%
25%
20% 18.4%
15%
10%
5%
0%
ITT Technical Apple
Institute Computer

Procter &
Gamble
9.5%
Lockheed
Martin
9.1%
Home Depot
So how can Title IV-funded education companies
earn substantially more money than nearly every
other major US business?
This growth however, is primarily a function of government largesse, as Title IV
has accounted for more than 100% of the revenue growth of these companies
A(!ollo Grou(! (APOL} 2007
Total revenues $2,724
Year-year growth
% revenue from Title IV* 65%
Title IV revenues $1,770
Year-year growth
% revenue growth from Title IV
Corinthian Colleges (COCO} 2007
Total revenues $919
Year-year growth
Title IV revenues $691
Year-year growth
ITT Technical Institute (ESI} 2007
Total revenues $758
Year-year growth
Title IV revenues $477
Year-year growth
Dollars in millions
*Title IV% includes 2008 Stafford unsubsidized loan limit increases
Source: Company-reporled financial s
2008
$3,141
$41 7
77%
$2,419
$648
155%
2008
$1 ,069
$1 49
81%
$866
$174
117%
2008
$870
$112
73%
$635
$157
141%
14
2009
$3,974
c $833
89%
$3,537
$1 ' 119
134%
2009
$1,308
$239
89%
$1 ,163
$297
124%
2009
$1 ,015
$146
85%
$863
$228
157%
More than 1 00/o of the
revenue growth of APOL,
COCO and ESI is driven by
an increase in Federal Title
IV dollars ...
.. . and of this incremental
$1.1 billion in Title IV and
$833 million in revenues,
ONLY $99 million or 9%
was spent on educational
expenses like faculty
compensation and other
instructional costs
But how do they do it? How are for-profit schools grabbing such a growing share of
Title IV dollars?
Traditional relationship- Matching Means with Costs
Families with greater needs generally seek lower-cost
institutions to maximize the available Title IV loans and
grants, getting the most out of every dollar to reduce out-
of-pocket expenses and minimize heavy debt burdens ...
Lesser Means
(Low-Mid Income Families)
D-
Low Cost Institutions
(Community College or In-State School)
Families with greater financial resources often seek higher-
cost institutions because they can afford to pay in excess of
what Title IV loans cover. These families typically are not
eligible for grants because of their higher-income status.
Greater Means
(High Income Families)
D-
High Cost Institutions
(Private Colleges)
For-profit Model- Max Cost with Minimal Means
Lesser Means
(Low-Mid Income Families)
D-
I High Cost lnsmutions I
The for-profit model has consciously separated the
traditional relationship between costs and means. They
seek to recruit those with the greatest financial needs and
put them in the highest-cost institutions ... and why?
This formula maximizes the amount of Title IV loans and
grants their students can receive.
15

s
Q)
.....
What results from this combination of profit-motive and lack of quality control is
an expensive education that is highly questionable
Everest College st udents angry over certification
~ l l ~ _. G
<li By Tomas Roman
HAYWARD. CA (KGO)- Nearly three dozen Everest College students are
furious they havent receiwd the medical certifications they paid for They refusal!
to go to class until they get some answers
Whether they a1tend class or not. the students ha-.-e to pay S100.
Some of the students have bean attending school for eight months Three weeks
ago they found oulthatthe college does not supply them with a certificate they
were told they would get in order to obt<Jin the medrcal positions they want
The students are all studying medrcal assisting and they pard S16.000 for an
eight-month course They were told the credits earned at the school do not
uansfer to any community or four-year college and that has many of them angry.
Source: ABC News, KGO-TV San Francisco, CA, March 19. 2010
17
News Article summary
Students paid $16,000 for an eight-month
course in medical assisting at an Everest
College campus in Hayward, CA
Students recently learned that:
Credits earned at the school do not
transfer to any community or four-year
college
Degrees granted at the school are not
recognized by the American
Association for Medical Assistants
(AAMA)
Hospitals will not interview students
for potential jobs
ABC7 talked to the state Medical
Assistant's Education Review Board
and found the Hayward Campus is one
of several Everest operates in California
that the board say is not accredited to
credential medical assistants.
Even when assuming reported graduation rates (BIG ASSUMPTION), more than
50/o of the student body still drops out every year
APOL 2006 2007 2008 2009
Beginning enrollment 278,300 282,300 313,700 362,100
+ New students 216,600 258,500 288,200 355,800
- Graduates I drop outs (212,600) (227,100) (239,800) (274,900)
Ending enrollment 282,300 313,700 362,100 443,000
Graduation r ate 28% 28% 28% 28%
Assuming these graduation rates,
Graduates 61 ,390 72,338 78,484 83,440
every year 50%+ of APOL and ESI
Drop outs 151,210 154,762 161,316 191,460 students drop-out annually.
Drops % of avg total enrollment 54% 52% 48% 48%
Assume avg tenure btwn 3-4 year.s for graduates
COCO recycles its entire
ESI 2006 2007 2008 2009
I
........._ enrollment annually.
Beginning enrollment 42,985 46,896 53,027 61 ,983
+ New students 49,935 54,593 65,313 85,928
- Graduates I drop outs (46,024) (48,462) (56,357) (67,145)
Graduation rate 44% 44% 44% 44%
Graduation rate estimate based on reported
Graduates 18,449 19,774 21,983 25,302
National Center of Education Statistics dat a;
Drop outs 27, 575 28,688 34,374 41,843
figures represent average instituti onal graduation
Drops % of avg total enrollment 61% 57% 60% 59%
rates at top 5 largest institutions
*Assume avg tenure btwn 2-3 year.s for graduates For reference, 2009 Dept of ED reported
graduati on rat es for full -ti me, first t ime students at
for-profit schools is between 14-22%; these
coco 2006 2007 2008 2009
I I
graduation rates have been adjusted to include non
Beginning enrollment 66,114 60,964 61 ,332 69,211 fi rst-time, full -time students, still may be largely
+ New students 92,185 90,105 100,210 117,352 overstated
-Graduat es I drop outs (97,335) (89,737) (92,331) (1 00,475)
I
1 Former academic counselors of APOL, ESI and
COCO claim that real graduation rates at many
Graduation rate 33% 33% 33% 33%
I I
locations are in the single digi ts
Graduates 20,968 20,179 21,540 25,624
Drop outs 76,367 69,558 70,791 74,851
Drops % of avg t otal enrollment 120% 114% 108% 96%
*Assume avg tenure btwn 1-2 year.s for graduates
Source: Company-reported financials, /PEDS data (College Navigator) , APOL student ou1.5bmes report 2009
Default rates - historical National Cohort Default rates by institution type
Outside of the mid-90's, when the regulatory environment was more stringent,
default rates at For-profit schools are roughly 2x non-profit default rates
Exhibit 2. National Cohort Default Rates by tnstitution Type (FY1991 ..
FY2008)
.lt:

o e111;93. o HS4 'm g 1;.96
0 1i%7 EJ:Dlt . e':IJ:?
., c2X3 o:ro:u oz:os o::oa

:.t
t-..

F:f'-Prt'61
tbb \s dr.Tt Sou.c.e: SMO CapiliJI M3rlHit"5 :lrC. US (lep.Jftm-?nt oi Educ.J".iln National w
.. Statf>tics.
Source: NCES industry data and chart taken from recent BMO capital markets research report
19
We are back to late-80's levels of lending to for-profit students, a key leading indicator
for loan defaults . .. back then, fraud was commonplace and regulation was minimal
Traditional vs. disbursements of Title IV Stafford Loans and Pell Grants
1
1987 - 2009
For-erofits% share of: Average Pell Grant+ Loans
Total Total Pell Stafford Total Per Student
Year Enrollment School s Grants Loans Titl e IV All school s Non-erofit For-Drofit
1987 1% 10% 26% 26%

$842 $643

1988 2% 10% 27% 27% 27% $899 $670 $14,262
1989 2% 10% 24% 28% 27% $933 $697 $14,640
1990 2% 10% 23% 23% 23% $948 $740 $14,179
1991 2% 10% 22% 17% 19% $954 $788 $11,133
1992 2% 9% 21% 14% 16% $1,053 $895 $10,831
1993 2% 9% 18% 10% 13% $1,120 $989 $9,263
1994 2% 9% 15% 10% 12% $1,385 $1,246 $9,723
1995 2% 9% 13% 10% 11% $1,780 $1,616 $11 ,339
1996 2% 9% 13% 8% 9% $1,967 $1,827 $8,402
1997 2% 15% 12% 9% 9% $2, 131 $1,974 $8,910
1998 3% 16% 12% 9% 9% $2,249 $2,093 $8,317
1999 3% 17% 13% 10% 10% $2,329 $2, 154 $8,152
2000 3% 18% 13% 10% 11% $2,323 $2,130 $8,681
2001 3% 19% 14% 12% 12% $2,351 $2,139 $8,533
2002 4% 19% 14% 13% 13% $2,531 $2,278 $9,349
2003 4% 19% 15% 14% 14% $2,848 $2,543 $9,786
2004 5% 20% 16% 16% 16% $3,146 $2,783 $9,909
2005 6% 21% 18% 17% 17% $3,364 $2,947 $10,153
2006 6% 22% 19% 18% 18% $3,420 $2,968 $10,498
2007 7% 23% 19% 19% 19% $3,407 $2,944 $10,074
2008 8% 24% 21% 22% 22% $3,740 $3,173 $10,541
2009 8% 26% 24% 24%

$4,626 $3,744 C $13,247
We must take note that because For-profit students recei ve 3-5x as much Title I V aid as traditi onal
students and are growing enrollment at 3x the pace of tradi tional schools. these early warning
signs must be addressed now before the impact is fel t in the coming years ...
Source: College Board
20
If history is any guide, we will return to late-80's Cohort Default rates in 1-2 years,
the worst period of recorded default rates in the history of the DOE
Average Total Loans + Grants per For-profit student vs. DOE Official CDRs, 1987 - 2009
I c:::::JAvg Loans+ Grants --Official CDR I
$16,000 24%
$15,000
$14,ooo 1 I.
1: $13,000
Q.l
"'0
:I
~
~ $12,000
a.
~
Q.l
.. $11 ,000
j::
iii
0
.... $10,000
$9,000
$8,000
~ / ~
;-
~
;-
;-
,.....
;-
;-
,.....
,....... ,.., ;-
,.....
;-
,.....
;-
;-
20%
16%
0:::
0
u
iii
12% I ~
:::
0
UJ
0
0
8%
4%
$7,000 I I I I I I
1
I I I I I
1
I I I I I
1
I I I I I
1
I I I I I
1
I I I I I
1
I I I I I
1
I I I I I
1
I I I I I
1
I I I I I
1
I I I I I
1
I I I I I I Oo/o
~ ~ ~ ~ ~ ~ ~ * ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ *
~ ~ 0 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
~
Source: College Board. US Dept of Education
21
Because of the excessive drop-out rates and high debt burdens of graduates, the credit
statistics for government loans at for-profits are deteriorating at an alarming pace
Corinthian Colleges Cohort Default Rates, 2004 - 2008
42%
40%
40% -1 I -+-2-yr rates ---- 3-yr rates I
38%
36%
34% _,
32%
30%
28%
26%
24%
22% 1 .---- 21 %
..
20%
18%
16%
14% _,
12% j
11%
11%
10%
2004 2005 2006 2007 2008
Source: Company-reported financials; note: 2008 2-yr rates still preliminary, 3-yr rates estimated
22
Currently, for-profit institutions provision 50 - 60% on loans they make to their
own students ... these are students who already have Title IV loans
Companies are provisioning for more than 50/o+ loss on loans they make to students ...
which means they expect more than 1 out of every 2 loans to go bad
But absent any regulatory threat, these companies could care less if they every loan they
made went bad because the per-student profitability of their models is so high!
Both companies would still be hugely profitable on a per-student basis even with a 100%
losses on every loan they made
ESI
Title IV loans, grants and private loans $16,959
Internal company Joan per student $2.100
Tuition per student (2009) $19,059
Provision for Joan losses (%) 60%
Expected losses on internal loans ($1 ,060)
Operating profit per student $8,792
Multiple of expected losses c-8.4x
Note: OP I student equals change in operating profit over change in total enrollment
Loan loss provisions provided by companies
23
coco
ESI earns more than 8 times the
$14,443
amount it expects to lose from
$1 ,770
internal loans to students.
$16,213
I
COCO earns more than 4 times
68%
I
its expected loan losses.
($1 ,027)
$4,282
4.2X
Reported statistics ... Cohort Default Rates (CDRs)
Cohort Default Rates (CDRs)
CDRs are the percentage of a school's borrowers who enter repayment on a Federal Loan during a particular
federal FY (Oct 1 to Sep 30), and default prior to the end of the next FY
Effectively a 2-yr snapshot of the total students in default
CDRs are an important measure of quality- if default rates breach the federally-mandated threshold of 25%
(soon to be 30%), schools can lose eligibility to Title IV
Can easi ly be manipulated to mask true defaults
Deferrals and forbearances used en mass to carry students over the 2 year reported timeframe
Schools partner with Sallie Mae and other lenders to delay or manage down defaults through the 2 year
timeframe in exchange for guaranteed loan volumes
Schools pay down student government loans with internal money and collect directly from students
24
Reported statistics ... the 90/10 rule
The 90/10 rule
90/10 says a for-profit may become ineligible to participate in Title IV programs if it derives more than 90% of its
cash basis revenue from Title IV programs
Applies only to for-profit institutions, effectively a cap on total Title IV dollars that can flow to a company as a
percentage of revenues
Intended to create a structural boundary for growth from Title IV dollars
Can also be manipulated
Over-returning Title IV dollars to the government when students drop out and then billing students directly
Pursue alternative government entitlement programs not counted under the Title IV umbrella (military educational
loans grants)
When all else fails, raise tuition! Students will have to find alternative (non-Title IV) funding sources to close the
gap between tuition and the amount of total Title IV loans
25
Reported statistics ... completions and placements
Completions (graduation stats)
Company-reported metric that measures the number of students who complete a program (graduate) in 150% of
normal time (for example, 6 years of graduation data for a 4-year bachelors program)
Non-traditional student body doesn't graduate together, and often takes much longer than normal to complete, so
hard to understand actual graduation by class
No independent verification of graduates
Placements (employment stats)
Company-reported metric that measures the number of students who are placed in a job they were trained for
(gainful employment)
This is gainful employment?
- Trained nurses become janitors at hospitals
- Homeland security degree grads become nighttime security guards at shopping malls
And for those grads who cannot find employment. .. hire them! Most schools hire unemployed graduates
internally to boost reported placement stats
26
As long as the government continues to flood the for-profit education
industry with loan dollars,
AND
the risk for these loans is borne SOLELY BY students and the government ...
THEN
the industry has every incentive to:
-Grow at all costs
- Compensate employees based on enrollment
-Influence key regulatory bodies
- Manipulate reported statistics and other regulatory measures
ALL TO MAINTAIN ACCESS TO THE GOVERNMENT'S MONEY.
"Its about the numbers. It will always be about the numbers."
- Bill Brebaugh, head of University of Phoenix Corporate Emollment
The entire business model of these companies is centered around growing enrollment -
it is the single most important measure of growth and profitability, period.
Boiler room tactics:
"Every 6 months we get a review that looks at how
many students we enrolled and what percentage of
them finished their first class. As long as they finish
their first class we get full credit and after that they are
not our problem ... "
"We are under so much pressure we are forced to do
anything necessary to get people to fill out an
application . .. "
It's a boiler room- selling education to people who
don't really want it."
- Ashford University (BPI) former enrollment
counselor
"The EC [enrollment counselor) review matrix is all
smoke and mirrors so we could fly under the radar of
the DOE ... "
- APOL former enrollment counselor
28
Actual APOL compensation table snapshot
Utrolll\ttllb.

-e

ltl to 4-4 tl6trfltolt
.fSe."""'lm<nls

4&Clll<lfln!Mit
4$41111ll-

$1 (f"Wol'll'Cnbt
iSZCIIIot-
51 cncllf!mntt

60 II!'Cih::r.b

&tnte ..... IICI

fSI

1Doii!J)J11!1t!!l
1' n'Ollmtnlo

m.\
UP.
S2i9\
$29\

31:
.,)lk

S24k

$3$11

f38lt
I:J1lc
n..-

S$EII

$3!tt
!<0<
Wll
$.10'1.
$10
$1Cll

S..lllyOI>
..
$ftllt"' ,,01<
$7:01\611$m

SUk

)1!(
$.ut,
ua
$S3t.

Wl

s.3$t.
SJ!llt
'*
sm:
S$71
$341.
S3llk
$311.
$411k
541k

$43k
Si.4t
1m.
$1flt
5$&0 I 1 """ 0 t
W2$C:(!( 1 ...... 01
l1110. 0l
S61&pet rn. O.t.
SG3l,.:r :t mo.. 0 T.
P<'" '&"0 0 1'

Source: Court documents. Hendow & Albertson vs. UOP. filed 2009
Accreditation ... the inmates running the asylum
What is Accreditation and why is it important?
Accreditation helps ensure that education
provided by institutions of higher education
meets acceptable levels of quality
The Accreditation bodies are non-governmental
(non-profit) peer-reviewing groups
Schools must earn and maintain proper
Accreditation to remain eligible to participate in
Title IV Programs
However, due to the peer-based composition of
the Accreditation boards, they cannot function
as a truly independent 3rd party review system
In many instances, for-profit institution's
representatives sit on the boards of their
own Accrediting body, inevitably influencing
the approval process and oversight of their own
institutions!
The Accrediting Council for Independent
Colleges and Schools (ACICS)
ACICS BOARD OF COMMISIONERS
Dr. Gary R. Carlson - Chair Elect
Vice President, Academic Affairs
ITT Technical Institute
Ms. Mary Hale Barry
Senior Vice President, Chief Academic Officer
Kaplan Higher Education
Ms. Jill DeAtley
Vice President of Regulatory Review
Career Education Corporation
Mr. Francis Giglio
Director of Compli ance and Regulatory Services
Li ncoln Educational Services
Mr. David M. Luce
Assistant Vice President, Accreditation and Licensing
Corinthian Colleges, Inc.
Mr. Roger Swartzwelder
Executive Vice President, General Counsel and Chief Compl iance Officer
Education Corporation of America
Not a/116 Board members shown
We have seen this before ... rating agencies and subprime mortgages.
Is for-profit Accreditation the new credit agency scandal?
29
Accreditation ... when you can't earn it, buy it
The latest trend of for-profit institutions is to acquire the dearly-coveted Regional Accreditation through the outright
purchase of small, financially distressed non-profit institutions
Regional Accreditation is the highest stamp of guality (Harvard is Regionally Accredited) , and usually takes 5-10 years to earn
through a long peer review process of educational materials, curriculum, teachers, etc
But who wants to wait 5 years?!
Once acquired, these institutions can serve as a shell for the parent organization to funnel in thousands of students and continue
the growth cycle ...
Past examples are Bridgepoint buying Regionally-Accredited Franciscan University of the Prairies (renamed Ashford University)
and more recent examples are ITT Tech buying Daniel Webster, and Corinthian Colleges buying Heald College
Bridgepoint Education (BPI)- a perfect model ...
Timeline
MARCH 2005 - BPI acquires Regionally-Accredited
Franciscan University of the Prairies and renames
Ashford University. Ground enrollment= 312
BPI flows students through online platform ... grows
enrollment by 50,000+ students in 4 years
Mgmt expects 70,000+ students by end of 2010
99% students now online, yet school retains its
Regional Accreditation
Source: Company-reported financials
80, 000
70,000
60, 000
50,000
40,000
30,000
20, 000
10,000
312
M a r ~ 5
30
BPI Total enrollment, 2005 -2008
31,558
,...----
12,623
4,471
n ll
2006 2007 2008
--- -
70,000
,---
53,688
-
2009 2010E

(/)
C)
>
..o
~
C)
u
~
1""""1

Summary
The pace of the growth of the for-profit education industry and their growing claim to Federal monies
will require greater scrutiny to protect students and the integrity of Title IV lending
The primary revenue and profitability driver for the for-profit companies is unrestricted access to Title
IV loans and grants
For-profit education companies are now among the most profitable businesses in the world due to
government largesse
Regulations built around company-reported statistics are ineffective, and the Accreditation process
for for-profit schools and programs is compromised
Disaggregation of risk from reward is the fundamental cause of all problems
32
Solutions -Gainful employment
Gainful employment gets at part of the problem because it deals with debt loads, but verification is
problematic
Programs DO NOT have to be shut down for schools to remain compliant with new regulations
Companies can restructure their business to accommodate the regulation and schools would
become more affordable and student debt loads would be lower
However, a gainful employment metric would structurally reset the earnings power of companies
33
Solutions- Gainful employment analysis impact (key assumptions)
1. Cost of programs based on reported cost I credit hour and program length
2. Percent of degree financed assumes Title IV
0
/o revenues less 10% (transfer credits and cash)
3. Debt service payment based on 7.5% interest rate (6.8% government loans I 12/o private) and 10-
yr repayment period
4. Starting salaries taken from applicable BLS codes, by program category and job type
5. Debt service I income ratio of 8o/o based on Gainful Employment proposed regulation
6. Student mix by program level and program type used to calculate total revenue impact
7. Cost cuts estimated on a per-school basis, based on disclosed cost categories and industry experts
8. EPS impacts and PIE ratios based on existing reported information, share counts, and current
street EPS estimates
9. Scenario 1: Gainful Employment with no Offsetting Cost Cuts
10. Scenario 2: Gainful Employment with 5%-15% Cost Cuts
34
Gainful employment and APOL
APQ.!:
Scenario 1 Scenario 2
Actual 2009 EPS $4.22 $4.22
2009 EPS (adjusted) $1.32 $2.12
2009 EPS impact -69% -50%
Street 2010 EPS Estimate $5.07 $5.07
EPS Impact ($2.90) ($2.1 0)
2010 EPS (adjusted) $2.17 $2.97
2009 EPS impact -57% -41%
Current P/E (2010 EPS) 10.8 X 10.8 X
2010 Pro-forma P /E 25.4 X 18.5 X
Note: PIE Ratios calculated as of 512112010
Source: Company-reported financials, programs. tuition rates, and management conference calfs. Street EPS estimates from Bloomberg. Projections based on program-
level tuition adjustments to comply with 8% debt service/income ratio and scenario 2 applies 5-15% cost cuts across education and SG&A to offset revenue declines.
35
Gainful employment and ESI
ESI Scenario 1 Scenario 2
Actual2009 EPS $7.91 $7.91
2009 EPS (adjusted) {$0.22} $2.02
2009 EPS impact -103% -74%
EPS Impact ($8.13) ($5.89)
2010 EPS (adjusted) $2.92 $5.16
2009 EPS impact -74% -53%
Current P /E (2010 EPS) 10.0 X 10.0 X
Pro-forma P /E 37.6 X 21.3 X
36
Gainful employment and COCO
coco Scenario 1 Scenario 2
Actual2009 EPS $0.81 $0.81
EPS (adjusted) ($0.76} $0.17
EPS impact -194% -79%
EPS Impact ($1.57) ($0.64)
2010 EPS (adjusted) $0.10 $1.03
2009 EPS impact -94% -38%
Current P/E (2010 EPS) 9.0 X 9.0 X
Pro-forma P /E 153.5 X 14.6 X
37
Gainful employment and EDMC
EDMC Scenario 1 Scenario 2
Actual 2009 EPS $0.87 $0.87
EPS (adjusted) ($5.50} ($2.21}
EPS impact -732% -353%
EPS Impact ($6.37) ($3.08)
2010 EPS (adjusted) ($4.86} ($1.57)
2009 EPS impact -422% -204%
Current P/ E (2010 EPS) 14.6 X 14.6 X
Pro-forma P /E (4.5}x ( 1 4 . 0 ~ x
38
Gainful employment and WPO (Kaplan)
WPO (Kaplan)
Actual 2009 EPS
EPS (adjusted)
EPS impact
Street 2010 EPS Estimate
EPS Impact
2010 EPS (adjusted)
2009 EPS impact
Current P/ E (2010 EPS)
Pro-forma P /E
Note: PIE Ratios cal culated as of 512112010
Scenario 1
$9.78
($33.25)
-440%
Scenario 2
$9.78
($6.19)
-163%
39
If these trends continue_, we believe the DOE will face nearly $275B in defaults over
the next 10 years on a half-a-trillion dollars of lending to the For-Profit Industry
Projected Cumulative Stafford Loans (in $ Billions) and Cumulative Defaulted Dollars
for For-Profit Education Students, 2007 - 2020
$ 5 5 0 ~ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~
$500
$450
$400
Vi
c
0
= $350
ill
ilt
;; $300
c
Ill
.3
?: $250
~
~ $200
~
$150
$100
$50
DTotal Stafford Loans to FP students
lillll Projected Defaulted Dollars
And because of fees associated with
default, the government collects
approximately $1.20 on every $1.00 lent ...
... meaning For-profit students will owe
$330 Billion dollars on defaulted loans over
the next 10 years
$0 I ' '"""' ' ....... , .I
$498
$423
$358
$301
$251
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: College Board. National Center for Education Statistics, industry estimates
40
SUMMARY PAGE FOR GAINFUL EMPLOYMENT OPTIONS
Key Assumptions forGE calculations
1. Cost of programs based on reported cost I credit hour and program length
2. Percent of degree financed assumes Title IV% revenues less 10% (transfer credits and cash)
3. Debt service payment based on 7.5% interest rate (6.8% gov't loans / 12% private)
4. Starting salaries taken from applicable BLS codes, by program category and job type
5. Student mix by program level and program type used to calculate total revenue impact
6. Assume 4% tuition increase per year for 2 and 4 year degree cost estimates
CURRENT ANNUAl TUITION (REVENUE PER STUDENT! AVERAGE COST OF A 2-YR DEGREE AVERAGE COST OF A 4-YR DEGREE
5 COMPANY AVERAGE
Cli'rtnl avt.mge amuaJ tliUon 516,811
Ctm!r< averliO. $10rtlnoUIIIV or orad
CliTt:nl .vera cost roa2 dt .. $34,295 Ct.l'renl avera cost roa<C dt .. $71,389
CWQISU!!IUUl i$;Ciltd2i
Caii'IIA tmQ:IO)t..._ seenar1os Calr"'IA tMQIO:a!!!t-l't
Nf!Waverage anl'l.lal tuitionunderdtrrerent GE1cenar1os Newcost for\11 2-yr degree dltTerent GE scenarios; HewcoR ot 4--yr degreeunder dtferent GE 5(ertarlo5
i%.!ill2
10%ratlo 8%ralio 10"& ral lo 8%r.lltl0 10"'fflrat:lo
1G-yr repa_ymeR $12,84$ $14,807
Otl'- from currltlt 2ol% ($2,004) -12%
10.yr repaymen1 $2&,204 $30,207
Delta ltomCUITtnt eoct ($8,091) .:u% ($4,088) .m;
1 o-yr repaymerw $&2,87$
Delta tomcvrrent cost ($1&,943) ZI% !SM101
1$-yr'repaymenr: Sl$.07 $17,560 15-yr repaymenl $30,69$ $35,.822 15-yr rtpaymtl"'l $63,89$ $74,566
Delta from current c-ost ($1.76$) 101. $708 4% Deltfl !Tomcurrent cost ($3,600) $1t526 4% Delta fromcurrent coot ($7,49) 10% $3,178 4%
2G-yr repa)'ment $16!562 S19AS3
DeUa from e-urrent cost ($2$01
':!
.$2,642
16'4
2o-yr rtpaymel't $33,786 $39,685
Delta fi'omcunent co&t t$$09) 1% $6,390 16"4
2t).yr rtpaymtrw $70,32$ $82,608
Delta !Tomc.urroot cot.t SI,06o! -1% $t1.-219 16%
From:
Sent:
To:
Subject :
Attachments:
From: Kvaal, James
Shireman, Robert
Monday, September 20, 2010 2:49PM
Kvaal, James
RE: Thanks!
missouri_ 6-11-1 o bs.xlsx
To: Shireman, Robert
Subject: Re: Thanks!
From: Shireman, Robert
To: Kvaal, James
Sent: Sun Sep 19 16:32:11 2010
Subject: RE: Thanks!
From: Kvaal, James
Sent: Friday, September 17, 2010 1:03PM
To: Shireman, Robert
Subject: Thanks!
From: Kvaal, James
To: Bergeron, David
Sent: Thu Sep 16 20:28: 11 2010
Subject:
From:
Sent:
To:
Subject:
Gomez, Gabriella
Monday, September 20, 2010 9:56AM
Kvaal, James
RE: Corinthian website
It is also running at the top of the politico website.
From: Kvaal, James
Sent: Monday, September 20, 2010 9:50AM
To: Gomez, Gabriella
Subject: FW: Corinthian website
From: Yuan, Georgia
Sent: Monday, September 20, 2010 9:49AM
To: Kvaal, James; McFadden, Elizabeth; Bergeron, David
Subject: Fw: Corinthian website
FYI
From: Jenkins, Harold
To: Yuan, Georgia; Burton, Vanessa; Finley, Steve; Marinucci, Fred; Morelli, Denise; Sann, Ronald; Scaniffe, Dawn;
Siegel, Brian; Varnovitsky, Natasha; Wanner, Sarah; Wolff, Russell; Woodward, Jennifer
Sent: Mon Sep 20 08:32:36 2010
Subject: Corinthian website
http://www.mycareercounts.org/
FYI, if you haven't seen it, here is Corinthian's website urging people to contact their congressional
representatives about the gainful employment regs.
From: Woodward, Jennifer
Sent:
To:
Saturday, September 18, 201 o 4:43 PM
Yuan, Georgia
Cc: Kvaal, James; Jenkins, Harold
Subject: RE: Gainful Employment Comments
Thanks,
From: Yuan, Georgia
Sent: Saturday, September 18, 2010 4:21 PM
To: Woodward, Jennifer; Jenkins, Harold; Kvaal, James
Subject: Re: Gainful Employment Comments
Thanks __ ....., __________ ....,.. __________________________ ..,... ______ ......, __
James- the list at the end has the numbers of the comments and you can find these at the regs site
G
To: Yuan, Georgia; Jenkins, Harold
Sent: Sat Sep 18 14:20:10 2010
Subject: Gainful Employment Comments
Georgia and Harold-
Jennifer
2
I
From: Finkel, Jessica
Sent: Thursday, September 16, 2010 4:46PM
To: Finkel, Jessica; Woodward, Jennifer; Kolotos, John; Sellers, Fred; Harris, Nikki; Smith, Kathleen
Subject: RE: GE comments
Addendum-
She also has two separate comments from DeVry (comment #s 12348 and 12530).
Jessica
From: Finkel, Jessica
Sent: Thursday, September 16, 2010 4:41 PM
To: Woodward, Jennifer; Kolotos, John; Sellers, Fred; Harris, Nikki; Smith, Kathleen
Subject: GE comments
Hi everyone-
Just a note to keep people updated. Jennifer has copies and is reviewing/summarizing the comments from:
1) Grand Canyon University (comment #12596)
2) Kaplan (comment #12597)
3} Education Management Corporation (comment #12598)
4) Career Education Corporation (comment #12599)
5) Corinthian College (comment #11548}
6) University of Phoenix (comment #12661)
7) Lincoln Educational Services (comment #12662)
8) University Technical Institute (comment #12663)
9} Capella University (comment #12664}
10) American Public University (comment #12226)
11) Strayer (comment #12725)
I was unable to find ITT or Bridgepoint Education in the system, so if you come across them let me know.
Thanks!
Jessica
Jessica Finkel
3
Management/Program Analyst
Office of Postsecondary Education
1990 K Street, NW
Washington, DC
Room 8031
Phone: 202-502-7647
4
From:
Sent:
To:
Subject:
Kanter, Martha
Friday, September 17, 2010 11 :34 AM
Rodriguez, Roberto J.;
FYI from ProPublica r....-------'
http:/ /www.propublica.org/article/for-profit-schools-donate-to-lawmakers-opposing-new-financial -aid-rules
From: Hamilton, Justin
Sent: Friday, September 17, 2010 11:14 AM
To: Private- Duncan, Arne; Cunningham, Peter; Kvaal, James; Kanter, Martha; Miller, Tony; Rose, Charlie; Yuan,
Georgia; Bergeron, David; Martin, Carmel; Gomez, Gabriella; Weiss, Joanne
Subject: FYI
Wanted to flag this story for you. This article is making the rounds today.
For-Profit Schools Donate to Lawmakers Opposing New Financial Aid Rules
Between 2005 and the beginning of this year, Rep. Donald M. Payne, D-N.J., received $6,000 in campaign contributions
from sources related to for-profit colleges. This year, he received more than $20,000 from the schools and their lobby
groups, according to campaign finance records.
What changed?
For one, the colleges have upped their lobbying efforts considerably in the face of proposed regulations that the
indust ry says could shutter many of its schools.
For another, Payne co-signed three letters to Education Secretary Arne Duncan, in which as many as 18 members of
Congress pleaded with the secretary to put the brakes on that proposed regulation.
Collectively, members who signed the letters received nearly $94,000 f rom the for-profit college sector between the
beginning of 2010 and late July, according to the most recent available campaign finance data reviewed by ProPublica.
Most of the donations flowed after March 22 --the date the f irst letter was written to Duncan.
Other co-signers who received campaign cash f rom the industry include Reps. Alcee Hastings, D-Fia., and Debbie
Wasserman Schultz, D-Fia.; and Jason Altmire, D-Pa. Payne and Altmire sit on the House committee that oversees
education, as do several other members who signed the letters and received donations.
Payne did not reply to our requests for comment, but longtime campaign f inance watchdog Fred Wertheimer, president
of the group Democracy 21, which seeks to "eliminate the undue influence of big money in American pol itics, " said the
money given to Payne created a troubling impression.
"Whenever a member of Congress gets a large amount of contributions relatively close to the period where they take a
specific action for an interest group, it raises appearance problems that undermine public confidence in the action that
was taken, and also undermines the argument for the position on the merits," Wertheimer said.
A spokesman for Wasserman Schultz, who signed two of the letters and received nearly $7,400 from the for-profit
industry this year, said the congresswoman signed the letters because the proposed Department of Education
regulations are "overly broad and were written without Congressional hearings."
5
None of the other congressional offices we contacted responded to calls or e-m ails.
The stakes are high for the for-profit schools because the proposed regulation tightens the conditions under which
educational programs can participate in federal student aid programs. Many propri etary schools draw the majority of
their revenue-- billions of dollars each year from those taxpayer-backed sources.
Called the "gainful employment" rule, the regulation would create a two-part test t hat Duncan has said is intended to
stop some career schools from "saddling students with debt they cannot afford in exchange for degrees and certificates
they cannot use."
The first part would measure how many former students are paying down the principal of their loans, while the second
establishes ratios between the debt students take on to finance their education and their earnings after leaving the
school, according to the Department of Education.
The test applies to individual programs of study rather than an entire school. Each program must satisfy at least one part
of the test for its students to remain eligible for financial aid.
For example, if a school's nursing program failed to meet the lowest thresholds for principal repayment and debt ratios,
future students could not pay for that program using federal financial aid. But if the same school's computer sciences
program was i n compliance, students in that field of study could continue accessing federal aid.
Schools could be required to warn students about high debt loads if a particular program falls into a danger zone, the
Education Department says.
The regulation would apply to all schools-- including for-profit, public and private, nonprofit institutions. Based on
current numbers, the department estimates that "5 percent of all programs would no longer be eligible to offer their
students federal student aid and 55 percent of all programs would be required to warn their students about high debt-
to-earnings ratios."
Mark Kantrowitz, a financial aid expert who publishes Fastweb.com and FinAid.org, predicted the rule will have a greater
impact on for-profit schools than other institutions. "The difference is that every type of program at for-profits is
impacted, whereas at traditional colleges, it's just the vocational programs," he said.
The department's move comes after government investigations found fraud in the recruiting practices of several major
for-profit colleges, and amid worsening data on loan default rates, especially for students at for-profit schools.
Harris Miller, president of the Career College Association, which represents for-profit colleges and trade schools, said the
gainful employment rule poses a "fundamental threat to a lot of very high-quality programs that could be forced to
close."
The industry's effort to build congressional pressure against the new rules has been carefully planned. ProPublica
obtained a "whip list" that appears to divvy up responsibilities to lobby individual Democratic members among various
schools and industry groups.
The whip list is in an Excel spreadsheet written by Chris Collins, according to the document's "properties" data. The
Career College Association lists a Chris Collins as its "Grass Roots Coordinator," but Miller said he would not comment on
"specific internal documents."
The for-profit industry has not been shy about using its financial weight to lobby for what it wants. The founder of one
for-profit chain, Arthur Keiser, has become a major national donor, according to campaign finance records. Keiser is also
the current chairman of the Career College Association.
6
Campaign finance records show that Keiser, his wife, Belinda, and mother, Evelyn, contributed a collective $31,600 to
members of Congress who signed the letters since the beginning of this year, when the fight over the regulations had
begun to heat up.
Key figures in the industry have also paid numerous personal visits to the Education Department, according to public
documents. They include visits by John McKernan, chairman of Education Management Corp., a company that owns
several major for-profit schools . McKernan is the former governor of Maine and the husband of Republican Sen.
Olympia Snowe.
Records also show visits to the department by officials from DeVry Inc. and Kaplan Inc., two of the biggest players in the
industry, and their lobbyists.
Schools have also elicited tens of thousands of comments about the proposed regulation from their students, resulting
in what the Department of Education said is by far the largest ever response to a public comment period.
In one instance, the president of the University of Phoenix, William Pepicello, sent out what appeared to be a blast e-
mail to students that the Department of Education called misleading.
The e-mail claimed the gainful employment regulation would "block hundreds of thousands of Americans from getting
the college education they need and deserve to get ahead in their jobs or find even better jobs."
An Education Department official told ProPublica that the e-mail inaccurately implied that the rule would prevent
students from getting loans, when in fact it would affect only particular degree programs at specific schools.
"Students do not lose loan eligibility," said James Kvaal, deputy undersecretary of education. "They can and many will
choose from the tens of thousands of programs that remain eligible," he said.
The University of Phoenix would not say to whom the e-mail was sent. The school's most recent financial filings say it
has 476,500 students.
Education Department officials would not comment on the industry's lobbying campaign. The agency expects the rule to
be finalized by November, and schools that fail the gainful employment test could be cut from the federal aid programs
beginning in 2012.
7
From:
Sent:
To:
Subject:
Attachments:
L m )@who.eop.gov) on behalf of Barnes, Melody C.
@who.eop.gov]
Thursday, September 16, 2010 4:22PM
Barnes, Melody C.; Jung, Bryan; Emanuel, Elizabeth N.; Jones, Lisa M.; Branch, Lisa D.
(CEA); Higginbottom, Heather A.; Holt, Meryl; Weiss, Margaret E.; Rodriguez, Roberto J.;
Borders, Tia; Sunstein, Cass R. ; Rouse, Cecilia E.; Gordon, Robert M.; Zients, Jeffrey D.;
Duran, Maribel; Goolsbee, Austan; Kvaal , James; Kanter, Martha; Kamin, David C.; Kahn,
Lisa B.; Mas, Alex
RE: Gainful Employment Discussion
GEdeck 0915410 ver 4.ppt; CEA Appendix 091610.pptx
Hi, please see two slide decks attached for meeting materials. We will have some printed at the meeting as well.
Thank you!
Allison
-----Original Appointment-----
From: Zelman, Allison L. On Behalf Of Barnes, Melody C.
Sent: Monday, September 13, 2010 3:44PM
To: Jung, Bryan; Emanuel, Elizabeth N.; Jones, Lisa M.; Branch, Lisa D. (CEA); Higginbottom, Heather A.; Holt, Meryl;
Weiss, Margaret E.; Rodriguez, Roberto J.; 'Tia.Borders@ed.gov'; Sunstein, Cass R.; Rouse, Cecilia E.; Gordon, Robert M.;
Zients, Jeffrey D.; 'Duran, Maribel'; Goolsbee, Austan; James.Kvaal@ed.gov; Martha.Kanter@ed.gov; Kamin, David C.
Cc: Zelman, Allison L.; Kahn, Lisa B.; Mas, Alex
Subject: Gainful Employment Discussion
When: Thursday, September 16, 2010 5:00 PM-6:00PM (GMT-05:00) Eastern Time (US & Canada).
Where: Roosevelt Room
Hi, please see two slide decks attached for meeting materials. We will have some printed at the meeting as well.
Thank you!
Allison
File: CEA Appendix 091610.pptx File: GEdeck 0915410 ver 4.ppt
Hi everyone,
Please let me know if you or your boss will be unable to attend this meeting on Thursday.
Thank you!
Allison
Manifest:
Melody Barnes
larry Summers
Secretary Duncan
Austan Goolsbee
Cass Sunstein
Ceci Rouse
8
Heather Higginbottom
Roberto Rodriguez
Roberto Gordon
Jeff Zients
9
From:
Sent:
To:
Subject:
Attachments:
FYI the final decks.
Kvaal, James
Thursday, September 16, 2010 7:46PM
Ochoa, Eduardo; Bergeron, David; Chesley, Susan
FW: Gainful Employment Discussion
GEdeck 0915410 ver 4.ppt; CEA Appendix 091610.pptx
Susan, thank you for working with CEA today on their calculation. The final f igures changed significantly as a result of
10
From:
Sent:
To:
Cc:
Subject:
Attachments:

Arsenault, Leigh
Friday, April 09, 2010 2:13PM
Hammond, Cynthia
Manheimer, Ann; Ceja, Alejandra; Shireman, Bob
RE: Gainful employment
Advertisements.doc
Here is what we pulled together but we can definitely get you more if needed.
1) Oversight
2) Background on the 56% default rate figure from Corinthian Colleges
Corinthian Colleges Executive Vice President and Chief Financial Officer Ken Ord stated in
their February 2010 investor call that they continue to anticipate a 56% to 58% default rate
on an estimated $150 million in internal student lending.
http://seekingalpha.com/article/186144- corinthian- colleges - inc -f2g10-gtr- end-12- 31-09-
earnings - call-transcript?source=yahoo&page=-1
This default rate of 56% to 58% is the same as Corinthian Colleges stated they had in August
2009 on their internal student lending.
http://seekingalpha.com/article/158257- corinthian- colleges - inc-f4g09-gtr- end-06-30-09-
earnings-call-transcript?page=-1
3) Advertisements
Attached are two key examples (but there is a plethora that i.e. we can send more)
The CollegeConnection YouTube clips are also worth viewing:
http://www.smartmoney.com/personal-finance/college-planning/Your-Worth-to-a-College-Referral-
Service/
Hope this helps.
- Leigh
Office of the Under Secretary
leigh.arsenault@ed.gov
-----Original Message-----
From: Cynthia
Sent: April 2010 11:39 AM
To: Leigh
Subject: FW: Gainful employment
LeighJ Here is the current list I have of requests from Amy Jones and David Cleary. They
want these todayJ if at all possible. Can you help with this? I am only working on partial
information here since these come from a meeting with Martha that I wasnJt in.
1) A list of all the oversight you are doing on the prop schools now with the tools at your
current disposal (ie working with the FTC to get at advertising).
--Would Robin Minor have this?
2) the quarterly report that had the 56% default rate figure in it.
3) the advertisements that Martha was referring to.
Thank you. I am happy to reach out to others to get this information if you have suggestions
on who to talk to.
2

Obama Approves $31 Billion
For "College Affordability Aid"
Return to School and You Could Qualify
For Pen Grants or a Tuition Tax Credit

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From:
Sent:
To:
Cc:
Subject:
Hammond, Cynthia
Manheimer, Ann
Ceja, Alejandra; Shireman, Bob; Arsenault, Leigh
YesJ I think that would be great.
From: ManheimerJ Ann
Sent: FridayJ April 09J 2010 2:25 PM
To: HammondJ Cynthia
Cc: CejaJ Alejandra; ShiremanJ Bob; ArsenaultJ Leigh
Subject: RE: Gainful employment
Cynthia - Still checking on question # 1 - the testimony Bob gave on the Ability to Benefit
GAO report references actions we are taking - do you think including that or excerpts would
be helpful? Thx - Ann
- - - - -Original Message-----
From: ArsenaultJ Leigh
Sent: FridayJ April 09J 2010 2:13 PM
To: HammondJ Cynthia
Cc: ManheimerJ Ann; CejaJ Alejandra; ShiremanJ Bob
CynthiaJ
1) Oversight
Ann in concert with Robin will send along a background of our oversight work.
http://seekingalpha.com/article/186144- corinthian- colleges - inc -f2g10-gtr -end-12- 31-09-
earnings-call-transcript?source=yahoo&page=-1
http://seekingalpha.com/article/158257- corinthian-colleges - inc -f4g09 -gtr- end-06- 30-09-
3) Advertisements
Attached are two key examples (but there is a plethora that existsJ i.e. we can send more)
http://www.smartmoney.com/personal -finance/college- planning/Your-Worth-to- a-College- Referral -
Service/
Hope this helps.
-Leigh
From: HammondJ Cynthia
Sent: FridayJ April 09J 2010 11:39 AM
To: ArsenaultJ Leigh
LeighJ Here is the current list I have of requests from Amy Jones and David Cleary. They
want these todayJ if at all possible. Can you help with this? I am only working on partial
information here since these come from a meeting with Martha that I wasnJt in.
on who to talk to.
2
From:
Sent:
To:
Manheimer, Ann
Friday, April 09,2010 4:11PM
Hammond, Cynthia
Cc:
Subject:
Attachments: Testimony Oct 14 Ed shireman final w highlights.docx
Cynthia - I highlighted the Testimony - will this format work? If need I can rework to a
one-pager - Ann
From: Leigh
Sent: April 2010 2:13 PM
To: Cynthia
Cc: Ann; Alejandra; Bob

1) Oversight
http://seekingalpha.com/article/186144-corinthian-colleges-inc-f2g10-gtr-end-12-31-09-
earnings - call -transcript?source=yahoo&page=-1
http://seekingalpha.com/article/158257- corinthian- colleges - inc -f4g09 -gtr - end-06- 30-09-
3) Advertisements
http://www.smartmoney.com/personal-finance/college-planning/Your-Worth-to-a-College-Referral-
Service/
Hope this helps.
- Leigh
3
-----Original Message- - - - -
From: Cynthia
To: Leigh
Here is the current list I have of requests from Amy Jones and David Cleary. They
want these if at all possible. Can you help with this? I am only working on partial
information here since these come from a meeting with Martha that I in.
- -Would Robin Minor have this?
on who to talk to.
4
Testimony of
Robert M. Shireman
Deputy Undersecretary
before the
Committee on Education and Labor
Higher Education, Lifelong Learning, and Competitiveness Subcommittee
U.S. House ofRepresentatives
October 14, 2009
Chairman Hinojosa, Ranking Member Guthrie and Members of the Committee:
Thank you for the opportunity to testify about the integrity of the Federal student financial aid
programs. During the upcoming academic year, the Department of Education will help an
estimated 14.2 million students enrolled at 6,200 of our Nation' s colleges and universities,
community colleges, and trade and technical schools begin and complete programs of study that
will prepare them to be an active and important part of America' s future. Students with degrees
and other formal credentials from our Nation' s postsecondary education institutions are more
likely to be employed, even during these difficult economic times. So, we were pleased to see
additional funds invested in student financial aid, including additional funds provided for Pell
Grants and Federal Work-Study in the American Recovery and Reinvestment Act (ARRA),
which will result in an estimated $129 billion in federal aid-- $31 billion in grants and $98
billion in loans. According to the College Board' s 2008 Trends in Student Aid report, Federal
student aid accounted for nearly 60 percent of a] I student aid provided and it is likely that the
Federal share will increase, given the current economic conditions that limit the ability of States
and institutions to increase aid.
Federa1 student aid serves a particularly important role in helping our Nation recover from the
economic downturn. Last year, there was an unprecedented 20 percent increase in the number of
applications filed for aid. More students than ever qualified for Pell Grants, and more students
from all economic backgrounds took out Federal loans. Federal student aid provides a critical
safety net. Far too many families have found themselves in increased financial difficulty, and
wondering whether they can afford to send their children to college. Far too many of our citizens
have, through no fault of their own, found themselves needing to return to school for additional
training, either because they had lost a job, or feared losing one. In light of the vital importance
of Federal student aid in these uncertain economic times, it is extremely important that we
maintain program integrity and ensure that the consumers of these programs are protected.
The issues of program integrity and consumer protection are complex and are not limited, as
some have asserted, to for-profit postsecondary education. There are many factors that are more
important than whether a college is a non-profit, for-profit or public institution. To protect
student consumers, we intend to monitor postsecondary education institutions, paying particular
attention to indicators such as: high dropout rates, heavy reliance on federal funds, students with
high levels of debt or defaults, the financial distress or difficulty managing the institution' s
financial affairs, consumer complaints, and rapid growth. If we find violations of our rules, we
2
will take appropriate limitation, suspension or termination action. For example, in FY08, ED
compliance staff conducted 190 in-depth program reviews at institutions that were triggered by
our risk-based indicators. Ultimately, these reviews led to five administrative actions, including
the loss of Title IV eligibility at an institution of higher education. In addition, through its other
monitoring activities, ED compliance staff initiated 30 additional administrative actions resulting
in 19 other institutions' loss of eligibility. However, if an institution is compliant with our rules,
we will provide additional technical assistance to address problems they face.
I appreciate the opportunity to appear here t o d a y ~ because we have a great deal to report on in
terms of the steps we are taking to ensure that Federal student financial aid funds are used
appropriately, and that the students they are intended to help are not harmed by the actions of
institutions and other participants in the Federal student aid programs. The Secretary, the Under
Secretary, the newly appointed Chjef Operating Officer for Federal Student Aid (FSA)> and I all
share the view that it is more important than ever that the Department ensure that the right aid
gets to the right students, with the right end result: ensuring that students have the opportunity to
gain the skills and knowledge to be successful in the workforce and in their communities.
In recent months, the Department began to take additional steps to ensure accountability from
institutions participating in the Federal student aid programs, and to ensure meaningful results
for students. We have been focusing our efforts on enhancing our leadership role in protecting
students and families, and improved communication and cooperation, both within the
Department and with other agencies that fund and monitor postsecondary education institutions.
3
Over the last several months, we have met with officials from other agencies, including the U.S.
Departments of Veterans Affairs and Labor, the Government Accountability Office, the Federal
Trade Commission (FTC), the National Association of Attorneys General, the National
Association of State Administrators of Private Schools, and the New York State Education
Department. Just last week we met with officials at the White House. These efforts were
designed to share information about effective program monitoring, including how risk factors are
identified and used, and to improve inter- and intra-agency communication on postsecondary
education issues. In addition, we have been working with the Department's Office of Inspector
General (OIG) to identify the recurring findings and recommendations OIG makes during audits
of Federal student aid program participants in order to identify ways in which we can quickly
reduce program vulnerabilities.
We have begun to retool our process for reviewing participants in the Federal student aid
programs and to assess recently-revised program review guidelines. The Department's FSA
office is working to improve the program review process, strengthen State and interagency
partnerships, and identify other steps to improve program compliance.
These efforts have resulted in better inter- and intra-agency coordination, use of available
technology and information, and staff preparation, including the following examples.
Access to, and use of, the FTC database of consumer complaint information: The
Department is now able to input and extract trend information about student-reported
problems regarding postsecondary schools. This information will be used to help make
decisions about the institutions we should monitor given available resources.
4
Creation of a database to promote student consumer complaint resolution: The
Department has created a database of contact information to allow student consumer
complaints to be referred, as appropriate, to State Attorney General offices or State
agencies responsible for consumer protection or licensing.
Expansion of the joint project to improve targeting of limited monitoring resources:
The Department plans to build on the previous successes of the OIG and FSA in
identifying risk factors for use in targeting program review activities. These offices
combined the efforts of staff with expertise in auditing, investigation, inspections,
program reviews, and system data knowledge to identify areas that were at high risk for
fraud. They then used this information to deter this activity and to propose legislative or
regulatory changes to reduce further instances of fraud. The initial OJG/FSA Fraud
initiative conducted resulted in approximately 65% of the 17 schools identified being
found to have committed the frauds or abuses identified by the data queries/fraud/abuse
indicators.
Notwithstanding our enhanced monitoring efforts, we have an additional safeguard in protecting
against waste, fraud, and abuse in the Federal student aid programs - the students who are the
direct beneficiaries of those programs. We need to equip them with the tools they need to make
good choices. We have increased our; efforts to get more and better, information to consumers.
In August, the Department began showing graduation rates, collected as part of the National
Center for Education Statistics' Integrated Postsecondary Education Data System (IPEDS), to aid
applicants when they select an institution to receive their ISAR information. We anticipate that
this additional consumer disclosure will help students and families assess whether they should
5
enroll in a particular institution. This information helps to remind students to review their
choices carefully, and leads them to sources for more comprehensive information. As a possible
next step, we are looking into ways that we might link students and their families to the
Depa1tment of Labor' s useful career information, which would enable students to assess what
careers are in demand and what wages they might expect to earn in order to inform their
decisions on further education in a selected field.
Over the last several years, the Department has been engaged in rulemaking on a variety of
issues arising from changes to the Higher Education Act of 1965 (HEA). These rulemaking
effotts have been very impottant to ensuring that new programs, like Academic Competitiveness
Grants, National SMART Grants, and TEACH Grants, have been appropriately and efficiently
implemented. These rulemaking efforts have also led to important changes to the Federal
student loan programs. While some of these rulemaking efforts have helped improve program
integrity indirectly, little has been done to focus rulemaking on that specific topic.
On May 26, 2009, the Department published a Federal Register Notice announcing our intent to
establish two negotiated rulemaking committees. One committee will develop proposed
regulations governing foreign schools. The second committee will develop proposed regulations
to maintain or improve program integrity in the Federal student aid programs. In late June 2009,
the Department held three public hearings for interested parties to discuss the agenda for the
negotiated rulemaking sessions and sought input about whether we should consider rules to
modify certain practices related to program integrity and how and when to implement these
modifications. We heard testimony and received written comments from approximately 290
6
individuals. Transcripts from the hearings and copies of the written comments are available on
the Department's website. Comments on program integrity issues during the hearings ranged
widely, from "make no change" to recommendations for significant change.
The negotiated rulemaking process is continuing. We have received nominations for individuals
to serve on the negotiating committees and we have started the process to select individuals to
serve on those committees. We will begin negotiations in early November 2009, and expect to
complete negotiations by February 2010.
Based on the feedback received at the public hearings held in Denver, Philadelphia and Little
Rock, we have identified a dozen topics for negotiations. Let me talk briefly about several of
those topics as they relate directly to program integrity in the Federal student aid programs.
One concern that arose during the public hearings and the public comments was about the level
of debt that students were incurring in relation to the education and training being provided. As
we looked at the regulatory requirements, several changes seemed to be appropriate for
consideration to address the debt that students incur. In this context, we plan to consider
regulatory changes in three areas: satisfactory academic progress; the definition of a "credit
hour"; and "gainful employment in a recognized occupation".
With regard to satisfactory academic progress (SAP), to be eligible to receive Federal student
financial aid, a student must meet standards of satisfactory academic progress toward a degree or
certificate offered by that institution. During the public hearings, the Department sought input on
7
whether, or how, to clarify the definition of SAP. As a result of those hearings, during the
negotiations we will discuss whether the current regulations on retaking courses to meet
qualitative standards should be reconsidered; whether students should be permitted to use
Federal student aid funds to retake courses to get a better grade; whether the regulations
governing SAP should be changed to require reviews more frequently than once each year; and
whether the regulations governing cumulative completion and grade point average requirements
should be revisited.
Another issue that will be considered during the upcoming negotiations is the definition of
"credit hours". Credit hours are used to measure progress toward the completion of a degree or
certificate, and in the award of Federal student aid, but there is no commonly accepted definition
of what is an appropriate measure of a credit hour. A credit hour is a unit that weights the value,
level, or time requirements of an academic course taken at an educational institution. At its most
basic, a credit hour is a proxy measure of student learning. During the public hearings, the
Department sought input on whether there should be a regulatory definition of a credit hour for
Federal student aid purposes; whether different standards for earning a credit hour should be
developed for undergraduate education, graduate study, distance education, and other non-
traditional programs; and what relationship such a definition for purposes of Federal student aid
should have to accrediting agencies' standards for program length.
Another issue to be discussed in the negotiations is "gainful employment in a recognized
occupation". Certain for-profit institutions of higher education and postsecondary vocational
institutions are generally allowed to use Federal student aid only for programs that prepare
students for "gainful employment in a recognized occupation." This HEA requirement was
8
restated in 2008 by the Higher Education Opportunity Act (P.L. 11 0-315), and we sought input
during the hearings on whether and how "gainful employment" could be more clearly defined.
One suggestion was that the term could be defined in a way that takes into consideration a
student' s likely earnings as well as the likely amount of student loan debt. The negotiators, in
consultation with the Department of Labor, can consider that suggestion and other ideas on the
ISSUe.
During the public hearings, we also heard concerns expressed about overly-aggressive
admissions officers and misleading advertising by postsecondary institutions. To address these
concerns, we will consider whether the rules related to the prohibition against making incentive
payments to recruitment personnel should be re-examined. The HEA prohibits an institution, as
a condition of eligibility for participating in the Federal student aid programs, from providing
any commission, bonus, or other incentive payment based directly or indirectly on success in
securing enrollments or financial aid to any individual or entity engaged in recruiting or
admissions. Current "safe harbor" regulations were intended to help institutions adopt
compensation arrangements that are not considered to run afouJ of these prohibitions.
Unfortunately, these regulations can result in what might otherwise be viewed as improper
student recruiting activities by some unscrupulous institutions. The Department has received a
large number of complaints from students and enrollment advisors about the high-pressure sales
tactics of some postsecondary institutions. Some argue that tying staff compensation to the
number of students enrolled is an inherent conflict of interest, and that the safe harbors
undermine the statutory ban on incentive compensation. The Department has also heard from a
number of educational institutions that the purported lack of clear guidance prior to
9
establishment of the safe harbors made it difficult for institutions to be confident of their
compliance with the law. During the upcoming negotiations, we will consider whether the safe
harbors should be maintained, amended, or eliminated in whole or in part from the regulations.
During the public hearings, we also heard complaints about false and misleading advertising and
other information that is provided to prospective students and their families. While this issue is
also under the purview of the FTC as it relates to for-profit entities, it is clear that the potential
for false and misleading information can be an issue at all types of postsecondary education
institutions. We will discuss this issue during the upcoming negotiations, and hope to have input
from the FTC on its experience.
The REA also includes a requirement that, to be eligible for Federal student aid, an institution
be legally authorized by a State to offer a postsecondary educational program. The Department' s
interpretations of this provision have, over time, evolved into considering a State's failure to
preclude the provision of postsecondary education as constituting that authorization. In the
upcoming negotiations, we will discuss whether the REA's State authorization requirement
should involve at least some minimal level of affirmative approval by a State.
With this description of the Department's program integrity and consumer protection efforts as
background, I will now address the recommendations made by the Government Accountability
Office (GAO) in its recent report, Proprietary Schools: Stronger Department of Education
Oversight Needed to Help Ensure Only Eligible Students Receive Federal Student Aid. Even
before the Department received the report, we had already identified the two topics discussed by
10
GAO- the Definition of High School Diploma for the Purpose of Establishing Eligibility to
Participate in Federal Student Aid and Ability to Benefit- as potential topics for negotiations in
the upcoming round of negotiated rulemaking.
The HEA requires an institution of higher education participating in the Federal student aid
programs to admit as a regular student only a person who have obtained a high school diploma,
or its recognized equivalent, unless the student passes an "Ability to Benefit" test, as discussed
below. The high school diploma serves as an indicator that the student is qualified to study at the
postsecondary level. During the public hearings, institutions expressed concern about the
administrative burden related to researching the legitimacy of a high school diploma. In
addition, some witnesses described situations in which institutions direct students without high
school diplomas to high schools with which the institution may have a business arrangement to
complete their secondary school degree. Many institutions have asked the Department or State
educational agencies, in order to reduce the burden on institutions, to develop either a
comprehensive list oflegitimate high schools or a listing of schools that are known as "diploma
mills." During the upcoming negotiated rulemaking, we will discuss these issues and develop
regulatory changes, if appropriate.
Generally, students without a high school diploma or its recognized equivalent, aGED, can
qualify for Federal student aid if they pass an independently administered test of basic math and
English skills approved by the Secretary, called an "Ability to Benefit" (ATB) test. These ATB
tests are published by private, for-profit and non-profit test publishers, and are administered to
11
students by an independent assessment center operated at public or non-profit institution of
higher education, or by a certified independent test administrator.
The Department is responsible for approving ATB tests, and ensuring that each test publisher is
monitoring the administration of its tests to students. The regulations provide that the test
publishers are responsible for certifying and monitoring test administrators to ensure the
independent and proper administration of ATB tests. Under the current regulations, test
publishers are required to conduct, and submit to the Department, an analysis of test scores every
3 years to identify any test irregularities that would suggest that ATB tests are not being
administered in accordance with the Department's regulations.
fn its report, GAO recommended that the Department strengthen its monitoring of test
publishers. GAO also recommended that the Department take steps to ensure that the analyses
conducted by test publishers are sufficient to identify improper testing. Finally, GAO
recommended that the Department modify its regulations to obtain more frequent analysis of test
scores by test publishers to improve the integrity of the testing process.
In general, we agree with the findings and recommendations in the GAO report and, even before
release of the report, we had taken steps to improve our monitoring and oversight of the A TB test
publishers. The Department now has systems in place to monitor and track the 3-year test-
anomaly analyses required of all test publishers. We are currently contracting for the services of
independent psychometricians who wm review not only the 3-year test analyses, but also any
new or renewal requests received from test publishers. Moreover, the Department has begun
12
planning for changes to its school-reporting systems that will support student-specific ATB
reporting. The results of this reporting will help us focus monitoring efforts on institutions that
have a high number of ATB eligible students.
ATB testing is among the issues for the upcoming negotiated rulemaking sessions. Among the
topics around ATB testing that will be discussed in those negotiations will be the establishment
of tighter reporting and other controls on individuals who have been de-certified by a test
publisher, and more frequent reporting by test publishers.
Let me conclude my remarks by emphasizing that our goal is to work to protect students and
families as consumers of educational and training services of all types, to ensure the integrity of
the student aid programs, and to use all the tools available to achieve those ends.
[would be pleased to respond to any questions that you might have.
13
From:
Sent:
To:
Cc:
Subject:
This is great
in there? By
updated since
paragraphs on
Hammond, Cynthia
Manheimer, Ann
for tonight. Can we get some more examples and details to flesh out what was
early next week? Anything on steps already taken or timelines that can be
his testimony would help as well. By the I un-highlighted the two
neg reg before sending.
From: Ann
To: Cynthia
Cc: Alejandraj Bobj Leigh
Cynthia - I highlighted the Testimony - will this format work? If need I can rework to a
one-pager - Ann
From: Leigh
To: Cynthia
Cc: Annj Alejandraj Bob

1) Oversight
http://seekingalpha.com/article/186144-corinthian-colleges-inc-f2g10-gtr-end-12-31-09-
earnings - call -transcript?source=yahoo&page=-1
http://seekingalpha.com/article/158257- corinthian- colleges - inc -f4g09 -gtr- end-e6- 30-09-
3) Advertisements
http://www.smartmoney.com/personal -finance/college-planning/Your-Worth-to-a-College- Referral -
Service/
Hope this helps.
-Leigh
u.s. Department of Education
- - - - -Original Message- - - - -
From: Cynthia
To: Leigh
Here is the current list I have of requests from Amy Jones and David Cleary. They
want these if at all possible. Can you help with this? I am only working on partial
information here since these come from a meeting with Martha that I in.
on who to talk to.
2
From:
Sent:
To:
Cc:
Subject:
Kvaal, James
Friday, September 03, 2010 6:37PM
Miller, Tony; Weiss, Joanne; Rose, Charlie; Cunningham, Peter; Gomez, Gabriella; Yuan,
Georgia
Kanter, Martha; Ochoa, Eduardo
gainful employment
Please let me know if you have any questions.
thanks
3
From: Rose, Charlie
Sent:
To:
Kvaal, James
Subject:
Thank you.
Chariie
From: Kvaal, James
Re: gainful employment
To: Miller, Tony; Weiss, Joanne; Rose, Charlie; Cunningham, Peter; Gomez, Gabriella; Yuan, Georgia
Cc: Kanter, Martha; Ochoa, Eduardo
Sent: Fri Sep 03 17:37:10 2010
Subject: gainful employment
thanks
4
From: Kvaal, James
Sent:
To:
Martin, Carmel
Subject: FW: gainful employment
Sorry Carmel! I'll loop you if there's fol low up
From: Kvaal, James
thanks
5
From: Gomez, Gabriella
Sent:
To:
Kvaal, James
Subject: Re: gainful employment
You may want to loop in Carmel
Gabriella Gomez, Assistant Secretary
Office of Legislation and Congressional Affairs
(202) 401-0020
From: Kvaal, James
Sent: Fri Sep 03 17:37:10 2010
thanks
6
From: Kvaal, James
Sent:
To:
Gomez, Gabriella
Subject: RE: gainful employment
Thanks! just noticed I forgot her
To: Kvaal, James
You may wantto loop in Carmel
(202) 401-0020
From: Kvaal, James
Sent: Fri Sep 03 17:37:10 2010
thanks
7
From:
Sent:
To:
Cc:
Subject:
Great
From: Kvaal, James
Cunningham, Peter
Friday, September 03, 2010 9:51 PM
Kvaal, James; Miller, Tony; Weiss, Joanne; Rose, Charlie; Gomez, Gabriella; Yuan, Georgia
Sent: Fri Sep 03 17:37:10 2010
Subiect: oainful emolovment
thanks
8
From:
Sent:
To:
Cc:
Subject:
James,
Miller, Tony
Friday, September 03, 201 o 10:06 PM
Kvaal, James
RE: gainful employment
Can we connect this weekend for a brief conversation on ~ ~ l
Thanks,
Tony
From: Kvaal, James
Sent : Friday, September 03, 2010 6:37 PM
thanks
9
Sent:
To:
Saturday, September 04, 201 o8:36AM
Miller, Tony; Kvaal , James
Cc: Ochoa, Eduardo; Ferguson, Keith
Subject:
From: Miller, Tony
To: Kvaal, James
Sent: Fri Sep 03 21:05:33 2010
James,
Can we connect this weekend for a brief conversationi!.
0
Jf!Jt
Thanks,
Tony
From: Kvaal, James
Sent: Friday, September 03, 2010 6:37 PM
thanks
10
Sent:
To:
Weiss, Joanne
Subject: FYI : gainful employment
To: Miller, Tony; Kvaal, James
Sent: Sat Sep 04 07:36:17 2010
Martha
From: Miller, Tony
To: Kvaal, James
Sent: Fri Sep 03 21:05:33 2010
James,
Thanks,
Tony
From: Kvaal, James
11
l
thanks
12
Sent:
To:
Bergeron, David
Subject: Fw: gainful employment
Sent: Sat Sep 04 07:36:17 2010
Martha
From: Miller, Tony
To: Kvaal, James
Sent: Fri Sep 03 21:05:33 2010
James,
Can we connect t his weekend for a brief conversation t < D ~ l
Thanks,
Tony
From: Kvaal, James
13
thanks
14
From: Miller, Tony
Sent:
To:
Saturday, September 04, 201 o 9:01 AM
Kanter, Martha; Kvaal, James
I'm traveling to California today so I need to have call start 5.30 pm or later.
Sent: Sat Sep 04 07:36:17 2010
From: Miller, Tony
To: Kvaal, James
Sent: Fri Sep 03 21:05:33 2010
James,
Can we connect this weekend for a brief conversation on JOO(OJ
Thanks,
Tony
From: Kvaal, James
Sent : Friday, September 03, 2010 6:37 PM
15
.I
thanks
16
From: Kvaal, James
Sent:
To:
Miller, Tony; Kanter, Martha
I'm flexible on time, look forward to talking
From: Miller, Tony
To: Kanter, Martha; Kvaal, James
Sent: Sat Sep 04 08:01:22 2010
Sent: Sat Sep 04 07:36:17 2010
From: Miller, Tony
To: Kvaal, James
Sent: Fri Sep 03 21:05:33 2010
James,
Can we connect this weekend for a brief conversation on ~ ~ , '
Thanks,
Tony
From: Kvaal, James
17
I
thanks
18
Sent:
To:
Miller, Tony; Kvaal , James
OK-6pm
From: Miller, Tony
Sent: Sat Sep 04 08:01:22 2010
Sent: Sat Sep 04 07:36:17 2010
From: Miller, Tony
To: Kvaal, James
Sent: Fri Sep 03 21:05:33 2010
James,
Can we connect this weekend for a brief conversation
Thanks,
Tony
From: Kvaal, James
19
I
thanks
20
From: Ochoa, Eduardo
Sent:
To:
Cc:
Kanter, Martha; Miller, Tony; Kvaal, James
Ferguson, Keith
6 pm it is. Let us know the conference call number and participant code.
Eduardo M. Ochoa
Assistant Secretary for Postsecondary Education
1990 K Street NW
Sent: Saturday, September 04, 2010 10:21 AM
OK- 6 pm
From: Miller, Tony
Sent: Sat Sep 04 08:01:22 2010
Sent: Sat Sep 04 07:36:17 2010
Martha
From: Miller, Tony
To: Kvaal, James
21
Sent: Fri Sep 03 21:05:33 2010
James,
Can we connect this weekend for a brief conversation o r { < ~
Thanks,
Tony
From: Kvaal, James
thanks
22
Sent:
To:
Ochoa, Eduardo
Will do.
To: Kanter, Martha; Miller, Tony; Kvaal, James
Cc: Ferguson, Keith
Sent: Sat Sep 04 09:45:20 2010
Eduardo M. Ochoa
Assistant Secretary for Postsecondary Education
1990 K Street NW
OK-6pm
From: Miller, Tony
Sent: Sat Sep 04 08:01:22 2010
Sent: Sat Sep 04 07:36:17 2010
23
Martha
From: Miller, Tony
To: Kvaal, James
Sent: Fri Sep 03 21:05:33 2010
James,
Can we connect this weekend for a brief conversation o l t b ~ l ~
Thanks,
Tony
From: Kvaal, James
thanks
24
From: Ferguson, Keith
Sent: Saturday, September 04, 201 o 1 :46 PM
To:
Subject:
Ochoa, Eduardo; Kanter, Martha; Miller, Tony; Kvaal , James
I am working to get the conference line established. Will email it out once I have it.
K
To: Kanter, Martha; Miller, Tony; Kvaal, James
Cc: Ferguson, Keith
Eduardo M. Ochoa
Assistant Secretary for Postsecondary Education U.S. Department of Education 1990 K Street,
NW Washington, DC 20006 ______________________________ ___________________________ ___
OK - 6 pm
From: Miller, Tony
Sent: Sat Sep 04 08:01:22 2010
Sent: Sat Sep 04 07:36:17 2010
that works for everyone.
Martha
25
From: Tony
To: James
Cc: Martha; Eduardo
Sent: Fri Sep 03 21:05:33 2010
James
Can we connect this weekend for a brief conversation on

Tony
From: James
To: Tony; Joanne; Charlie; Peter; Gabriella;
Georgia
Cc: Martha; Eduardo
thanks
26
I
Sent:
To:
Saturday, September 04, 201 o4:37PM
Ferguson, Keith
Thanks.
From: Keith
To: Eduardo; Martha; Tony; James
K
From: Eduardo
Sent: September 2010 10:45 AM
To: Martha; Tony; James
Cc: Keith
Eduardo M. Ochoa
Assistant Secretary for Postsecondary Education U.S. Department of Education 1990 K
NW DC 20006 ------------------------------ ------------------------------
From: Martha
To: Tony; James
Cc: Eduardo; Keith
OK - 6 pm
From: Tony
To: Martha; James
Cc: Eduardo; Keith
Sent: Sat Sep 04 08:01:22 2010
I'm traveling to Califor nia today so I need to have call start 5.30 pm or later.
From: Martha
To: Tony; James
Cc: Eduardo; Keith
Sent: Sat Sep 04 07:36:17 2010
27
From: Tony
To: James
Cc: Martha; Eduardo
Sent: Fri Sep 03 21:05:33 2010
James

Tony
From: James
Sent : September 2010 6:37 PM
Georgia
Cc : Martha; Eduardo
Subiect: gainful employment
thanks
28
Sent:
To:
Kanter, Martha
You bet. Going in on Monday afternoon by they way. Will make sure we are ready for the
upcoming week!
From: Kanter) Martha
To: Ferguson) Keith
Sent: Sat Sep 04 15:37:03 2010
Thanks.
From: Ferguson) Keith
Sent: Saturday) September 04) 2010 1:45 PM
To: Ochoa) Eduardo; Kanter) Martha; Miller) Tony; Kvaal) James
K
From: Ochoa) Eduardo
Sent: Saturday) September 04) 2010 10:45 AM
To: Kanter) Martha; Mi ller) Tony; Kvaal) James
Cc : Ferguson) Keith
Eduardo M. Ochoa
Assistant Secretary for Postsecondary Education U.S. Department of Education 1990 K Street)
NW Washington) DC 20006 _________________________________________________________ ___
From: Kanter) Martha
Sent: Saturday) September 04) 2010 10:21 AM
To: Miller) Tony; Kvaal) James
Cc: Ochoa) Eduardo; Ferguson) Keith
OK - 6 pm
From: Miller) Tony
To: Kanter) Martha; Kvaal) James
Cc: Ochoa) Eduardo; Ferguson) Keith
Sent: Sat Sep 04 08:01:22 2010
29
From: Martha
To: Tony; James
Cc: Eduardo; Keith
Sent: Sat Sep 04 07:36:17 2010
Martha
From: Tony
To: James
Cc: Martha; Eduardo
Sent: Fri Sep 03 21:05:33 2010
James

Tony
From: James
Georgia
Cc: Martha; Eduardo
Suh; <>r+ a::.i n.f1 11 <>mn 1 n tm<>n+
thanks
30
Sent: Saturday, September 04, 201 o2:12PM
To:
Subject:
Ochoa, Eduardo; Kanter, Martha; Miller, Tony; Kvaal , James
Hello allJ
I have set up the following number:
Phone:
Leader Code:
I will not be able to activate the line personally. MarthaJ will you handle the leader code?
You should be set. Let me know if you have questions.
Keith
From: OchoaJ Eduardo
Sent: SaturdayJ September 04J 2010 10:45 AM
To: KanterJ Martha; MillerJ Tony; KvaalJ James
Cc: FergusonJ Keith
Eduardo M. Ochoa
Assistant Secretary for Postsecondary Education U.S. Department of Education 1990 K StreetJ
NW WashingtonJ DC 20006 _________________________________________________________ ___
Sent: SaturdayJ September 04J 2010 10:21 AM
To: MillerJ Tony; KvaalJ James
Cc: OchoaJ Eduardo; FergusonJ Keith
OK - 6 pm
From: MillerJ Tony
To: KanterJ Martha; KvaalJ James
Sent: Sat Sep 04 08:01:22 2010
I'm traveling to California today so I need to have call start 5.30 pm or later .
31
To: MillerJ Tony; KvaalJ James
Sent: Sat Sep 04 07:36:17 2010
Martha
From: MillerJ Tony
To: KvaalJ James
Cc: KanterJ Martha; OchoaJ Eduardo
Sent: Fri Sep 03 21:05:33 2010
James J
Can we connect this weekend for a brief conversation o n i ~ M Q J
ThanksJ
Tony
From: KvaalJ James
Sent: FridayJ September 03J 2010 6:37 PM
To: MillerJ Tony; WeissJ Joanne; RoseJ Charlie; CunninghamJ Peter; GomezJ Gabriella; YuanJ
Georgia
thanks
32
Sent: Saturday, September 04, 201 o 4:35 PM
To: Ferguson, Keith; Ochoa, Eduardo; Miller, Tony; Kvaal , James; Yuan, Georgia; Bergeron,
David
I will activate the leader code. Keith.
From: Keith
To: Eduardo; Martha; Tony; James
Hello
I have set up the following number:
I will not be able to activate the line personally. will you handle the leader code?
You should be set. Let me know if you have questions.
Keith
From: Eduardo
To: Martha; Tony; James
Cc: Keith
Eduardo M. Ochoa
Assistant Secretary for Postsecondary Education U.S. Department of Education 1990 K
NW DC 20006 ______________________________ ___________________________ ___
From: Martha
To: Tony; James
Cc: Eduardo; Keith
OK - 6 pm
From: Tony
To: Martha; James
Cc: Eduardo; Keith
Sent: Sat Sep 04 08:01:22 2010
33
From: Martha
To: Tony; James
Cc: Eduardo; Keith
Sent: Sat Sep 04 07:36:17 2010
Martha
From: Tony
To: James
Cc: Martha; Eduardo
Sent: Fri Sep 03 21:05:33 2010
James

Tony
From: James
Georgia
Cc: Martha; Eduardo
I wanted to make sure that aware of continuing White House discussion on the GE rule.
The NEC has expressed interest in four questions specifically: whether we are giving adequate
weight to consumer choice in ensuring program quality; whether the standards should apply to
all institutions; whether we adequately consider the disadvantaged populations served by some
schools; and whether we have any external benchmarks for whether we are accurately
identifying the most problematic institutions.
While we have considered all of these questions we are g1v1ng them more thought now
and in some cases undertaking additional analysis. Because this discussion is on the West
Wing you and Arne may hear more about it.
also looking at the Phoenix analysis circulated particularly their claim
that there is no federal cost to their programs.
34
thanks
35
From: Finley, Steve
Sent:
To:
Kanter, Martha
I'm sorry I missed the call this afternoon.
Steve
Sent: SaturdayJ September 04J 2010 4:47 PM
To: FinleyJ Steve
Subject: FW: gainful employment
From: KvaalJ James
To: MillerJ Tony; WeissJ Joanne; RoseJ Charlie; CunninghamJ Peter; GomezJ Gabriella; YuanJ
Georgia
thanks
36
From:
Sent:
Gordon, Robert M. J @omb.eop.gov]
Wednesday, septerne:Ts. PM
To:
Cc:
Rodriguez, Roberto J.; Kvaal , James; Kahn, Lisa B. ; Rouse, Cecilia E.
Higginbottom, Heather A.; Pope, David F.
Subject:
Attachments:
Th::mk<:
0

Best,
Robert
GEdeck 0915410 ver 1 (2).ppt
From: Rodriguez, Roberto J.
Sent: Wednesday, September 15, 2010 10:06 PM
To: Rodriguez, Roberto J.; Gordon, Robert M.; 'Kvaal, James'; Kahn, Lisa B.; Rouse, Cecilia E.
Cc: Higginbottom, Heather A.; Pope, David F.
Subject: RE: gainf ul employment
Thanks.
From: Rodriguez, Roberto J.
To: Gordon, Robert M.; 'Kvaal, James'; Kahn, Usa B.; Rouse, Cecilia E.
All,
Please have a look at the

Roberto
37
I
I
From:
Sent:
To:
Cc:
Subject:
Attachments:
OK.
Thanks,
Roberto
From: Gordon, Robert M.
Rodriguez, Roberto J.

Thursday, September :43 Ati:f
Gordon, Robert M. ; Kvaal , James; Kahn, Lisa B.; Rouse, Cecilia E.
Higginbottom, Heather A.; Pope, David F.
GEdeck 0915410 ver 3.ppt
Sent: Thursday, September 16, 2010 11:30 AM
To: Kvaal, James; Kahn, Lisa B.; Rodriguez, Roberto J.; Rouse, Cecil ia E.
From: Kvaal, James fmailto:James.Kvaal@ed.gov]
To: Kahn, Lisa B.; Rodriguez, Roberto J.; Gordon, Robert M.; Rouse, Cecilia E.
KDJI'J I
From: Kahn, Lisa B. L @cea.eop.govl
To: Kvaal, James; Rodriguez, Roberto J.; Gordon, Robert M.; Rouse, Cecilia E.
'J
From: Kvaal, James <James.Kvaal@ed.gov>
To: Rodriguez, Roberto J.; Gordon, Robert M.; Kahn, Lisa B.; Rouse, Cecilia E.
Sent: Thu Sep 16 10:45:32 2010
thanks
From: Rodriguez, Roberto J. pPJ l @who.eop.govl
To: Gordon, Robert M.; Kvaal, James; Kahn, Lisa B.; Rouse, Cecilia E.
All,
Please have a look at the
Roberto
2
J
From:
Sent:
To:
Subject:
Attachments:
FYI.
Kvaal, James
Thursday, September 16, 2010 10:59 AM
Chesley, Susan; Bergeron, David
FW: gainful employment
GEdeck 091541 o ver 1.pptx; CEA Appendix 09161 O.pptx
From: Rodriguez, Roberto J. Jl(6)(t} )@who.eop.gov]
To: Gordon, Robert M.; Kvaal, James; Kahn, Lisa B.; Rouse, Cecilia E.
All,
Roberto
3
Embargoed until Thursday, Sept. 16, at 12:00 am.
UNCORRECTED PROOF. DO NOT CITE OR DISTRIBUTE.
EDUCATI ONSECTOR REPORTS
September 201 0
ARE YOU GAINFULLY EMPLOYED?
Setting Standards for For-Profit Degrees
By Ben Miller
ABOUT THE AUTHOR
BEN MILLER is a policy analyst at Educat ion Sector. He can be
reached at bmiller@educat ionsector.org
ABOUT EDUCATION SECTOR
Education Sector is an independent t hink tank that challenges
conventional thinking in education policy. We are a nonprofit,
nonpartisan organization committed to achieving measurable
impact in education, both by improving existing reform initiatives
and by developing new, innovative solutions to our nation's most
pressing education problems.
Copyright 2010 Education Sector
Education Sector encourages the free use, reproduction, and distribution
of our ideas, perspectives, and analyses. Our Creative Commons licens-
ing allows for the noncommercial use of all Education Sector authored
or commissioned materials. We require attribution for all use. For more
information and instructions on the commercial use of our materials,
please visit our website, www.educationsector.org.
1201 Connecticut Ave., N.W, Suite 850, Washington, D.C. 20036
202.552.2840 www.educationsector.org
Education policy events in Washington, D.C., attract a familiar cast
of characters: think tank representatives, members of organizations
with eight-letter acronyms, and the occasional retired college
professor. But an event at the New America Foundation this summer
attracted a different crowd: organizations with names that ended in
"markets," "capital," and "fund. " The questions from the audience
weren't about quality teaching or common curriculum standards;
they were about income vs. earnings, access to federal databases,
and student debt thresholds. Someone hearing just the audio feed
might have easily mistaken the conference for the quarterly earnings
call of a Fortune 500 corporation.
The subject of the event was for-profit higher
education. Representatives from the financial
sector had come to New America, a nonpartisan
public policy instit ute, to hear a high-level Obama
administration official talk about a regulatory
cont roversy that could make them-or lose t hem-
hundreds of millions of dollars. Just a few days
before, the U.S. Department of Education had
released a new proposal that would make it more
difficult for for-profits to access billions of dollars in
federal funds. At the center of the proposal is a rule
called "gainful employment" that would penalize for-
profit colleges and other vocational training programs
for saddling students with more debt than they can
pay back.
For-profits have grown by leaps and bounds in
recent years, largely free of federal regulation. That
freedom would be significantly curtailed if the gainful
employment st andard takes effect. Vocational
training programs would be judged by t he ratio of the
debt t hat graduates assume relative t o their current
earnings and t he rate at which t hey are able to repay
it. If programs offered by for-profit colleges exceed
certain thresholds on t hose measures, they risk losing
eligibility for federal student aid. Given that many
for-profit colleges receive close to 90 percent of their
revenue from federal grants and loans, losing access
to these dollars would be a death sentence.
www.educationsector.org
With such high stakes, the proposed gainful
employment standard has generated intense debate.
While the owners of for-profits see a $29 billion
industry that produces some of the best earnings
rat ios in the st ock market , a group of well-f unded
short-sellers paints a picture of a f raudulent , over-
leveraged industry that's poised f or a subprime
mortgage-style collapse. The institutions argue
that they serve a class of st udents excluded from
t raditional higher education and that they are crucial
for meeting the Obama administration's college
complet ion goals. But many lawmakers worry that in
fulfilling that mission, for-profits have relied too heavily
on federal aid, forced st udents t o borrow t oo much
money, and produced degrees of questionable worth.
Sen. Tom Harkin, t he Iowa Democrat who chairs
the Senate committee overseeing t hese schools,
has warned t hat "even good actors in t his industry
are lured int o t he vortex of bad practices in order t o
compete and meet investors' expect ations."
1
Critics of t he gainful employment standard,
meanwhile, have claimed t he proposal "will eliminate
quality programs while doing little or not hing to
address the issue of excessive student debt."
2
Some
have even gone so far as t o say it "will attack our
freedom and individual liberty to make decisions t hat
have consequences."
3
EDUCATION SECTOR REPORTS: Are You Gainfully Employed? 1
Yet despite all the noise and controversy, important
questions have been left unanswered: Which
institutions are most vulnerable to the proposed
rules? What types of programs are most likely to be
affected? This report t ries to answer these questions,
using publicly available data to present, for the first
time, a picture of what effect the gainful employment
proposal could have at more than 12,600 vocational
programs at for-profit colleges and universities across
the country. This includes more than 2,350 bachelor's
degree programs.
Much of the focus in Congress and in the media
has been on institutions, particularly those that
are publicly traded. But this analysis suggests that
individual programs within those institutions may
vary widely in how they perform under t he proposed
gainful employment standard. An institution could
very well offer both programs that are unaffected and
programs that become ineligible for federal student
aid. This analysis also finds that the type of programs
that could lose eligibility under the gainful employment
standard vary significantly. Some fields, like those
for medical assistants, are likely to produce large
numbers of ineligible programs, but only exceed the
proposed debt-to-income standard by a few thousand
dollars, meaning they could avoid penalties if they
slightly reduced their costs. Others, like culinary arts
and food services, produce fewer violations, but those
that miss the mark often miss by a wide margin.
Out of more than 12,600 programs, about 4 percent,
or just over 500 programs, would lose eligibility
because of the new standard. This includes 8 percent
of bachelor's degree programs, 6 percent of associate
degree programs, and 1 percent of programs that are
generally certificate programs of two years or less.
4
Overall, the programs most likely to be affected are
those tied to high-tech fields, such as e-commerce or
graphic design, or those with low expected starting
salaries, such as medical assistant or chef.
Although these programs cover a range of different
jobs, they employ similar marketing tactics. Colleges
are forbidden by law to make false promises of jobs
or to inflate salary data, so they play on emotions,
appealing to students' desires to be valued in their
careers.
5
TESST College of Technology in Beltsville,
Md., a school owned by Kaplan Higher Education,
2 EDUCATION SECTOR REPORTS: Are You Gainfully Employed?
tells would-be medical assistants that they are
joining a "growing field that allows [them] to assist
others in need."
6
Students looking at Le Cordon
Bleu Institute of Culinary Arts, owned by Career
Education Corporation, are encouraged to "follow
[their] passion" and "explore [their] creativity. "
7
Kaplan
advertises its information technology degrees as a
chance for students to "be the most valued person
at work."
8
And at the Art Institute of Pittsburgh's
Online Division, even the ads for the interior design
program tell prospective students that they can have
a "profound impact on people's lives."
9
Colleges do connect these emotional appeals to "in-
demand" fields and the rapid growth of technology,
but these marketing pitches often tout an entire
industry, like health care, rather than the specific job
for which the college is preparing students. Instead,
the apparent benefits of these programs tend to rest
on amorphous and incalculable arguments that are
impossible to judge. And as this analysis shows, many
of these programs are poor investments for students.
And while these at-risk programs comprise only a
small minority of all programs at for-profit colleges,
it would be wrong to conclude that most for-profit
programs will emerge from the new federal standards
unscathed. A much larger number- some 65
percent- are likely to fall in a middle ground between
full eligibility and total ineligibility called "el igible with
a debt warning," which requires colleges to, among
other things, post prominent cigarette pack- style
"debt warnings" alerting potential students to the
likelihood that enrolling could be hazardous to their
financial health.
The gainful employment standard would not lead to
a wholesale shutdown of the for-profit sector. But it
will probably force many for-profits to substantially
change t heir pricing and approach to student
debt. More broadly, it will establish a new f ederal
perspective on higher education, involving close
examination of college prices relative to graduates'
future earnings, an idea that was first contemplated
decades ago but is only now seeing the light of day.
An Undefined Standard
Gainful employment is not a new standard. When
Congress passed the Higher Education Act in 1965, it
required that non-accredited public or private not-
for-profit programs provide gainful employment in
a recognized occupation in order to receive f ederal
money for student aid.
10
When for- profit colleges later
became eligible for these aid programs, Congress
required them to meet the same criteria.
But Congress never fully defined gainful employment
or explained how colleges could meet the standard.
Even when for-profits came under intense scrut iny
as part of a Congressional investigation into
widespread industry fraud in the early 1990s, the
term remained unclear. Instead of clarifying the
requirement, Congress and federal agencies turned
their attention to closing schools, tracking the rate at
which borrowers defaulted on their loans, and limiting
the percentage of revenue for-profit colleges could
receive from federal aid programs.
Today, for-profits are again in the spotlight. Enrollment
at these schools grew by 160 percent in the last
decade.
11
And despite enrolling only about 10
percent of all student s, for-profits consume 25
percent of all Pell Grant dollars disbursed and 21
percent of all federal student loan dollars.
12
That's a
large investment for a sector in which the average
graduation rate is 20 percent for bachelor's degrees
and just over 60 percent for programs of two years or
less, and in which it's estimated that as many as 40
percent of student loans go into default.
13
Those numbers prompted the federal government to
take a fresh look at the sector. The U.S. Senate has
held multiple hearings about the quality, recruitment
practices, and cost of t hese institutions, questioning
whether the more than $26 billion in federal aid given
to these schools each year is a good investment.
Likewise, the Obama administration is seeking greater
control of these schools through the regulatory
process. This June, the U.S. Department of Education
proposed language on 15 rules that, among other
things, would prevent for-profit inst itut ions from
paying recruiters based on student enrollment and
provide more consumer protections against false
advertising. A month later, it released a proposal to
define gainful employment by relying upon measures
of student borrowing, expected earnings, and student
loan repayment rates. That regulation is currently
going through a public comment period, and a final
version will be released later in 2010. If enacted, it
would go into effect on July 1, 2011 . It if does, the
standard would tie college quality to work-force
outcomes for the fi rst ti me, substantially changing the
way vocational programs are judged in the process.
Calculating Gainful
Employment
To determine whether a program meets the proposed
gainful employment standard, the Department of
Education would consider how much students borrow
to attend that program, the annual income of program
graduates, and t he rate at which program graduates
repay their loans. Using t hose fi rst t wo pieces of
inf ormation, the department would create a rat io of
annual earnings t o debt payments. Each individual
program offered by a for-profit institut ion and all non-
degree training programs at public or private, not-for-
profit colleges would have to meet certain t hresholds
on the debt-to-earnings comparison and maintain a
certain a minimum repayment rate in order to remain
eligible for federal student aid funds.
A program's repayment rate looks at the status of all
loans that entered repayment in the last four years.
Among those loans, it measures the dollar amount
of all loans being actively repaid divided by the
amount of loans t hat entered repayment during that
t imeframe. The regulation defines the numerator of
t his equation as t he original outst anding principal
balance of all loans that entered repayment in the
past four years and were repaid in f ull or had enough
payments to reduce the principal owed in t he last
fiscal year.
14
These figures include not just federal but
also private student loans. Note that the numerator
is based on the original principal value of a loan
that is being repaid, not the amount repaid. In other
words, if the principal owed is reduced by at least
$0.01, then the entire balance of the loan is counted
in the numerator. For example, consider a school
that had two students borrow $1,000 each. One
borrower makes no payments and does not reduce
the principal, the ot her pays enough to reduce t he
principal owed t o $999. In t his case, the repayment
rate is $1,000 divided by $2,000, or 50 percent.
The repayment rat e can also be thought of as the
percentage of loans being repaid, weighted for t he
size of the loans.
The proposed gainful employment standard also
judges programs based upon two ratios of students'
annual debt payments to their earnings. They are
calculated using the following three figures:
Annual loan payment: The median borrowing
amount among graduates from the past three years
is used to calculate an annual loan payment based
on the assumption that the debt is paid over 1 0
years with an interest rate equal to the standard
unsubsidized Stafford loan rate.
Average annual earnings: The average annual
income earned by program graduates over a
three-year period.
15
This data will be collected by
a federal agency, most likely the Social Security
Administration, and reported as a single figure to
the Department.
Discretionary income: The average annual
earnings minus 150 percent of the poverty
threshold for a single individual living in the
continental United States (about $16,245 in 2009).
For each program, the department calculates the
annual loan payment and then compares it to both
the annual average earnings and discretionary income
numbers for that program.
The department's proposal establishes thresholds
(described below) for repayment rates and debt-to-
income ratios. Based upon their performance relative
to these thresholds, programs are placed into four
different categories of eligibility: "eligible," "ineligible,"
"eligible with a debt warning," or " restricted."
These categories rest on three types of ranges. If a
program is entirely above the upper bound, then it is
eligible; if it is entirely below the lower bound, then it
is ineligible. All others that fall somewhere between
these two thresholds are either eligible with a debt
warning or restricted.
Eligible: These programs have a repayment rate of
at least 45 percent, and the annual loan payment is
less than or equal to 8 percent of the average annual
earnings or 20 percent of discretionary income.
Eligible programs are free of any restrictions.
Ineligible: These programs have a repayment rate
below 35 percent and an annual loan payment that
is both above 12 percent of average annual earnings
and 30 percent of discretionary income. These
programs will lose federal student aid eligibility.
Ineligible programs may not provide federal student
aid to any new students and must warn existing
enrollees of debt dangers, in addition to all the other
disclosures described below.
Eligible with a debt warning: These programs have
either a repayment rate or debt-to-income ratio that
exceeds the threshold for an eligible program, but
not both. In other words, the repayment rate must be
at or above 45 percent, or the debt-to-income ratio
must be at or below 8 percent or 20 percent, but both
cannot occur.
16
These programs may still participate
in the federal student aid programs, but they must
include in all materials and online a prominent warning
saying that students may have difficulty repaying their
loans. The school must also disclose its recent loan
repayment and debt-to-income rates.
Restri cted: These programs do not meet any of the
requirements for an eligible program, but exceed
some of the benchmarks for an ineligible program.
They occupy a middle ground. These programs have
a repayment rate below 45 percent and a debt-to-
income ratio below 8 percent and 20 percent. They
also have either a repayment ratio at or above 35
percent or a debt-to-income ratio at or below 12
percent or 30 percent, or both. Programs marked as
restricted by the U.S. Department of Education will
have their enrollment capped at the average of the
past three years, provide warnings to consumers
about debt levels, and must get statements from area
employers about why the program should continue.
These last two categories are opposites. A program
that is eligible with a debt warning is good enough on
one measure to meet the eligible threshold, but falls
short in the other. A restricted program doesn't meet
any of the eligible standards, but has at least one
calculation that is above the ineligible threshold. (See
Table 1.)
Other Important Considerations
In addition to the new set of standards and
measurements, the proposed gainful employment rule
contains a few other things worth mentioning.
The bottom 5 percent: The gainful employment
standard will go into effect in the 2012-13 academic
Table 1. How to Determine If a Program Meets the Gainful Employment Standard
Annual loan payment is ...
:s: 8%
:s: 8%
>8%
>8%and :s: 12%
> 8%and :s: 12%
>12%
>12%
OR
Share of
disc etionary income
AND
s: 20%
>20%
s; 20%
> 20% and :s: 30%
>30%
> 20% and ::; 30%
>30%
year, but penalties will be administered differently
that first year. Rather than preventing all ineligible
programs from receiving federal student aid that
year, those with low repayment and debt-to-income
rates will be broken down by the type of degree or
credential (associate, bachelor's, certificate, etc.)
awarded. In each category, the programs will be
sorted by repayment rate. The programs with the
lowest rates will lose their eligibility for aid until the
enrollment of all the ineligible programs equals 5
percent of the enrollment of all programs in that
category. The remaining programs will face the same
penalties as restricted programs.
New programs: Traditionally, new programs have
been able to gain access to federal student aid dollars
as long as they are offered at an accredited institution.
Under the proposed gainful employment standard,
new programs would also have to be approved by
the Department of Education. They would have to
fi le an application with t he department and include
enrollment projections along with comments from
unaffiliated employers about t he need for such a
program and the availability of related jobs. The
department will then determine whether to grant the
program eligibility.
Longer time frames: Programs that prepare
people for careers in which income levels increase
substantially after a few years (such as doctors or
social workers) can have their data calculated over the
fourth, fifth, and sixth years after t heir students leave
school. To stay eligible, programs that use the longer
t ime frame must show that their students' annual loan
<: 45%
Eligible
Eligible
Eligible
Debt warning
Debt warning
Debt warning
Debt warning
. ." '
Debt warning
Debt warning
Debt warning
Restricted
Restricted
Restricted
Restricted
Debt warning
Debt warning
Debt warning
Restricted
Restricted
Restricted
INELIGIBLE
payment is no more than 20 percent of discretionary
income or no more than 8 percent of average annual
earnings.
Overall Results
Under the gainful employment proposal, the
education department estimated that about 5 percent
of programs would be deemed ineligible and 8
percent would be restricted.
17
Another 48 percent
would be eligible with a debt warning, and 39 percent
would be fully eligible.
18
Among for-profit institutions,
the Department expects about 1 ,658 programs to
be declared ineligible, but it did not say how many
for-profit programs it considered overall.
19
It provided
no details on which institutions or program types are
likely to fall into this category.
It is impossible to independently verify the
Department's estimates because student income data
are protected by federal privacy laws. This analysis
estimates how many and what kind of programs are
at risk under the proposed standards by comparing
program costs to the potential income levels of
program graduates and by looking at the repayment
rate for the institution overall. In other words, if a
student borrowed to cover the entire cost of his or
her program, after receiving available federal grant
aid, would that amount, coupled with the institution's
repayment rate, put that program in danger of losing
eligibility? (See "Methodology" sidebar on page 6 for
a complete explanation of these estimates.)
Methodology
It is possible to estimate potential income levels for
individual programs because all institutions are required
to report an instructional program code for each of their
offerings.
1
Each code corresponds to specific professions
and their earnings data-information that is kept by the
Bureau of Labor Statistics.
2
Because one code can be
linked to multiple professions, the salary estimate reflects
the average annual 25th percentile earnings for each
instructional code. For codes tied to multiple jobs, the
earnings are weighted by the number of people employed
in each job.
Multiplying the salary amount by 8 percent and 12 percent
produced income threshol.ds for the average annual
earnings. Calculating discretionary income required
subtracting 150 percent of the poverty threshold for
a single individual and then multiplying the remaining
amount by 20 percent and 30 percent. Under the
proposed gainful employment calculation, the income
thresholds will be compared to the annual payment on
debt owed by a program's students. Because actual
earnings data ~ r e not available, this analysis instead
calculated how much debt a student could take on
if his or her annual loan payments were equal to the
income thresholds determined earlier. Loan amounts
were calculated by dividing the average annual earnings
and the discretionary income levels by 12 to determine
a monthly payment. The resulting figure was then
used to calculate the original amount a student would
have borrowed if they were making that payment each
month for 1 0 years and had a fixed interest rate ot 6.8
percent.
3
These loan terms are identical to those on an
unsubsidized Federal Stafford Loan.
The resulting original loan balance amounts represent
the maximum debt load a student could take on.
Students with higher debt burdens would be devoting
a larger percentage of their income to making annual
loan payments than what is allowed under the proposed
standard.
While the education department did release estimated
federal student loan borrowing levels by institution,
this information did not provide similar information on
average private loan borrowing by school-additional
debt that is also included in the proposed gainful
employment calculations. Private student loans can be
a significant source ot additional debt. Moreover, the
borrowing information was not reported uniformly-
some institutional data reflected both graduate and
undergraduate borrowers, while some offered separate
figures for the two. The lack of private stucient loan
borrowing is especially problematic because it is a
significant source of additional debt.
4
Unfortunately, there
is no central repository of reliable information on private
student loan borrowing at the institutional level.
fi EDUCATION SECTOR REPORTS: Are You Gainfully Employed?
So instead of relying on reported borrowing information,
this analysis approximates students' debt levels by
looking at the cost of their program, minus federal grant
aid received. Where available, program costs were
calculated using actual pricing information for tuition,
fees, books, and supplies reported by institutions.
5
This information is available for 1,890 schools in the
Department of Education's Integrated Postsecondary
Education Data System, or I PEDS, th.at also had
repayment rate information available. For programs that
take more than a year to complete, the total cost figure
encompasses all charges that may be spread out across
several years. If an institution did not specifically report
costs by program, its cost estimate per program is based
on the school's published figures for tuition and fees and
books and supplies. Bachelors degree programs reflect
the past four years of cost information; associate's degree
programs reflect the past two.
While students at proprietary colleges and universities do
take on large levels of debt, they also receive significant
amounts of federal grant aid. To account for this, each
program's cost estimate was reduced by the average
amount of federal grant aid received by students at
that institution, data that are also reported to I PEDS.
Bachelor's degree programs had their costs reduced by
the average federal grant aid received over the past four
years; associate degree programs had their costs reduced
by the average grant aid over the past two years.
Programs' eligibility under the proposed gainful
employment standard was then determined by taking
the cost estimates and subtracting from them the
borrowing thresholds established using the Bureau
of Labor Statistics data. If a programs cost minus the
borrowing thresholds yielded a positive number; then
that indicated a student was likely to borrow more than
the income estimates would allow. If the subtraction
produced a negative number, then that meant students
were likely to borrow less than the maximum allowable
amount. This information was paired with the institutional
repayment rates reported by the Department of Education
to determine whether a school would be affected by
the proposed standard. While there is no guarantee that
such programs would actually be sanctioned under the
new standard, this analysis does suggest which types of
programs and institutions may need to consider reining in
their borrowing over the next few years.
There are several limitations to this approach. Students
may borrow less than the full amount to cover program
costs, or they may borrow more than the full amount. The
assumption that students will borrow the full cost of their
education, minus available federal aid, is supported by
a number of statistics on student debt and the revenue
structure of for-profit colleges. An analysis of data from
Methodology, cont.
the National Postsecondary Student Aid Survey published
by Education Sector last year shows that over 92 percent
of students at for-profit colleges take out a loan to finance
their education.
6
And the debt levels these students
assume are quite high. The education department
estimates that the median debt level of for-profit students
ranges from $18,415 for an associate degree to over
$31 ,000 for a bachelor's degree? Similarly, the College
Board found that over 53 percent of bachelor's degree
recipients at for-profit institutions graduated owing over
$30,500.
8
And while it is reasonable to expect that not
every student would borrow such a high debt level, for-
profit colleges and their defenders note that they cannot
control how much students borrow and that some take
out too much debt. That over-borrowing could balance
out students who take out a lesser amount in loans.
The revenue structure of for-profit colleges also bolsters
the assumptions about student borrowing used in this
report. For-profit institutions may not take in more than
90 percent of their revenue from the federal student aid
programs, and many, especially the large publicly traded
companies are close to this threshold.
9
After subtracting
federal grant dollars, the remaining loan money represents
a very significant portion of a school's revenue. And there
is evidence that the revenue that does not come from
federal aid programs still comes in the form of loans. For
example, Corinthian Colleges Inc., a large publicly traded
company, reported that 89 percent of its revenue comes
from federal aid programs and only about 1 to 2 percent
comes from cash payments from students.
10
That leaves
private student loans as the most likely other source of
financing.
Students' actual earnings could also be higher than the
Labor Statistics figures. Estimates of federal grant aid
may also be too generous, because they reflect awards
given to first-time, full-time students. These amounts are
going to be higher than what the large number of part-
time students would receive.
While this approach could incorrectly identify programs
as at-risk for violating the gainful employment standard
when they are not, it is also possible for the opposite to
occur. Some programs may produce graduates with even
lower earnings than the national figures, further lowering
the income threshold. This analysis is meant to provide an
overall estimate of the how the proposed federal rules will
change the for-profit higher education sector as a whole
and how different program types are likely to be affected.
It not a fool-proof predictor of which individual institutions
or programs will meet the standards.
Notes
1. These institutions are known as program reporters and must
break down cost by program because their offerings start
at multiple times throughout the year and do not follow the
standard academic calendar.
2. Each student aid eligible offering is assigned a six digit
Classification of Instructional Programs (CIP} code that
identifies the content area covered by a program. For
a program in cosmetology may be assigned
the code 12.0401, which corresponds to "Cosmetology/
Cosmetologist, General." Using information from the
National Crosswalk Service Center, institutions can then
link a program's CIP code to the corresponding Bureau of
Labor Statistics codes. To continue the example, a program
with a CIP code of 12.0401 has four corresponding codes
in the Labor database: 39-5012 (hairdressers, hairstylists,
and cosmetologists), 39-5091 (makeup artists, theatrical and
performance}, 39-5092 (manicurists and pedicurists}, 39-5094
(skin care specialists}. For each profession, the SOC database
provides information on the number of people employed in an
occupation and their earnings at the 1oth, 25th, 50th, 75th,
and 90th percentiles.
3. Stan Brown, "Loan or Investment Formulas," Oak Road
Systems, February 19, 2010, http://oakroadsystems.com/
math/loan.htm#LoanAmount (accessed September 7, 2010}.
4. Sandy Baum and Patricia Steele, "Who Borrows Most?
Bachelor's Degree Recipients with High Levels of Student
Debt," College Board, April 2010, http://advocacy.
collegeboard.org/sitesldefault/files!Trends-Who-Borrows-
Most-Brief.pdf (accessed September 7, 2010}, 3.
5. Program reporters must provide the total cost for a program.
Thus, if a two-year program is listed, the expense figure that
goes with it covers both years of enrollment.
6. Kevin Carey and Erin Dillon, '' Drowning in Debt,"
(Washington, DC: Education Sector, July 9, 2009) http://
www.educationsector.org/analysis/analysis_show.htm?doc_
id,964333 (accessed September 7, 2010).
7. "Program Integrity: Gainful Employment (Notice of Proposed
Rulemaking},'' Federal Register Page 43647.
8. Sandy Baum and Patricia Steele, "Who Borrows Most?
Bachelor's Degree Recipients with High Levels of Student
Debt,'' 1.
9. "Emerging Risk: An Overview of Growth, Spending, Student
Debt and Unanswered Questions in For-Profit Higher
Education,'' U.S. Senate Health, Education, Labor, and
Pensions Committee, June 24, 2010, http://harkin.senate.gov/
documentslpdf/4c23515814dca.pdf (accessed September
10, 2010), 4.
10. "COCO- 02 2010 Corinthian Colleges Earnings Conference
Call, " Final Transcript, Thomson StreetEvents, February 2
1
2010, http://phx.corporate-ir.nef/Externai.File?item=UGFyZW
SOSUQ9Mzc3NjM4fENoaWxkSUQ9Mzc2NTI4fFR5cGU9MO=
=&1=1, (accessed September 7, 2010), 10.
Figure 1. Eligibility Status under Gainful
Employment
Overall
Programs
W.
Bachelor's Degree Associate's Degree
Programs Programs
-Ineligible
Restricted
Debt
warning
Eligible
This analysis examined 12,662 programs offered by
2,667 colleges or universities. It encompasses three
different types of programs, all of which are classified
by an instructional code known as a CIP. First, the
analysis looked at institutions that report the total
cost of specific programs.
20
This group includes 793
programs offered at public or private, not-for-profit
institutions, only two of which would be negatively
affected by the standard. These 6,140 programs at
1,890 institutions report students' exact cost to attend
that program. The analysis also included any program
offered at a for-profit institution that produced at
least one bachelor's or associate degree last year.
This includes 2,351 bachelor's degree programs at
431 schools and 4,171 associate degree programs
at 721 schools. In every case, only institutions with
repayment rate information were included.
Of this sample of more than 12,600 programs,
504 -or about 4 percent-would be ineligible for
federal student aid funds based upon this analysis.
That percentage is a bit lower than the education
department's estimates. Of the remaining programs,
16 percent would be eligible, 65 percent would be
eligible with a debt warning, and 15 percent would be
restricted.
21
(See Figure 1.)
Ineligible Programs
The 504 programs with high cost-to-income ratios
and low repayment rates are offered at 222 different
colleges or universities. Of those, 1 02 colleges had
more than one ineligible program. But 196 of the
institutions with an ineligible program had at least
one other program that would retain its eligibility.
This means that even if that program lost student
aid eligibility, the school could continue offering
other programs, so would not be put out of business
entirely.
These 504 programs represent 87 different
instructional codes. The instructional type with the
largest number of ineligible programs is medical/
clinical assistant, which represented 74 of the 504
violations. Other common types were programs for
culinary arts/chef training (34), e-commerce (31), and
accounting technology/technician and bookkeeping
(26).
Though medical/clinical assistant offerings were
among the most common program types to violate the
borrowing standards, the average amount by which
they exceeded these thresholds was much lower
than other program types-particularly those in the
food services. On average, medical/clinical assistant
Table 2. Most Common Types of Ineligible
Programs
Instructional category
MedicaVCiinical Assistant
Culinary Arts/Chef Training
E-Commerce/Electronic Commerce
Accounting Technology/Technician and
Bookkeeping
Graphic Design
74
34
31
26
Health Information/Medical Records 21
Technology/Technician
Interior Design 20
Administrative Assistant and Secretarial 13
Science, General
Baking and Pastry Arts/Baker/Pastry Chef 12
Design and Visual Communications, General 11
Medical Insurance Coding Specialist/Coder 11
Fashion Merchandising 11
exceeded the borrowing threshold for 12 percent of
average annual income by just over $7,900. Similarly,
other health-related programs like health information
and medical records, medical insurance coding, and
medical office assistant all had several programs in
violation, but these exceeded the 12 percent threshold
by an average of between seven and nine thousand
dollars. Since many of these programs are offered at
the associate or bachelor's degree levels, that works
out to only a few thousand dollars over each year.
Other program types are nowhere near meeting the
gainful employment standard. The ineligible programs
in culinary arts have an average repayment rate of 27
percent and have costs more than $29,000 above the
borrowing limits. The 12 ineligible programs in baking
and pastry arts also fare poorly with an average
repayment rate of 25 percent and costs more than
$22,000 above the limits.
Others have already raised concerns about student
debt at culinary institutions. In March, the New York
Times ran a front-page article on student debt at for-
profit colleges, featuring a picture of students in chefs'
uniforms. Inside, it discussed the story of Andrew
Newburg, who paid $41,000 for a program at Le
Cordon Bleu with the promise of a $38,000 line cook
job, only to find out classmates were taking $8-an-
hour dishwashing jobs.
22
Thirteen programs at Le
Cordon Bleu show up on our list of ineligible schools,
and 18 are on our list of restricted schools.
Restricted Programs
According to the analysis, 1,899 programs, or 15
percent, would be restricted under the proposed
gainful employment standard. These offerings all had
repayment rates that were too low or cost-to-income
ratios that were too high, but not both. The programs
are offered by 807 different institutions. Cosmetology
programs were the most common type of offering to
end up in this category, with 210 programs restricted.
Other program types that show up in large numbers
on the list include medical/clinical assistant (142
instances), animation, interactive technology, video
graphics, and special effects (83), and electrical,
electronic and communications engineering
technology (70). Forty-five culinary arts programs are
categorized as restricted, while 15 baker/pastry chef
programs fell into this category.
Many of these restricted programs could be in further
trouble if their graduates' earnings end up being
lower than the estimates. Over 800 of the restricted
programs had a repayment rate below 35 percent,
and 163 of these had a repayment rate below 20
percent. If these programs end up violating the debt-
to-income ratio they will become ineligible.
Bachelor's and Associate
Degree Programs
One particular concern raised by critics of the gainful
employment standard is that it would "preclude
for-profit colleges from offering bachelor's degree
programs," and eliminate many associate degree
programs, all due to their high cost.2
3
To test these
assertions, the analysis separated out all programs
offered by for-profit colleges in these two degree
types. This was done by using completion data from
I PEDS, which each year reports the type of program
and degree level for every credential conferred by
a college or university. A program's total cost was
estimated using the figures for tuition, fees, books,
and supplies for the total number of years it would
take to complete a program. This means summing the
cost over four years for bachelor's degrees and over
two years for associate degrees.
24
Table 3. Most Common Types of Restricted
Programs
Cosmetology/Cosmetologist, General
Medical/Clinical Assistant
Animation, Interactive Technology, Video
Graphics and Special Effects
Electrical, Electronic and Communications
Engineering Technology/Technician
CAD/CADD Drafting and/or Destgn
Corrections and Criminal Justice, Other
Legal Assistant/Paralegal
Administrative Assistant and Secretarial
Science, General
Graphic Design
Interior Design
142
83
70
68
66
55
53
47
45
45
This methodology has a few additional limitations.
Unlike the programs where the institutions report
specific costs, such a breakdown is not available
for these bachelor's degrees. Instead, the analysis
assumes that the tuition is the same for each offering
at a school. Recent research indicates price variability
is less pronounced at four-year institutions than at
two-year colleges. According to a research paper
published in May 201 0 by a fellow at the Association
for Institutional Research and the National Center
for Education Statistics, only about 13.3 percent of
for-profit four-year institutions vary their tuition by
program, and 6.7 percent vary their fees by program.
25
Second, it is possible that a student may take longer
to complete a degree. In that case, the cost would be
even higher than the estimate.
Bachelor's Degree Results
The bachelor's degree subset included 2,351
programs offered at 431 different institutions. Out of
all the bachelor's degree programs considered, 62
percent would be either eligible or eligible with a debt
warning under the proposed gainf ul employment
standard. An additional 29 percent would be
restricted, and 8 percent-or 193 programs-would
be ineligible. (See Figure 1.)
Programs, Bachelor's Degrees
E-Commerce/Eiectronic Commerce
Interior Design
Graphic Design
Fashion Merchandising
Animation, Interactive Technology, Video
Web Page, Digital/Multimedia and
Information Resources Design
Accounting Technology !Technician and
Bookkeeping
Computer Graphics
Design and Visual Communications, General
Fashion/Apparel Design
Cinematography and FilmNideo Production
-
~
31
19
16
9
8
8
8
7
7
7
7
1 Q EDUCATION SECTOR REPORTS: Are You Gainfully Employed?
Ineligible Programs
The 193 programs that would be ineligible are
offered at 78 colleges and universities. This includes
programs at branches of the Art Institutes, the
International Academy of Design and Technology, ITT
Technical Institute, and Westwood College. Of the
ineligible programs, 31 are in e-commerce -the most
of any program type. Other program types with large
numbers of ineligible programs include interior design
(19) and graphic design (16). On average, all of these
programs are well below the minimum repayment rate
of 35 percent and are more than $20,000 away from
meeting the debt-to-income standard.
These results indicate that programs with greater
work-force need are less likely to be ineligible.
Only a handful of programs in accounting and
one program each in business management, legal
assistant/paralegal, and nursing would be ineligible.
By contrast, most ineligible programs are in "dream
job" areas: they provide training in cutting-edge
fields like online businesses and graphic design, or
in luxury occupations like interior design or fashion
merchandising. These areas are associated with
relatively high borrowing levels, but do not offer large
numbers of jobs.
Programs, Bachelor's Degrees
Animation, lnt('lractive Technology, Video
Electrical, Electronic and Communications
Engineering Technologyffechnician
Corrections and Criminal Justice, Other
Interior Design
Legal Assistant/Paralegal
Accounting
Web Page, DigitaVMultimedia and
Information Resources Design
Graphic Design
Psychology, General
Computer and Information Systems
Security
79
70
45
36
32
31
24
23
21
21
Restricted Programs
About 29 percent of bachelor's degree programs
could be restricted-meaning they would not be able
to offer federal financial aid to new students and
would have to demonstrate a continued need for their
program from the local business community. The
most common types of programs in this category are
in animation, interactive technology, video graphics
and special effects (79 programs), followed by
electrical, electronic and communications engineering
technology (70), corrections and criminal justice (45),
and interior design (36). Programs in legal assistanV
paralegal, accounting, web page, digital/multimedia
and information resources design, and graphic design
also appeared numerous times.
Associate Degree Results
The associate degree subset included 4,171 different
programs offered by 721 institutions.
26
Of these
programs, 6 percent, or 267 programs, would be
ineligible under the gainful employment standard.
Another 75 percent of programs would be fully eligible
or eligible with a debt warning, while the remaining 19
percent would be restricted. (See Figure 1.)
Ineligible Programs
The 267 ineligible programs are offered by 142
different colleges or universities. This includes
programs offered by well -known college chains like
the Art Institutes, Everest (college, university, and
institute), ITT Technical Institute, Kaplan (college and
university), among others.
Fifty-seven different types of programs fall into
the ineligible category. Medical/clinical assistant
programs are the most common type of offering to be
ineligible, with 67 programs falling into this category.
Programs in culinary arts/chef training (22) and health
information/medical records technology (21) also
appear frequently in the list of ineligible program
types. On average, none of the most common
types of ineligible programs are close to meeting
the repayment rate standard, but many are less
than $1 0,000 above the borrowing threshold. These
programs would have to either significantly reduce
cost or raise their repayment rates in order to avoid
losing eligibility.
One interesting trend that emerges from the data for
associate programs is the large number of medical-
related programs that would be ineligible under
the proposed standard. In addition to the medical-
related categories already mentioned, medical
programs in insurance coding, office assistant,
office management, and secretary all appear in high
numbers on the list of ineligible programs. All of these
professions have low starting salaries. As a result,
many would not be able to justify the price tag of as
much as $28,000 for some of these programs.
Restricted Programs
The 787 restricted programs are offered at 375
different colleges and universities. This includes
multiple branches of Argosy University, the Art
Institutes, Brown Mackie College, Bryant and
Stratton College, DeVry University, Everest (college,
institute, and university), ITT Technical Institute, and
Le Cordon Bleu, among others. The most common
program types varied a little bit from those on the
list of ineligible programs. Medical/clinical assistant
programs again showed up on the top with 1 08
restricted programs. They are followed by programs
in computer aided design and drafting, administrative
assistant and secretarial science (53), and health
inf ormation/medical records technology (39).
Programs, Associate Degrees
Program instructional category
Medical/Clinical Assistant 67
Culinary Arts/Chef Training 22
Health Information/Medical Records
Accounting Technology/Technician and 18
Bookkeeping
Adminil>trative Assistant and Secretarial 13
Science, General
Medical Office Management/Administration
Baking and Pastry Arts/Baker/Pastry Chef
Medical Insurance Coding Specialist/Coder 10
Medical Office Assistant/Specialist 9
Cosmetology/Cosmetologist, General
Graphic Design
Programs, Associate Degrees
-
Program instructional category
CAD/CADD Drafting and/or Design
Technology !Technician
Administrative Assistant and Secretarial
Science, General
Health Information/Medical Records
Technology !Technician
Medical Administrative/Executive Assistant
and Medical Secretary
Medical Insurance Coding Specialist/Coder
Allied Health and Medical Assisting Services,
Other
Medical Office Management/Administration
Graphic Design
Accounting Technology!Technician and
Bookkeeping
Pharmacy Technician/Assistant
-
68
53
39
34
27
27
26
23
21
In aggregate, data on associate and bachelor's degree
programs suggest that a larger percentage of these
programs might be in danger of losing eligibility
than the overall sample that also included certificate
programs. For bachelor's degrees, the programs at
greatest risk appear to be in fields that are related to
high-tech jobs or luxury professions that may not be
in high demand; for associate degrees, the concerns
arise around expensive programs associated with
low-salary professions. The data suggests that degree
programs that provide training for well-paying, high-
demand jobs should not be affected too severely.
Publicly Traded Companies
Several programs at publicly traded companies
show up on the lists of either ineligible or restricted
programs. The Art Institute, Everest University, ITT
Technical Institute, and Westwood College would all
have both ineligible and restricted programs. While
the University of Phoenix, Strayer University, or DeVry
Inc., and American InterContinental University will not
have any ineligible programs, they all show up on the
list of restricted programs. Table 8 shows estimates
of the percentage of programs at colleges owned
by publicly traded companies that would be eligible,
eligible with a debt warning, restricted, or ineligible.
It includes programs of all levels from certificate to
bachelor's degree.
An Important Step Forward
The proposed gainful employment regulation is a
significant departure from existing laissez-faire policy
on federal student aid, policy that requires little
accountability for the use of funds or outcomes for
students. Formally acknowledging the link between
training and earnings is an important codification of
the promises about jobs and salaries that for-profit
institutions highlight in their marketing materials.
The standard also represents a first step in better
engaging employers in discussions about higher
education. It means that before an institution can offer
a new program it must provide assurances from local
companies that the curricula are aligned with needed
skills and that sufficient job demand exists. Restricted
programs must provide the same information. Local
companies hire area graduates and can recognize
a quality training program. Seeking their feedback
recognizes the valuable role they can play in helping
to ensure that students are entering a program that is
likely to produce jobs.
The gainful employment standard is also a gain
for students as consumers. Publishing repayment
rates, debt ratios, and cost warnings gives potential
enrollees information that, using a set formula, can
be compared across all institutions. This information
is more useful than job placement data, which can
be calculated in different ways and is not easily
verifiable. It is also more helpful than graduation rate
information, which doesn't give an accurate picture
of student success at schools with large numbers of
non-traditional or part-time students. But perhaps the
greatest consumer benefit is providing this information
on a program-by-program basis, rather than
aggregating it across an institution. For-profit colleges
offer a wide variety of training programs in completely
unrelated fields, so breaking apart the information by
program ensures that a nursing student, for example,
can see how his or her program actually performed
without getting results conflated with business
programs that serve students seeking very different
careers.
Table 8. How Publicly Traded Companies Would Fare Under the Gainful Employment Standard
Company Eligible (%) Debt warning (%) Restricted (%) Ineligible(%) Programs
Alf publicly traded companies 4
American Public Education 85
Bridgepoint Education 43
Capella Education Co. 0
Career l:ducation Corp. 0
Corinthian Colleges Inc. 5
OeVry Inc.
Education Management Corp. 1
Grand Canyon Education Inc. 22
llT Educational Services Inc. 2
Kaplan Higher Education
Lincoln Educational Services 7
Strayer Education Inc. 0
Universal Technical Institute Inc. 4
University of Phoenix 0
The gainful employment standard also explicitly
introduces value as one way of judging quality and
cost at the same time. Current college rankings,
especially those compiled by U.S. News and World
Report, already list "best value" colleges that offer
good quality for their costs. But the opposite can also
be true; at a certain price point, the quality of a college
becomes irrelevant. A student could get the best
clinical/medical assistant training in the world, but if
it costs $35,000 or more, and if the average annual
income for these positions, is just $29,000, then the
student is going to have trouble paying off the debt.
The inclusion of debt-to-income ratios by the gainful
employment standard is a worthwhile attempt to
capture this idea with easily understandable data.
But the proposed standard isn't perfect. It applies to
all for-profit programs, except those in the liberal arts,
but only to non-degree certificate programs at public
and private not-for-profit colleges. Thus, a for-profit
institution and a neighboring community college could
offer the exact same program, but only one of them
would have to meet the gainful employment standard.
If the offerings and instructional program codes are
the same, then the same standards should be applied
to all institutions. Programs in the liberal arts should
continue to be excluded because they do not carry
an implicit promise of a job in a specific profession.
But strictly vocational offerings should be subject to
64
15
57
62
61
80
73
40
78
66
84
96
90
21
0
0
38
23
11
26
46
0
25
18
16
0
10
6
0
0
0
16
4
0
13
0
7
0
0
0
3,99'1
52
30
13
430
626
244
718
46
825
139
19
46
487
the gainful employment standard regardless of the
college's tax status.
The calculation of the repayment rate also presents
some difficulties. Loans are counted as being in
repayment if there has been any reduction in the
principal owed. But this standard fails to consider
whether borrowers are actually on track to pay off the
debt on time or whether they are just making a few
minimum installments. For example, a borrower with a
$1,000 loan who makes enough payments to reduce
the principal by $1 a year for four years is considered
to be in repayment even though, at that rate, he or she
won't be able to pay down the debt in 10 years.
Including both federal and alternative, or private,
student loans in the borrowing figures also makes the
debt-to-income ratio and repayment rate harder to
determine. Much of private borrowing is direct to the
student. There is no central repository of information
on private student borrowing information, and schools
may have no way of capturing all the private loans
taken out by their students. Also, assuming a low
fixed rate will make the annual payment on private
loans seem cheaper than it actually is, and the loan
may have a 20- or 30-year repayment timeframe,
rather than the assumed length of 10 years. In either
case, exact costs are misstated. Private student loans
also don't fit the rationale of why gainful employment
needs to be defined in the first place. From a
taxpayer's point of view, poor usage of federal student
aid dollars is a waste of scarce resources. There is no
similar involvement with privat e loans.
Another concern wit h the proposed st andard's debt-
to-income ratio is t hat it only considers program
completers. While this makes sense from the
standpoint of wanting to make sure graduates are
gainfully employed, it is also important to remember
the large numbers of borrowers who drop out.
Students who fail to graduate are frequentl y left
with significant amounts of debt but none of the
economic benefits associated with a college degree
or certificate. One 2005 study found that students
who borrowed and did not complete their program
were "twice as likely to be unemployed as borrowers
who received a degree, and more than 1 0 times as
likely to default on their loan."
27
A program that fails to
graduate large numbers of its students should also be
seen as not providing gainful employment.
The debt -to-income ratio also fails t o address the fact
that f ederal student loan regul at ions allow students
to borrow beyond t he t otal cost of their program.
Students who t ake out far more in loans than
necessary can inflate borrowing totals, which can lead
to a school being penalized for something largely out
of its control.
28
One way around this problem would be
to compare the average borrowing amounts relative to
program costs. Those that seem fairly close should be
judged according to the debt figures, while programs
with a large discrepancy should be subject t o further
investigation. If an investigat ion shows t hat increased
borrowing is solely due to student decisions, t hen
the school should only be judged on a portion of that
borrowing.
A common critique of the new gainful employment
proposal is that it holds institutions accountable for
outcomes beyond their control. More specifically, it
judges programs based on their graduates' earnings
several years after they have left school. This issue
recalls t he rhet oric around cohort default rates, in
which coll eges argue that student charact erist ics,
not program quality, play the largest role in assessing
whether a student is likely to default. But this
argument contradicts t he schools' marketing claims
that their programs can improve students' lives and
lead to a better job. Either an institution does lead to
better jobs and higher earnings-in which case those
results should be measured using a standard like
gainful employment-or it doesn't, in which case it
should not be making these claims.
Gaining from Gainful
Employment
The gainful employment standard is just one part of a
larger movement to regulate for-profit colleges. Other
regulat ions released in June propose to eliminate
exemptions t hat previously allowed schools to tie
part of recruiters' compensat ion to getting students
to enroll. The regulations would also crack down on
so-called ability-to-benefit tests-exams given to
students without a high school degree to determine
their ability to handle college-level work. A U.S.
Government Accountability Office report in September
2009 found that colleges were coaching ill-prepared
students through these tests so they could receive
federal student aid.
29
Congress coul d also take legislative act ion in t his
area. The Senat e's Health, Education, Labor, and
Pensions Committee has already held two hearings
on for-profit colleges and promises to convene more
in the fall. The hearings could prompt legislation to
further limit the percentage of revenue that proprietary
colleges can receive from federal aid programs. Such
legislation might also prevent these col leges from
using money from these aid programs to pay for
market ing.
America's higher education system is among the
most diverse in the world in terms of the types of
colleges and variety of programs it provides. But, to
date, federal student aid programs have done little
to formally acknowledge that diversity. The gainful
employment standard is an important first step in
addressing that flaw. Establishing clear connections
between employers, jobs, wages, and t rai ning-
oriented programs is a welcome new way of thi nking
about education not just in terms of quality, but also
to recognize that vocational programs must also take
value into account. And most importantly, it does
this at the sub-institutional level, acknowledging
that these types of programs have little overlap with
other offerings at the same institution. Critics of the
gainful employment standard are quick to disparage
it as an attempt to shut down the sector. But this
claim is unfounded. Our analysis shows that gainf ul
employment would likely force 4 percent of program's
to close and rest rict the act ivities of another 15
percent. But t hese results are not set in st one.
Colleges will not be judged by the gainful employment
standard for a few years, so t hey will have time to
reduce their costs and student borrowing, to help
students repay their debts, and to help them find
higher-paying employment. And any process that can
encourage reducing student costs or improving job
placement is a good thing.
Notes
1. Sen. Tom Harkin, "Beware of For-Profi t Higher
Education," Forbes, August 11, 2010, http:/ / www.forbes.
com/201 0/ 08/ 01 /higher-education-student -debt -opinions-
best-colleges-1 0-harkin.html (accessed September 6, 201 0).
2. Jennifer Epstein, "Pushback on Gainful Employment ," Inside
Higher Ed, April 22, 2010, http:/ / www.insidehighered.com/
news/201 0/04/ 22/gainful (accessed September 3, 201 0);
3. Daniel Bennett, "Beating My Head on the Desk Won't Stop the
Insanity," Center for College Affordability and Productivity, May
21, 2010, http://collegeaffordability.blogspot.com/201 0/ 05/
beating-my-head-on-desk-wont-stop.html (accessed
September 3, 2010).
4. Many institutions that do not offer a traditional semester-length
course schedule report information to the U.S. Department of
Education by program. These are the programs counted in the
1 percent and are generally certificate programs of two years
or less.
5. Gregory D. Kutz, "For Profit Colleges: Undercover Testing Finds
Colleges Engaged in Deceptive and Questionable Marketing
Practices," U.S. Government Accountability Office, August 4,
2010, http:/ / www.gao.gov/ products/ GA0-1 0-948T (accessed
September 7, 2010).
6. TESST College of Technology "Medical Assistant," TESST
College of Technology, http://bit.ly/aJk2aO (accessed
September 7, 2010).
7. Le Cordon Bleu Institute of Culinary Arts, "Le Cordon Bleu
Institute of Culinary Arts in Pittsburgh," http://lecordonbleu-
pittsburgh.com/index.asp?src=141574 (accessed September
7, 2010).
8. Google, "Kaplan Information Technology Degree Google
Search," http://bit.ly/biWSjk (accessed September 7, 2010).
9. The Art Institute of Pittsburgh Online Division, "Interior Design
Program," http://bit.ly/9gUSbj (accessed September 7, 2010).
10. The Higher Education Act of 1965, Public Law 89-329, 89th
Cong., 1st sess. (November 8, 1965), Page 30, http://ftp.
resource.org/gao.gov/89-329/00004C5 7 .pdf (accessed
September 3, 2010).
11. Author-calculated statistic using data from the U.S. Department
of Education's Integrated Postsecondary Education Data
System.
12.Author calculated statistic using data from the U.S. Department
of Education's Federal Student Aid Data Center.
13. Kelly Field, "Government Vastly Undercounts Defaults,"
Chronicle of Higher Education, July 11, 201 0, http:/ /chronicle.
com/article/Many- More-Students-Are/ 66223/ (accessed
September 3, 201 0); Author calculated statistics using
data from the U.S. Department of Education's Integrated
Postsecondary Education Data System.
14. Loans that are replaced by a single consolidation loan are not
considered paid off. Loans that have an in-school or military
deferment or entered repayment after March 31 of a given
fiscal year are excluded.
15. By default, institutions have the rate calculated over the three
years in repayment. If they can prove to the Department of
Education that graduates' salaries increase significantly in the
future, then It can be judged over the fourth, fifth, and six years
after entering repayment.
16. There are three ways a program can end up in this category:
(1) it has a repayment rate above 45 percent and a debt-to-
income ratio above 8 percent and 20 percent , (2) it has a
debt-to-income ratio at or below 8 percent and a repayment
rate below 45 percent, or (3) it has a debt-to-income ratio at or
below 20 percent and a repayment rate below 45 percent.
17. James Kvaal (remarks at the conference, "Reining in For-Profi t
Higher Education," New America Foundation, Washington,
D.C., July 30, 2010).
18.1bid.
19. "Program Integrity: Gainful Employment (Notice of Proposed
Rulemaking)," Federal Register 75: 142, July 26,2010 Page
43636, http://www.gpo.gov/fdsys/pkg/FR-201 0-07-26/
pdf/ 201 0-17845.pdf (accessed September 3, 201 0).
20. Some programs may be spread over multiple years, but the
cost figure represents the total expense to complete that
program.
21 . The numbers do not add to 1 00 percent due to rounding.
22. Peter Goodman, "In Hard Times, Lured Into Trade School and
Debt," New York Times, March 13, 2010, http:/ / www.nytimes.
com/201 0/03/14/business/14schools.html (accessed
September 13, 201 0).
23. Mark Kantrowitz, "What is Gainful Employment? What is
Affordable Debt?" FinAid.org, March 11, 2010, http://www.
finaid.org/educators/201 00301 gainfulemployment.pdf
(accessed September 3, 2010).
24. Data for all other award levels was discarded because they
required fractions of a year, and it was too difficult to estimate
the appropriate cost amount.
25. Sean Simone, "Tuition and Fee Differentiation at Degree
Granting Postsecondary Education Institutions," Association for
Institutional Research, National Center for Education Statistics,
May 2010, http://www.airweb.org/ images/ Simone_Final_
Report_2010.pdf (accessed September 10, 2010), 20.
26.ln total, we considered 6,7 47 programs at 790 for-profi t
institutions. Some colleges offered both bachelor's and
associate degrees and so were considered under both
categories, albeit for different programs.
27. Lawrence Gladieux and Laura Perna, "Borrowers Who Drop
Out: A Neglected Aspect of the College Student Loan Trend,"
National Center for Public Policy and Higher Education, May
2005, http://www.highereducation.org/reportslborrowing/
borrowers.pdf (accessed September 3, 201 0).
28. Some colleges argue that excess borrowing is used to fund
things like vacations and car payments. In other cases, the
school may encourage students to borrow more than they
need because it is easier to take out the maximum and then
return money, rather than take out too little and need more.
For example, a recent investigation from ABC News found that
students at a branch of the University of Phoenix were being
told to take out the maximum because it was easier and they
could keep the extra money with no questions asked.
29. "Proprietary Schools: Stronger Department of Education
Oversight Needed to Help Ensure Only Eligible Students
Receive Federal Student Aid,'' U.S. Government Accountability
Office, August 2009, http://www.gao.gov/new.items/d09600.
pdf (accessed September 10, 2010).
From:
Sent:
To:
Subject:
Kvaal, James
Hamilton, Justin
Kaplan
They say they are considering something like a guarantee on p. 25-26. Not clear they have an actual proposal.
http ://phx.corporate-ir. net/External. File ?item=UG Fy ZWSOSUQ9N jl2 NzZ8Q2hpbG RJ RDOtMXxUeXBI PTM=&t= 1
From: Madzelan, Dan
Sent: Tuesday, September 14, 2010 5:37PM
To:
Cc:
Kvaal, James; Ritsch, Massie; Bergeron, David
Hamilton, Justin
Subject: RE: help with CDR representation
image001.gif; image002.gif; image003.jpg Attachments:
1. Enrollment data are from I PEDS, which are reported to ED by institutions. We use the full -year headcount
(undergraduate plus graduate).
2. About this time 2 years ago, we were asked by the community colleges (AACC) and TICAS to include an
"i ndicator" on the CDR f ile that would help the public understand that a school with few borrowers relative to
enrollment would likely not face sanctions even if their default rate was relatively high. In those waning months
we chose to do nothing.
In subsequent months, we decided to do something. The regulations provide for a "low participation rate"
appeal for schools subject to CDR-based sanctions-the basis for the AACC/TICAS suggestion-but the data to
support such an appeal are unknown to us until the appeal is presented. That's why our "indicator" is the
number of borrowers compared to total enrollment.
We did include enrollment in the "three-year CDR trial" (i.e. unofficial) rates that we published last winter.
However, we merely provided an enrollment figure-we did not do any
Dan
From: Kvaal, James
To: Ritsch, Massie; Bergeron, David; Madzelan, Dan
Cc: Hamilton, Justin
Justin, to answer your other question, no these data don't say anything about graduation rates. You don't need to
complete a degree to show up in either measure.
From: Ritsch, Massie
To: Bergeron, David; Madzelan, Dan; Kvaal, James
Subject: FW: help with CDR representation
Gentlemen:
Below is a question from a Wall Street analyst. Let me know if you're inclined to answer these questions, and what the
answers are.
James, you sounded good on NPR this morning.
Best,
2
Massie
From: Trace A. Urdan [mailto:turdan@shcg.com]
To: Ritsch, Massie
Subject: help with CDR representation
Massie-
In the reporting of new CDR rates yesterday, the Department went to a new format and also included some additional
data including enrollment as well as a calculation of those in active repayment relative to that total enrollment number.
I am hoping that you or a colleague can shed some light on two points:
1. Where does the enrollment data come from, because it does not tie to the data reported by the schools.
Theoretically for those schools that report both ending enrollments and new starts we should be able to tie the
data to this number but we are very far off, so I am trying to understand more about what's included in the
numbers. Are these students that pulled down federal aid? Applied for federal aid? Or were self-reported by the
schools in a separate database?
2. Why is repayment as a percent of total enrollment being presented here. Clearly there is an intended message
and I'd like to better understand its intent. Is the point to note that relatively small number of students in
repayment, suggesting larger numbers of deferrals?
Thanks Massie. I have included the example of the University of Phoenix below so my comments will make sense.
'-' 'l A R f ! I f R F
G 0 F U R T fl F. R
FEDERAL STUDENT
School Default Rates
FY 2008, 2007, and 2006
Record 1 of 1
--
OPE
School Type Control PRGMS
ID
--
FY2008 FY2007 FY2006
I
I Default
12.9 r
9.3 7.2
Rate
I
No. in
17287 9941 7373
Master's
Default
University ofPhoenix Degree
Both No. in
020988 4615 East El wood Street or Proprietary
(FFELIFDL) Repay
134002 106702 101894
Phoenix AZ 36104-5714 Doctor's
Degree
Enrollment
figures
662509 546351 369123
Pcccntage
20.2 19.5 27.6
Calculation
ENROLLMENT: To provide context for the Cohort Default Rate (CDR) data we include enrollment data
(students enrolled at any time during the year) and a corresponding percentage (borrowers entering
repayment divided by that enrollment figure). While there is no direct relationship between the timing of
when a borrower entered repayment (October 1 through September 30) and any particular enrollment
3
year, for the purpose of these data, we have chosen to use the academic year ending on the June 30 prior
to the beginning of the cohort year (e.g., FY 2008 CDR Year will use 2006-2007 emollment).
Current Date: 09/14/2010
[lrtillm:ttI1111IU'II
Trace A. Urdan I Research Analyst I Signal Hill Capital Group
343 Sansome Street, Suite 425 San Francisco, California 94104
415-364-0365 I Cell 415-596-1629 I turdan@shcg.com li M Tracelator
~
Signa! HiJ)
Our focus is on small and mid-cap companies in the Business and Healthcare Services, Education, Media, Technology, and Telecommunications sectors. Signal
Hill Capital Group LLC, a FINRA member, has offices in Baltimore and San Francisco.
Th is elect ron ic message transmi ss ion contains informa t ion tha t may be confidential or
pri vi leged. The informa t ion i s in tended to be for the use of the individual or ent i ty
named above . If you have received thi s communication in error, pl ease re-send thi s
communication to the sender and delete the original message and any copy of i t from your
computer sys tem. Thank you .
4
From:
Sent:
To:
Subject:
Attachments:
Kvaal, James
Tuesday, September 14, 20101:55 PM
Arsenault, Leigh
for Arne
090910 analysts on GE release.xlsx; 090710 GE quality comparison.doc; 091010 GE us
News and repayment rates.doc; 090910 lobbying and repay rates 2.ppt; 091310 all
programs.xls; 091010 GE 1990s experience.docx
5
From: Madzelan, Dan
To:
Cc:
Kvaal, James; Ritsch, Massie; Bergeron, David
Hamilton, Justin
image001.gif; image002.gif; image003.jpg Attachments:
Dan
1. Enrollment data are from I PEDS, which are reported to ED by institutions. We use the full -year headcount
(undergraduate plus graduate).
2. About this time 2 years ago, we were asked by the community colleges (AACC) and TICAS to include an
"i ndicator" on the CDR f ile that would help the public understand that a school with few borrowers relative to
enrollment would likely not face sanctions even if their default rate was relatively high. In those waning months
we chose to do nothing.
In subsequent months, we decided to do something. The regulations provide for a "low participation rate"
appeal for schools subject to CDR-based sanctions-the basis for the AACC/TICAS suggestion-but the data to
support such an appeal are unknown to us until the appeal is presented. That's why our "indicator" is the
number of borrowers compared to total enrollment.
We did include enrollment in the "three-year CDR trial" (i.e. unofficial) rates that we published last winter.
However, we merely provided an enrollment figure-we did not do any arithmetic.
From: Kvaal, James
To: Ritsch, Massie; Bergeron, David; Madzelan, Dan
Justin, to answer your other question, no these data don't say anything about graduation rates. You don't need to
complete a degree to show up in either measure.
From: Ritsch, Massie
To: Bergeron, David; Madzelan, Dan; Kvaal, James
Subject: FW: help with CDR representation
Gentlemen:
Below is a question from a Wall Street analyst. Let me know if you' re inclined to answer these questions, and what the
answers are.
James, you sounded good on NPR this morning.
Best,
Massie
From: Trace A. Urdan [mailto:turdan@shcg.com]
To: Ritsch, Massie
Subject: help with CDR representation
Massie-
In the reporting of new CDR rates yesterday, the Department went to a new format and also included some additional
data including enrollment as well as a calculation of those in active repayment relative to that total enrollment number.
I am hoping that you or a colleague can shed some light on two points:
1. Where does the enrollment data come from, because it does not tie to the data reported by the schools.
Theoretically for those schools that report both ending enrollments and new starts we should be able to tie the
data to this number but we are very far off, so I am trying to understand more about what's included in the
numbers. Are these students that pulled down federal aid? Applied for federal aid? Or were self-reported by the
schools in a separate database?
2. Why is repayment as a percent of total enrollment being presented here. Clearly there is an intended message
and I'd like to better understand its intent. Is the point to note that relatively small number of students in
repayment, suggesting larger numbers of deferrals?
Thanks Massie. I have included the example of the University of Phoenix below so my comments will make sense.
'-' 'l A R f ! I f R F
G 0 F U R T fl F. R
FEDERAL STUDENT
School Default Rates
FY 2008, 2007, and 2006
Record 1 of 1
--
OPE
School Type Control PRGMS
ID
--
FY2008 FY2007 FY2006
I
I Default
12.9 r
9.3 7.2
Rate
I
No. in
17287 9941 7373
Master's
Default
University ofPhoenix Degree
Both No. in
020988 4615 East El wood Street or Proprietary
(FFELIFDL) Repay
134002 106702 101894
Phoenix AZ 36104-5714 Doctor's
Degree
Enrollment
figures
662509 546351 369123
Pcccntage
20.2 19.5 27.6
Calculation
ENROLLMENT: To provide context for the Cohort Default Rate (CDR) data we include enrollment data
(students enrolled at any time during the year) and a corresponding percentage (borrowers entering
repayment divided by that enrollment figure). While there is no direct relationship between the timing of
when a borrower entered repayment (October 1 through September 30) and any particular enrollment
2
year, for the purpose of these data, we have chosen to use the academic year ending on the June 30 prior
to the beginning of the cohort year (e.g., FY 2008 CDR Year will use 2006-2007 emollment).
Current Date: 09/14/2010
[lrtillm:ttI1111IU'II
Trace A. Urdan I Research Analyst I Signal Hill Capital Group
343 Sansome Street, Suite 425 San Francisco, California 94104
415-364-0365 I Cell 415-596-1629 I turdan@shcg.com li M Tracelator
~
Signa! HiJ)
Our focus is on small and mid-cap companies in the Business and Healthcare Services, Education, Media, Technology, and Telecommunications sectors. Signal
Hill Capital Group LLC, a FINRA member, has offices in Baltimore and San Francisco.
Th is elect ron ic message transmi ss ion contains informa t ion tha t may be confidential or
pri vi leged. The informa t ion i s in tended to be for the use of the individual or ent i ty
named above . If you have received thi s communication in error, pl ease re-send thi s
communication to the sender and delete the original message and any copy of i t from your
computer sys tem. Thank you .
3
From:
Sent:
Matthew Stiehm at 027 (MStiehm@itt-tech.edu]
To:
Cc:
Duncan, Arne; Private - Miller, Anthony; Kanter, Martha; Ochoa, Eduardo
Gilcher, Kay; Griffiths, Carol; Weiss, Joanne
Subj ect: Accreditation Standards
Attachments: MN_POST _BOARD _DOCUMENT. PDF
Greetings and Good Afternoon Secretary Duncan,
My name is Matt Stiehm and I am currently employed at ITI Technical Institute in Minnesota. ITI as you know is a for-
profit post-secondary education provider that is national accredited, and I am currently challenging language in the
Minnesota State Rules 6700.0100 sub 20, which states that only regionally accreditation institutions can provide law
enforcement training in Minnesota (letter attached, if you would like to read it). I am arguing that Regional and National
Accreditation are two sides of the same coin, both have internal, and external processes in place which control, assess
and evaluate outcomes, faculty, academic rigor, and a whole lot of other things.
What I would like to get and or find from the Federal Department of Education is a stance, or position on Regional
Accreditation standards versus National Accreditation standards. If there was some formal statement on the web-site or
if you have an official document (already created/or to be created) that would outline the Federal Department of
Education positions on this problem that would be greatly appreciated. I am having a tough time navigate through all
the robust and quality information to find specifically what I need.
I am looking forward to any information that your office would be willing to share, or provide to me. If anyone would
like to contact me please feel to call me at 952-914-5346.
Respectfully,
Matthew J. Stiehm M.S Ed.D (abd)
School of Criminal Justice
8911 Columbine Road
Eden Prairie, Minnesota 55347
952-914-5346
4
Accreditation
Matt Stiehm
Eden Prairie Campus
1
2
ACCREDITATION
Introduction
According to the Federal Department of Education, "the goal of accreditation is to ensure
that the education provided by institutions of higher education meets acceptable levels of
quality" (DOE, 2010, para 1). Institutions can be granted accreditation in a variety of ways first
and foremost is by the National Accrediting agencies (ACICS and ACCSC) or Regional
Accrediting agencies (Higher Learning, and Mid-States).
This paper is created as an effort to create a dialogue with the Minnesota Peace Officer
Standards and Training Board (POST) and the schools who fall outside rule 6700.0100 subpart
20, in attempt to bring in more diverse and quality applicants to Minnesota Law Enforcement
organizations. National Accrediting agencies are approved by both the Federal and State
Department ofEducation to provide post-secondary education.
"Accreditation is both a process and status. It is the process of reviewing colleges,
universities, institutions and programs to judge their education quality- how well they serve
students and society" (CHEA, 2010, p.2). AJl accrediting bodies have a set of standards which
they judge their member institutions against. Furthermore the accreditation process is a set forth
to ensure that the institutions are always keeping up to date with standards that deal with faculty,
staff, students, support services, financial aid, facilities, curriculum, and most important student
learning outcomes. There is a process of self review against the standards, a site visit by an
evaluation team and a complete review by the accrediting governing board. There are review
visits that occurred on regular cycle, additionally the accrediting institutions can visit based on
complaints, or just or surprise inspection to ensure compliance.
Functions of Accreditation
According to the Federal Department of Education (2010), the following are the
functions of accreditation;
1. Verifying that an institution or program meets established standards;
2. Assisting prospective students in identifying acceptable institutions;
3. Assisting institutions in determining the acceptability of transfer credits;
4. Helping to identify institutions and programs for the investment of public and private
funds;
5. Protecting an institution against harmful internal and external pressure;
6. Creating goals for self-improvement of weaker programs and stimulating a general
raising of standards among educational institutions;
7. Involving the faculty and staff comprehensively in institutional evaluation and
planning;
8. Establishing criteria for professional certification and licensure and for upgrading
courses offering such preparation; and
9. Providing one of several considerations used as a basis for determining eligibility for
Federal assistance. (page 2, para 2).
Process
The process of accreditation as outlined by the federal department of education (2010):
l. Standards: The accrediting agency, in collaboration with educational institutions,
establishes standards.
2. Self-study: The institution or program seeking accreditation prepares an in-depth self-
evaluation study that measures its performance against the standards established by the
accrediting agency.
3. On-site Evaluation: A team selected by the accrediting agency visits the institution or
program to determine first-hand if the applicant meets the established standards.
3
4. Publication: Upon being satisfied that the applicant meets its standards, the accrediting
agency grants accreditation or preaccreditatlon status and lists the institution or program
in an official publication with other similarly accredited or preaccredited institutions or
programs.
5. Monitoring: The accrediting agency monitors each accredited institution or program
throughout the period of accreditation granted to verify that it continues to meet the
agency's standards.
6. Reevaluation: The accrediting agency periodically reevaluates each institution or
program that it lists to ascertain whether continuation of its accredited or preaccredited
status is warranted. (page 2, para 3)
4
FOR-PROFIT
Introduction
For-profit schools are academic institutions that are run by a private for profit
organization or entity. For profit educational institutions make up a small percentage of higher
educational institutions. There are nearly 3,000 career or for profit educational institutions that
dot the landscape. In the past few years for profit education enrolled has grown at nine percent
nationally, as compared to 1.5% of traditional universities. For profit colleges education is
roughly seven percent of the 19 million students who are seeking advanced degrees. For example
University of Phoenix is the second largest higher education institution with 455,600 students
enrolled as of January 2010 (Wilson, 2010).
For profit institutions can respond and accommodate students that public institutions
cannot, and that small colleges and universities need to maintain their enrollments. For profit
education is forcing traditional academics to rethink and revaluate the way that they conduct
business. For profits are reaching out to adult learners, continuing with the growth on online
education and saving money by recruiting and hiring qualified faculty as opposed to relying on
the tenure system (Wilson, 201 0). For profit education has pioneered student centered education,
course plans are set and students understand what they need to complete their degree. Unlike
traditional institutions classes are arranged around student needs. There is also an effort by for
profit education institutions to retrain their students, and provide support.
Differences
Regional accreditation agencies concentrate on specific areas of the country. National
accreditation agencies can represent colleges across the United States and even in some
other countries.
Historically, regional accreditation agencies started as leagues of traditional colleges and
universities in a specific area. National accreditation agencies started as associations of
schools with a common theme. Many served schools that were not initially founded as
colleges or universities. (Eleaners.com, 2010)
Commonalities
Regional accreditation and national accreditation have a number of important things in
common:
Both are voluntary. Colleges do not have to apply for any type of accreditation.
Both types of accreditation involve a lengthy and detailed review process. Agencies
evaluate schools' programs, campuses, faculty, finances, and educational delivery
methods.
AJl regional and national accreditation agencies are nonprofit organizations. Accrediting
agencies do not make money off their evaluations, and they do not work for the
government. (Eleaners.com, 2010)
5
Both types of accreditation qualify colleges to offer federal financial aid to their students.
If a college is neither regionally nor nationally accredited, you cannot receive federal
financial aid to attend that institution. (Note: accreditation is not the only factor that
allows for Title IV or federal student assistance funds. Be sure to ask your admissions
counselor whether or not his/her college is eligible.)
MINNESOTA FOR-PROFIT
Populations
Students who generally apply to for profit institutions tend to be first generation students,
from low-income families and come from a minority background. In looking at the population of
ITT the students are approximately 50/50 male to female, most are non-traditional learners who
have had problems at other academic institutions. For profit colleges tend to work with students
who have full time or part time jobs and accommodate their schedule. Students enrolling at for
profit institutions tend to live within the immediate proximity to the school.
After attending a "career" college or for profit institutions students feel that they can get a career
easier than with traditional academics (Kantrowitz, 2010).
Curriculum
6
In reviewing the curriculum at ITT Tech and Minnesota School ofBusiness, there would
only need to be minor modifications to ensure that the MN POST Learning Objectives are being
achieved. ITT Tech would need to create or modify two classes, Minnesota Criminal Law, and
Minnesota Traffic to meet the Learning Objectives. At this time for-profit educational
institutions in Minnesota that are national accredited tend to teach criminal justice courses, which
Jaw enforcement is a component.
Accreditation
Most Minnesota for-profit educational institutions are accredited by a National
organization. The two primary organizations are Accrediting Commission of Career Schools and
Colleges (ACCSC) and Accrediting Council for Independent Colleges and Schools (ACICS).
Locations
In reviewing Minnesota for profit education most the institutions are located near large
urban or populations centers. For example with the Minneapolis St. Paul Metro area there are
approximately 25 for profit campuses. Not all of the approximate 25 for profit programs teach
criminal justice. Examples include Le Cordon Blue, McNally Smith College of Music, and
Herzing University.
NURISING
The Nursing and MN POST Board were both created by legislative action in 1976,
original they Nursing Board had a provision 630'1 .0500 subpart 2
The controlling body proposing a program must be a Minnesota public or private
postsecondary educational institution that is accredited by a regional or national
accrediting association for postsecondary institutions, or a general hospital that had an
existing program as of July 1. (MN Revisor web-site).
7
It is assumed and presumed that the Nursing Board and the POST Board were created in an
effort to maintain the integrity of working professionals and to deal with occupational licenses.
Currently the Minnesota Statues or Rule has no controlling language on who can provide
nursing training in Minnesota. It is up to the Board which is demonstrated in MN Statute 148-
191 subd 2;
(a) The board is authorized to adopt and, from time to time, revise rules not inconsistent with
the law, as may be necessary to enable it to carry into effect the provisions of sections
148.171 to 148.285. The board shall prescribe by rule curricula and standarrlsfor
schools and courses preparing persons for licensure under sections. It shall conduct or
provide for surveys of such schools and courses at such times as it may deem necessary.
It shall approve such schools and courses as meet the requirements of sections 148.171 to
148.285 and board rules ...
For initial approval a school (for profit/non profit or public institution) all the schools
need to do is follow and be in accordance with MN Statute 148.251 Sub 1 (1 );
An institution desiring to conduct a nursing program shall apply to the board and submit
evidence that:
( 1) It is prepared to provide a program of theory and practice in professional or
practical nursing that meets the program approval adopted by the boanl
Instruction and required experience may be obtained in one or more institutions or
agencies outside the applying institution as long as the nursing program retains
accountability for all clinical and nonclinical teaching.
The Minnesota Nursing Board also requires a level of inspection of nursing schools
program directors (MN Rule 6301.0700). The board requires the faculty to be thoroughly vetted
in reviewing their academic and experiential requirements (MN Rules 630 1.1300), while the
Minnesota POST Board requires a similar process. Additionally in a personal conversation with
Sharon Ridgeway MN Nursing Board she indicated that schools only need to meet the
requirements set forth by the Minnesota Department of Higher Education to be able to apply to
teach nursing education. The board then controls the accreditation of the programs specifically.
Minnesota Higher Education Department
From: Roedler, George (OHE) [mailto:george.roedler@state.mn.us]
To: Matthew Stiehm at 027
Cc: Metzen, Dave (OHE)
Subject: RE: Question
Your email to Dave Metzen, the Director of the Office of Higher Education has been
forwarded to me for response.
8
The Office of Higher Education views accreditation by agencies approved or recognized
by the U.S. Department of Education for the purpose of permitting schools to participate
in Federal Financial Aid as equivalent. Schools that are regionally accredited are treated
the same as the schools that are nationally accredited as long as the accrediting agency
has been approved by the U.S. Department o(Education.
The subject matter being taught by a school does not change the manner in which the
school is regulated.
I hope this answers your questions. If not please feel free to give me a call.
George
George R. Roedler, Jr. , JD
Manager, Institutional Registration & Licensing
Minnesota Office of Higher Educat1on
1450 Energy Park Drive, Suite 350
St. Paul, MN 55108
Tel : 651-259-3975
Fax: 651-642-0675
E-Mail: george. roedler@state. mn. us
ACICS and ACCSC
In attempt to keep this report brief, both accrediting agencies have lengthy process to become
accrediting see attached/accompanying material.
9
MNSCU
Review of December 2007 Report
The MNSCU reports states that most of the academic programs are located outside of the
seven county metro area where 53% of the population resides. This report has not been adjusted
since data was collected and the material might have changed. Based on the report MNSCU is
recommending that no new PPOE programs be offered, the reports also make recommendations
that the MNSCU partner with already existing training facilities to accommodate the current
graduates and expected graduates ofPPOE programs (MNSCU, 2007)
It is proposed that for-profit education institutions would be able to create a "Skills"
training facility to accommodate the need of graduating students and create a partner relationship
with other PPOE schools to put qualified candidates in the hiring pool. As indicated by
PPOE Schools
In the December 2007 report written by MGT on behalf of the MNSCU Board of
Chancellors it lists a total of27 academic institutions, one is for-profit, one is a tribal college, 2'1
are state colleges, and four are non-profit colleges or universities (MNSCU, 2007).
CONCLUSION
Based on a review of relevant material, MN Rules and Statues, similar board WE (for-
profit) educational institutions feel that WE meet or exceed the standards set forth by institutions
accredited by the Higher Learning Commission. Just like HLC schools WE are review on a
regular basis, and WE are compared against best practices, OUR curriculum is researched
andcreated by national experts to keep up with trends, WE have professional advisory
committees that guide our local programs.
POST BOARD
10
Proposed Actions
WE for profit educational institutions request that the MN POST Board reconsider and
recommend changes to MN Rule 6700.0100 subp 20 to include the national accrediting agencies
ACICS and ACCSC.
At the very least I request an audience with the MN POST Board to present on this topic.
References
Department ofEducation. (2010). Overview of Accreditations . Retrieved September 8, 2010
http://www2.ed.gov/admins/finaid/accred/ accreditation.html#Overview
11
Kantrowitz, M. (2010). Characteristics of students at for profit institutions. Retrieved September
8, 2010 from http://www.nasfaa.org/publications/2010/ rforprofitOl 0810.html
MNSCU (2007). Needs Assessment Study of Professional Peace Officer Education Program in
Minnesota
The Value of Accreditation (2010). Council for Higher Education Accreditation. Retrieved
September 8th, 2010 from
http://www.chea.org/pdfNalue%20ofO/o20US%20Accreditation%2006.29.2010_buttons.pdf
Wilson, R. (2010). For-profit colleges change higher education' s landscape, Retrieved
September 8, 2010 http:l/chronicle.com/article/For-Profit-Colleges-Change/64012/
From:
Sent:
To:
Subject:
Hi NicoleJ
Ferguson, Keith
Richard, Nicole
RE: Thanks again!
Thanks for following up. I think the word "formal" may have created undue confusion. I simply
meant that I had not been contacted by the President's office yet with either a request or
inquiry about the meetingJ and therefore was unsure of the status of the meeting . Is there a
number where I can call Jacqui?
Thanks!
BestJ
Keith Ferguson
Confidential Assistant
Department of Education
(202) 401- 0264
keith.ferguson@ed.gov
-----Original Message- ----
From: RichardJ Nicol e [mai l to:nrichard@exchange.tc.col umbia.edu]
Sent: TuesdayJ September 14J 2010 12:21 PM
To: FergusonJ Keith
Subject: RE: Thanks again!
Hi KeithJ
I just spoke to Jacqui at the President's office who claims that she was unaware that a
formal letter was needed. The meeting between President Fuhrman and Under Secretary Kanter is
confirmed for September 22J at 3:00pm. Please let me know if you require the formal letter.
We apologize for any l apse in correspondence.
BestJ
Nicole
From: FergusonJ Keith [mailto:Keith.Ferguson@ed.gov]
To: RichardJ Nicole
Hi NicoleJ
Hope you are well. I currently have a hold on Under Secretary Kanter's calendar for a meeting
with President Fuhrman at 3:00 on September 22J howeverJ I not yet received a formal email
from President Fuhrman's office requesting the meeting. Do you happen to know who in the
President's office I can follow- up with? I appreciate the help.
BestJ
Keith Ferguson
Confidential Assistant
Department of Education
(202) 401- 0264
keith.ferguson@ed.gov
-----Original Message- - - - -
From: RichardJ Nicole [mailto:nrichard@exchange.tc.columbia.edu]
Sent: WednesdayJ August 04J 2010 9:47 AM
To: FergusonJ Keith
Cc: BaileyJ Thomas
Dear KeithJ
Teachers College is located on 120th Street between Amsterdam and Broadway. Here are
directions to the campus using a variety of transportation methods:
http://www.tc.columbia.edu/abouttc/visit.htm?id=Directions
Please call 212-678- 3091 if you need additional assistance.
Nicole Richard
Administrative Assistant
CCRC & NCPR
Teachers CollegeJ Columbia University
439 Thorndike HallJ Box 174
525 W 120th St .
New YorkJ NY 10027
212-678-3091 I nrichard@tc.edu
From: BaileyJ Thomas
Sent: WednesdayJ August 04J 2010 8:13AM
To: FergusonJ Keith
Cc: RichardJ Nicole
Subject: Re: Thanks again!
Keith:
Why doesn't she come to our offices at 435 Thorndike Hall at Teachers Colege
at 4J but I can meet her at the main entrance to Teachers College on 120th
St. If you would like more explicit instructionsJ Nicole Richard can help
you out.
Tom
On 8/2/10 4:42 PMJ "FergusonJ Keith" <Keith.Ferguson@ed.gov> wrote:
2
> Thanks, Tom.
>
> ----- Original Message -----
> From: Bailey, Thomas <TBailey@exchange.tc.columbia.edu>
> To: Ferguson, Keith
> Sent: Mon Aug e2 15:41:11 2e1e
Subject: Re: Thanks again!
>
> Keith: I will get back in touch tomorrow.
>
> Tom
>
> Sent from my iPhone
>
> On Aug 2, 2e1e, at 1:27 PM, "Ferguson, Keith" <Keith.Ferguson@ed.gov> wrote:
>
>> Hello Tom,
>>
>> Under Secretary Kanter does currently have availability to join you an hour
>> prior to the reception on September 22. Please send the specific time and
>> location of the meeting so I can add it to the itinerary.
>>
>> Thank you.
>>
>> Best,
>> Keith Ferguson
>> Confidential Assistant
>> Office of the Under Secretary
>> U.S. Department of Education
>> keith.ferguson@ed.gov
>>
>> ----- Original Message
>> From: Thomas Bailey <tbailey@tc.columbia.edu>
>> To: Kanter, Martha
>> Sent: Tue Jul 27 15:33:46 2e1e
>> Subject: Re: Thanks again!
>>
>> Martha:
>>
>> You certainly ask an interesting question--what evidence we have about the
>> effects of accreditation reports on student outcomes--, but I don't know of
>> any study that can answer it . I ' m not even sure how one would go about it .
>> Perhaps we could see if there are changes in trends in students outcomes
>> that are related to accreditation visits. Perhaps we could look
>> particularly at accreditation findings that suggest significant changes.
>> Certainly if you run across any evidence or relevant studies I would like to
>> know about them.
>>
>> I would also like to ask you about your plans for our dev ed conference in
>> September. I believe that you will be at the reception on Wednesday evening
>> September 22nd. Is there any chance that you might be able to come by say
>> an hour earlier so that we could fill you in on the broader work of our
>> national center (the conference is sponsored by the IES funded National
>> Center for Postsecondary Research)? We are doing many projects and expect
>> to be releasing several reports over the next few months.
>>
>> So let me know whether you think that that might be possible. In any case,
3
>> I look forward to seeing you in September.
>>
Best

Tom
>>
>>
On 7/15/10 10:38 Martha" <Martha.Kanter@ed.gov> wrote:

>>> Is there any way to study whether accreditation findings lead to improved
>>> student learning improved campus more efficient use of
> resources?
>>> There are thousands of visiting team reports that are never leveraged. This
> is
>>> one area of interest. Another is the work on comptency assessments. I'm
> giving
>>> the commencement speech at Western Governors University that is now
>>> expanding
>>> to Indiana. They pride themselves on competency-based learning to accelerate
>>> give credit for prior etc. Lumina supported the tuning
>>> project. And AAC&U is supporting competency work. We're going to support the
>>> Assessment of Higher Education Learning Outcomes project. All of this also
>>> ties into voluntary systems of accountability and whether such a system
> would
>>> improve transparency and accountability. A few thoughts!
>>> Have a great Tom!
>
>>> From: Thomas Bailey [tbailey@tc.columbia.edu]
>>> Sent: July 2010 9:26AM
>>> To: Martha
>>> Subject: Re: Thanks again!
>
>>> I have heard about the Phoenix research and Judy who
>>> made the financial aid presentation on has been to a planning
>>> meeting. Someone who worked here for several has left to become a
>>> marketing VP at and we are in contact with him. We are also
>>> developing a proposal that looks at the earnings of graduates of
>>> for-profits. we will dig around and let you know if we turn anything
>>> up. Certainly if you know of any other research going or if you are
>>> doing anything I would love to know about it.
>
> Tom
>>>
>
> On 7/15/10 9:15 Martha" <Martha.Kanter@ed.gov> wrote:
>
>>>> Many of us have been intrigued by their sophisticated marketing strategies
and
>>>> on-demand support (individual mentors and tutors). Apollo (Phoenix)
apparently
>>>> has a $200 million research center on the drawing board that will bring
>>>> cognitive scientists together with academics. I haven't looked at the plans
>>>> but heard about it from one of their VPs at an Excelencia meeting. We're
also
>>>> intrigued about the coherence and quality of their general education
>> courses
>>>>
4
>>>> From: Thomas Bailey [tbailey@tc.columbia.edu]
>>>> Sent: Thursday, July 15, 2010 9:00 AM
>>>> To: Kanter, Martha
>>>> Cc: Chong, Frank; Dann -Messier, Brenda
>>>> Subject: Re: Thanks again!
>>
Martha:
>>
>>>> Thanks for the message. We enjoyed the session and hope that it was
useful.
>>>> The question about the pluses and minuses of the for-profit marketing has
>>>> indeed intrigued us. I can't say that we have done any systematic
analysis,
>>>> but have informally asked around. If this seems particularly interesting
to
>>>> you, I will think more seriously about how to get a systematic
>>>> understanding.
>>
>>>> Best wishes,
>>
Tom
>>
>>
On 7/13/10 10:58 PM, "Kanter, Martha" <Martha.Kanter@ed.gov> wrote:
>>
>>>>> Great to see you, Tom. After your meeting, a few of us discussed whether
> you
>>>>> have reached out to the for-profit sector to analyze how their marketing
> and
>>>>> cohort engagement efforts might be studied in the future. They certainly
> have
>>>>> done the best job of any sector in reaching out to students and getting
> them
>>>>> signed up for Pell grants and loans. So while you are studying what
> community
>>>>> colleges have and haven't been able to accomplish and why, it might be
> worth
>>>>> thinking about lessons learned from research on this sector and the return
> on
>>>>> investments they've made. Thanks for joining us this morning.
> Best,
> Martha
>>>>>
>>>>> From: Thomas Bailey [tbailey@tc.columbia.edu]
>>>>> Sent: Tuesday, July 13, 2010 3:57 PM
>>>>> To: Chong, Frank
>>>>> Cc: Schwartz, Gail; Dann-Messier, Brenda; Kanter, Martha
>>>>> Subject: Re: Thanks again!
>
> Frank:
>
>>>>> Thank you for the nice note. We were delighted to be able to do it. We
>>>>> certainly hope that our research can be useful to you as you carry out
> your
>>>>> important work. And we look forward to continued collaboration in the
> future.
>>>>> Please let us know what else we can do to help you.
5
>
>>>>> Best wishes,
>
> Tom
>
>
> On 7/13/10 3:27 PM, "Frank Chong" <Frank.Chong@ed.gov> wrote:
>
>>>>>
> Tom:
>
>>>>> Please know how much we appreciated your presentation today.
>
>>>>> Shauna and Judy did a wonderful job as well.
>
>>>>> Let
1
s continue to work together to reach the President
1
s Completion Goal!
>
> Best,
>>>>>
>>>>> Frank Chong, Ed.D
>>>>> Deputy Assistant Secretary for Community Colleges
>>>>> U.S. Department of Education
>>>>> Office of Vocational and Adult Education
>>>>> 550-12th Street SW Room 11140
>>>>> Washington, DC 20202-7100
>
>>>>> (202) 245-7812 (W)
>>>>> (202) 570-8302 (C)
>
>>>>> Website: www.ed.gov/ovae
>
>
>>>>>
>
>
>>>>> Thomas Bailey
>>>>> George and Abby 0
1
Neill Professor of Economics and Education
>>>>> Director, Community College Research Center
>>>>> Director, National Center for Postsecondary Research
>>>>> Box 174 Teachers College, Columbia University New York, NY 10027
>>>>> 212-678-3091 (phone) 212-678-3699 (fax) tbailey@tc.edu (email)
>>>>>Website: http://ccrc.tc.columbia.edu/
>>>>>
>>
>
>
>>>
>>> Thomas Bailey
>>> George and Abby 0
1
>>> Director, Community College Research Center
>>> Director, National Center for Postsecondary Research
>>> Box 174 Teachers College, Columbia University New York, NY 10027
>>> 212-678-3091 (phone) 212-678-3699 (fax) tbailey@tc.edu (email)
>>>Website: http://ccrc.tc.columbia.edu/
>
>
>>
6
>>
>>
>> Thomas Bailey
>> George and Abby 0
1
>> Community College Research Center
>> National Center for Postsecondary Research
>> Box 174 Teachers Columbia University New NY 10027
>> 212-678-3091 (phone) 212-678-3699 (fax) tbailey@tc.edu (email)
>> Website: http://ccrc.tc.columbia.edu/
>>
>>
Thomas Bailey
George and Abby O'Neill Professor of Economics and Education
Community College Research Center
National Center for Postsecondary Research
Box 174 Teachers Columbia University New NY 10027
212-678-3091 (phone) 212-678-3699 (fax) tbailey@tc.edu (email)
Website: http://ccrc.tc.columbia.edu/
7
From:
Sent:
To:
Cc:
Subject :
Woodward, Jennifer
Tuesday, September 14, 201011 :16 AM
Finley, Steve; Siegel, Brian; Burton, Vanessa; Scaniffe, Dawn; Morelli, Denise; Marinucci,
Fred; Jenkins, Harold; Wolff, Russell ; Sann, Ronald; Wanner, Sarah; Varnovitsky, Natasha
Yuan, Georgia
RE: higher ed blog post on UOP study about for-profit institutions
Cl ick on the li nk and not e the fi rst comment at the end of the ieee. It is written b Trace Urdan who has a f inancial
st ake in Apoll o.
From: Finley, Steve
Sent: Tuesday, September 14, 2010 10:34 AM
To: Siegel, Brian; Burton, Vanessa; Scaniffe, Dawn; Morelli, Denise; Marinucci, Fred; Jenkins, Harold; Woodward,
Jennifer; Wolff, Russell; Sann, Ronald; Wanner, Sarah; Varnovitsky, Natasha
Cc: Yuan, Georgia
Subject: higher ed blog post on UOP study about for-profit institut ions
http://higheredwatch.newamerica.net/blogmain
Guest Post: University of Phoenix Founder Forgets One Important
Stakeholder -- Students
September 14, 2010
By Craig Smith
Anyone working on Capitol Hi ll these days knows that the for-profit higher education industry is spending
millions of dollars on lobbying in an effort to defeat, delay or weaken the Department of Education' s proposed
regulations on gainful employment. This should come as no surprise-- like bankers swarming House and
Senate offices in an effort to weaken proposed financial reforms in response to the sub-prime meltdown, for-
profit colleges are businesses lobbying to protect their main revenue stream. In this case that is federal tax
doll ars in the form of federal student aid. Nor is it a surprise that the for-profit college sector is enli sting their
employees to write comments opposing the regulations or paying for high profile education summits in an effort
to change people' s minds about recent reports of fraud and abuse in their sector.
Recently, however, the University of Phoenix has ratcheted up the lobbying blitz with the help of a recent report
issued from the NEXUS Research and Policy Center. Now, as The Chronicle o{Higher Education and CNBC
have reported, this report entitled "For-Profit Colleges and Universities: America's Least Costly and Most
Efficient System of Higher Education," has raised some eyebrows. NEXUS is funded by in-kind support from
University of Phoenix' s parent company the Apollo Group and grants from the John G. Sperling Foundation--
the foundation set up by the founder of the University of Phoenix and the head of the Apollo Group.
Furthermore, the report is authored by Jorge Klor de Alva, President ofNEXUS and coincidentally a past-
executive ofUniversity ofPhoenix and an Apollo board member.
8
In an effort to maintain a position of independence for the Center and avoid charges of astroturfing, Klor de
Alva tried to distance the Center and its report from current lobbying efforts around gainful employment.
According to Chronicle coverage:
Nexus sees its business as advocacy but "not lobbying," and Mr. Klor de Alva said he has no plans to
distribute the report to members of Congress, where lawmakers are continuing to hold hearings on the for-
profit sector. But that doesn't mean the report won't become anotherpiece of fodder in the debate. "I
suspect," he said, "that it will get distributed over there."
Well how prescient of him. Any takers on who would have sent this report to all Congressional officers? Why,
John Sperling, of course.
The report arrived in Congressional staffers' email boxes as a PowerPoint presentation along with a message
from Sperling and a sample letter members of Congress could send to Education Secretary Arne Duncan
opposing the gainful employment regulations. Says Sperling:
The attached power point has been prepared by NEXUS, a research and policy institute whose primary
focus is the for-profit sector of higher education. Given its commitment to fact based research, not special
pleading, the power point presents a rationale for the need to rethink the reforms proposed by the
Education Department and the HELP Committee using as an example the case of the University of
Phoenix, whose massive database on its operations and its academics has been made available to NEXUS
researchers.
It is unclear how a policy center whose only report is a piece of blatant advocacy for the organization that funds
the center is committed to "fact based research" and not "special pleading," but that is not the most outlandish
claim in the package. No, that comes in a broad finding of the report, which Sperling highlights in his letter:
Perhaps the most important finding of the case study is the fact that for-profit institutions operate at no cost
to taxpayers because the interest students pay on their federal loans plus the taxes paid by the institutions
is greater than the Pell Grants and all of the other state and federal subsidies received by the students and
the institutions. Further, the study shows that not only will the proposed reforms require a major increase
in Department of Education oversight staff, they will greatly lower the efficiency and raise the costs ~ [ t h e
institutions in the sector-- all at the expense of taxpayers.
Let's work through that. According to the Department ofEducation's proposed rule for Gainful Employment:
In 2009, the five largest for-profit institutions received 77 percent of their revenues from the Federal
student aid programs. This figure that does not include reven-ue receivedfi-om certain Federal student
loans (not authorized by the Higher Education Act) that are exempted under the so-called 90110 rule, or
other revenue derived from government sources including Federal Veterans' education benefits, Federal
job training programs, and State student financial aid programs. A recent study completed for the Florida
legislature concluded that for-profit institutions were more expensive for taxpayers on a per-student basis
due to their high prices and large subsidies.
Let's be clear. For-profit colleges receive the vast majority of their revenue and their profit from taxpayer
money. They generate this flow by charging high tuition, which results in their students receiving a
disproportionate amount ofPell Grant money and borrowing more on average and therefore carrying higher
debt burdens. This leads to more significant interest on those loans and overall loan repayments. To argue that
this model is better because it is "revenue-neutral" for the federal government is to turn the equation on its head.
9
Yes, the for-profit sector pays corporate taxes which means they must budget for that expenditure. How do they
do that? By making sure they generate enough revenue and that means making sure tuitions are high enough
which means more federal student aid dollars flowing to the institution. In short, to make sure they have enough
money to pay the federal government, they have to get more money from the federal government on the front
end. I believe that is what we call a zero-sum game. But to even enter into that argument is to miss the real
point. Students.
To defend a business model of education in which it is okay for students to take on excessive loan debt (and, in
too many cases, default on those loans) while companies like Apollo make millions of dollars by arguing that it
doesn' t cost the federal government anything is ludicrous if not immoral.
The goal of our federal financial aid system is not for the federal government and business to make money with
the welfare of students-particularly low-income and minority students-as an afterthought. The financial aid
system envisioned in the Higher Ed Act is supposed to use the economies of scale at the federal government's
disposal to help all students get an affordable and equivalent education that will improve their economic and
social well-being. If the for-profit sector wants to convince Congress and the public that they are not the next
sub-prime mortgage crisis waiting to happen and that they are vital to the effort of strengthening our system of
higher education, perhaps they should remember that helping students succeed without unmanageable loan debt,
and not milking the federal student aid system to improve their bottom-line, is the key.
Craig Smith is the Deputy Director of Higher Education for the American Federation o{Teachers where his
primmy responsibilities are field services and communications with an emphasis on political and legislative
action. Prior to joining the AFT's national staff he was a full-time faculty member and local union president at
Salt Lake Community College. Craig blogs regularly on AFT's Faculty and College Excellence website. His
views are his own and not necessarily those of the New America Foundation.
10
From:
Sent:
To:
Subject :
Kvaal, James
Monday, September 13, 2010 6:17PM
Gomez, Gabriella
RE: Pell after refund
To: Kvaal, James
Subject: Fw: Pell after refund
(202) 401-0020
From: Swarthout, Luke (HELP Committee) ~ ~ : : : = d ) ~ . . . - __ __.t..,.@::..:.h.:..:::e,.., lp'"".se=.:..:n.:::;at.,.e:.:.:.a..,.o:..:..v>
Sent: Fri Sep 10 13:09:12 2010
Subject: RE: Pell after refund
A couple things-are you actuall y saying UoP will get 1.5 billion in pell this year?
Second-what we're actually looking for was t he total net Pell dollars forAY 08-09. You report it to be 655, they report
something significantly less. Is the 655 total disbursements or net?
From: Gomez, Gabriella [mailto:Gabriella.Gomez@ed.govl
To: Swarthout, Luke (HELP Committee)
Federal Loans
2009
University of Phoenix 4,323,040,601
Western International University 16,358,239
Total 4,339,398,840
Federal Grants Campus Based
(AY 2009-10) Programs (2007-08)
1,503,838,027 4,601,477
4,672,508 243,919
1,508,510,535 4,845,396
11
From: Swarthout, Luke (HELP Committee) ___
Subject: FW: Pell after refund
Question:
ED's grant volume reports forAY 08-09 say that UofP received $65Sm in Pel I. (We know this amounts is pre refunds.)
Link: http ://federalstudentaid.ed.gov I datacenter /program matic.html
Can you say what the University of Phoenix's Pell dollars were post refunds?
12
From: Kvaal, James
Sent:
To:
Monday, September 13, 201 o 10:32 AM
Bergeron, David; Weko, Tom
Subject: RE: for the GE presentation on Monday
From: BergeronJ David
Sent: MondayJ September 13J 2010 7:51 AM
To: WekoJ Tom; KvaalJ James
Subject: RE: for the GE presentation on Monday
Just a couple of points.

From: WekoJ Tom
Sent: SundayJ September 12J 2010 9:26AM
To: KvaalJ James
Cc: BergeronJ David
Subject: for the GE presentation on Monday
Importance: High
Dear JamesJ
I have revised the document that you sent -- both the bullet points and the figures.
RegardsJ
Tom
From: KvaalJ James
To: WekoJ Tom
Cc: BergeronJ David
13
I
Subject: RE: graphs with notes
many thanks
From: Tom
Sent : September 2010 6:44PM
To : James
Cc: David
Subject: FW: graphs with notes
Dear
Take a look at and l et's talk about if that suits your purposes. We can do
more/different if that is necessary.
Tom
From: Janice
To: Tom
14
Cc: MillerJ Elise; BarbettJ Samuel
Subject: graphs with notes
15
From:
Sent:
To:
Subject:
Attachments:
Thanks!
David Halperin [dhalperin@americanprogress.org]
Kvaal, James
RE: Phoenix to all of their students
image007.jpg; image006.jpg; image005.jpg; image004.jpg; image003.jpg; image002.jpg;
image001 .jpg
From: Kvaal, James fmailto:James.Kvaal@ed.govl
To: David Halperin
Subject: FW: Phoenix to all of their students
---------- Forwarded rn essage ----------
From: Bill Pepicello, University of Phoenix
<proud@uni versi tyofphoeni x. com>
Date: Mon, Aug 16, 201 0 at 4:56 PM
Subject: Sign the Petition to President Obama
To:
To reply to this e-mail, click here
Dear,
Today I'm writing to ask you to take a simple but important step in
making sure the voices of our university community are heard.
Please sign this petition asking President Obama to protect
access to higher education for all students in the nation.
As you may know, some leaders in Washington are proposing a
regulations that could affect our university and restrict students'
options within higher education. I want to make sure that the national
conversation about University of Phoenix includes the voices of the
people who know it best-- hardworking students like you.
Regulations could prevent students at for-profit schools like
University of Phoenix-- and only schools like ours-- from having the
same access to grants and student loans as traditional universities.
16

Under these new rules, students could still get aid for community
colleges, state schools, and private universities-- schools that don't all
share our philosophy that everyone deserves the opportunity to go to
college.
As you know better than anyone, if our students can't have equal
access to student loans, that's going to block hundreds of thousands of
Americans from getting the college education they need and deserve
to get ahead in their jobs or find even better jobs.
Please sign this petition to President Obama, asking him to protect
access to higher education for all students, especially working adults
from diverse backgrounds like so many of our students. join
thousands of students, alumni, staff, and faculty who are speaking out
about the value of their education at University of Phoenix and the
critical role that it is playing in your current career or in the career
you intend to pursue.
Thank you for your time.
Sincerely,
Bill Pepicello
President
University of Phoenix
2010 University of Phoenix, Inc. All rights reserved. I 4615 E. Elwood St., Phoenix, AZ 85040
View our privacy policy I Unsubscribe
This message was sent t o
17
Sent:
To:
Thursday, September 09, 2010 12:03 PM
Weiss, Joanne
Subject: Fw: A Message from Dr. John Sperling, Founder- University of Phoenix
In case Arne needs TPs on this.
From: Georgia
To: James; Peter; Justin; Martha
Cc: Steve
Sent: Thu Sep 09 10:52:46 2010
Subject: FW: A Message from Dr. John Founder - University of Phoenix
Here's Steve's advice.
From: Steve
To: Georgia
Subject: RE: A Message from Dr. John Founder - University of Phoenix
From: James
To: Peter; Martha; Justin
Peter:
18
From: Cunningham) Peter
Sent: FridayJ September 03J 2010 7:40 AM
To: KanterJ Martha
Cc: KvaalJ James
Subject: RE: A Message from Dr . John Sperling) Founder - University of Phoenix
Sent: Thursday) September 02J 2010 9:27 PM
To: Cunningham) Peter
Subject: FW: A Message from Dr. John Sperling) Founder - University of Phoenix
Sent: Thursday) September 02J 2010 10:24 PM
To: WeissJ Joanne; MartinJ Carmel; YuanJ Georgia; RoseJ Charlie; GomezJ Gabriella; OchoaJ
Eduardo; MillerJ Tony; peter . cunnigham@ed.gov
Subject: FYI: A Message from Dr. John Sperling) Founder - University of Phoenix
September 2J 2010
Attn. Legislative Director
Dear Congress MemberJ
As founder of the University of Phoenix) I am writing to you and to every Member of Congress
concerning recent actions by the U.S. Department of Education and the Senate Committee on
HealthJ Education) Labor and Pensions. The Department of Education) seconded by the HELP
Committee) has proposed new rules that will seriously undercut the ability of the nation to
remain globally competitive by undermining a vital sector of our higher education system- for-
profit colleges and universities.
I am writing to you because I am confident that every Member of Congress) whether or not they
are a member of a committee that deals with higher education) would like quality higher
education to be available to every American who seeks to earn a college degree. That is the
stated goal of President Obama. However) we will not be able to reach the PresidentJs goals
without for-profit colleges. The states do not have the funding needed to increase capacity
whereas private sector colleges like ours can provide the necessary capacity. For-profit
colleges already provide flexibility and access for millions of underserved and
nontraditional students who could not complete their education in a traditional institution.
The attached power point has been prepared by NEXUSJ a research and policy institute whose
primary focus is the for-profit sector of higher education. Given its commitment to fact
based research) not special pleading) the power point presents a rationale for the need to
rethink the reforms proposed by USDOE and the HELP Committee using as an example the case of
19
the University of Phoenix> whose massive database on its operations and its academics has
been made available to NEXUS researchers.
As the largest institution in the sector- 465>000 students with 90>000 graduates last year-the
University of Phoenix illustrates the strengths and weaknesses of for-profit colleges and
universities. The NEXUS study documents the financial system that sustains it> the quality of
the University>s programs> the innovations it has brought to higher education and where it
has failed to meet regulatory standards and its own code of conduct. It also documents the
steps the University has taken to insure future compliance with all regulatory standards.
Perhaps the most important finding of the case study is the fact that for-profit institutions
operate at no cost to taxpayers because the interest students pay on their federal loans plus
the taxes paid by the institutions is greater than the Pell Grants and all of the other state
and federal subsidies received by the students and the institutions. Further> the study
shows that not only will the proposed reforms require a major increase in Department of
Education oversight staff> they will greatly lower the efficiency and raise the costs of the
institutions in the sector- all at the expense of taxpayers.
It would seem wiser to restore the status quo ante when the Department of Education was
pursuing a reform that would truly benefit taxpayers> namely to require all institutions of
higher education to measure the learning outcomes of their students and to publish those
results on an annual basis. Overseeing the measurement protocols used by institutions in
order to expose cheating on the tests> would be a far more productive use of Department of
Education resources than what is presently contemplated. Only when learning outcomes are
measured and published will taxpayers know what they are getting for their money and the abad
actors" be easily identified-namely the institutions whose students are low performers.
When you have finished reviewing the power point> we hope you will be persuaded that for-
profit colleges and universities are a vital sector of the American higher education system
that deserve the support of the Department of Education and the Congress> along with
responsible oversight> rather than a set of regulations that will instead inhibit their
efficiency> their growth> their culture of innovation and> most importantly> their ability to
deliver a quality education to millions of low- income Americans now denied access to the
education they need to give them a chance to join the middle class.
The worst of these regulations concerns the definition of ((gainful employment" and a new
regulation that sets the minimum rates at which students in a program must be repaying on the
principal of their student loans. The new definition of gainful employment is so onerous it
would make it impossible for the sector to offer many programs that prepare students for
certification in such occupations as teachers> nurses> counselors and public safety officers.
The repayment percentage requirements> apparently arrived at with insufficient attention to
their potential negative consequences> would have a devastating impact on institutions that
enroll low- income students who often require several years in the workforce before they can
begin repaying the principal on their student loans. For example> if these requirements were
applied to Historically Black Colleges and Universities> over 90% of them would have to close
their doors.
Representative Robert Andrews (New Jersey - 01) has proposed a definition of gainful
employment that would correct the many faults of the definition proposed by the Department of
Education. He has written to Education Secretary Arne Duncan setting forth the negative
consequences resulting from the Department>s definition while proposing an alternative which
would remove these negative consequences and still gain the same objectives. Many of the
institutions in the for -profit sector support Congressman Andrews>s initiative and we are
asking all Members of the Congress to lend their support as well. I have attached a draft of
a letter of support which we hope you will use as a model for a letter from you to Secretary
Duncan with copies to Speaker Nancy Pelosi and to Congressman Andrews. The University and
every institution in the sector would very much appreciate your support.
20
Thank you for your time and consideration of this important issue.
[cid:image001.gif]
John G. Sperling
Founder
21
From:
Sent:
To:
Subject:
Attachments:
Kvaal, James
Friday, September 03, 2010 9:42AM
Higginbottom, Heather A.; Rodriguez, Roberto J.; Kamin, David C.; Gordon, Robert M.
FW: A Message from Dr. John Sperling, Founder- University of Phoenix
image001 .gif; For_Profit Colleges and Universities_America's Least Cost and Most Efficient
System of Higher Education1.pdf; Suggested Sample Letter to Secretary Arne Duncan from
Members of Congress, Senate version.docx
Just wanted to make sure this made its way to you. We're looking into the claim that Phoenix has no
cost to taxpayers.
This appears to have gone to all House and Senate Legislative Directors (I got it from a House and
Senate LD). Among other points, Sperling says "Perhaps the most important finding of the case study is
the fact that for-profi t institutions operate at no cost to taxpayers because the interest students pay on their
federal loans plus the taxes paid by the institutions is greater than the Pell Grants and all of the other state and
federal subsidies received by the students and the institutions."
From: John Sperling [mailto @gmail.com]
Subject: A Message from Dr. John Sperling, Founder- University of Phoenix
September I, 201 0
Senator
US Senate
Senate Office Building
Washington DC 20510
Dear Senator __ ,
As founder of the University of Phoenix, I am writing to you and to every Member of Congress conceming recent actions
by the U.S. Department of Education and the Senate Committee on Health, Education, Labor and Pensions. 1l1e
Department of Education, seconded by the HELP Committee, has proposed new mles that will seriously undercut t he
ability of the nation to remain globally competitive by undermining a vital sector of our higher education system-for-
22
I am wri ting to you because I am confident that every Member of Congress, whether or not they are a member of a
committee that deals with higher education, would like quality higher education to be available to every American who
seeks to earn a college degree. That is the stated goal of President Obama. However, we will not be able to reach the
President ' s goals without for-profit colleges. The states do not have the funding needed to increase capacity whereas
ptivate sector colleges like ours can provide the necessary capacity. For-profit colleges already provide flexibility and
access for millions of underserved and nontraditional students who could not complete their education in a traditional
institution.
The attached power point has been prepared by NEXUS, a research and policy institute whose primary focus is the for-
profit sector of higher education. Given its commitment to fact based research, not special pleading, the power point
presents a rationale for the need to rethink the reforms proposed by USDOE and the HELP Committee using as an
example the case of the University of Phoenix, whose massive database on its operations and its academics has been
made available to NEXUS researchers.
As the largest institution in the sector-465,000 students with 90,000 graduates last year -the University of Phoenix
illustrates the strengths and weaknesses of for-profit colleges and uni versities. The NEXUS study documents the financial
system that sustains it, the quality of the University's programs, the innovations it has brought to higher education and
where it has failed to meet regulatory standards and its own code of conduct. It also documents the steps the University
has taken to insure future compliance with all regulatory standards.
Perhaps the most impottant finding of the case study is the fact that for-profit institutions operate at no cost to taxpayers
because the interest students pay on thei r federal loans plus the taxes paid by the institutions is greater than the Pell Grants
and all of the other state and federal subsidies received by the students and the institutions. Further, the study shows that
not only will the proposed reforms require a major increase in Department of Education oversight staff, they will greatly
lower the efficiency and raise the costs of the institutions in the sector-all at the expense of taxpayers.
It would seem wiser to restore the status quo ante when the Department of Education was pursuing a reform that would
truly benefit taxpayers, namely to require all institutions of higher education to measure the leaming outcomes of their
students and to publish those results on an rumual basis. Overseeing the measurement protocols used by institutions in
order to expose cheating on the tests, would be a far more productive use of Department of Education resources than what
is presently contemplated. Only when learning outcomes are measured and published vlill taxpayers know what they are
getting for their money and the "bad actors" be easily identified- nrunely the institutions whose students are low
performers.
Wl1en you have finished reviewing the power point, we hope you will be persuaded that for-profit colleges and
uni versities are a vital sector of the American higher education system that deserve the support of the Department of
Education and the Congress, along with responsible oversight, rather than a set of regulations that will instead inhibit their
efficiency, their growth, their culture of innovation and, most importantly, their ability to deliver a quali ty education to
millions of low-income Americans now denied access to the education they need to give them a chance to join the middle
class.
The worst of these regulations concer:ns the definition of "gainful employment" and a new regulation that sets the
minimum rates at which students in a progran1 must be repaying on the principal of their student loans. The new definition
of gainful employment is so onerous it would make it impossible for the sector to offer mru1y programs that prepare
students for certification in such occupations as teachers, nurses, cow1selors and public safety officers. The repayment
percentage requirements, apparently arrived at with insufficient attention to their potential negati ve consequences, would
have a devastati ng impact on insti tutions that enroll low-income students who often require several years in tl1e workforce
before they can begin repaying the principal on their student loans. For exru11pl e, if these requirements were applied to
Historically Black Colleges and Universities, over 90% of them would have to close their doors.
Representative Robert Andrews (New Jersey-0 1) has proposed a definition of gainful employment that wouJd correct the
many faults of the definition proposed by the Department of Education. He has written to Education Secretary Arne
Dtmcan setting forth the negative consequences resulting from tl1e Department's definition while proposing an alternative
which would remove these negative consequences and still gain the same objectives. Many of the institutions in the for-
profit sector support Congressman Andrews' s initiative and we are asking all Members of the Congress to lend their
support as well. I have attached a draft of a letter of support which we hope you vvill use as a model for a letter from you
23
to Secretary Duncan 'vvith copies to Senate Majori ty Leader, Harry Reid and to Congressman Andrews. The University
and every institution in the sector would very much appreciate your support.
John G. Sperl ing
Founder
Uni versity of Phoenix
24
From:
Sent:
To:
Subject:
From: Gomez/ Gabriella
Kvaal, James
Gomez, Gabriella
RE: Pell after refund
Sent: Friday/ September 10
1
2010 2:50PM
To: Kvaal
1
James
Subject: Fw: Pell after refund
(202) 401-0020
From: Swarthout/ Luke (HELP Committee) lc tl.i.:.:. * .....: > ____
To: Gomez/ Gabriella
Sent: Fri Sep 10 13:09:12 2010
A couple thi ngs-are you actually saying UoP will get 1.5 billion in pell this year?
Second-what we're actually looking for was the total net Pell dollars forAY 08-09. You report it to be 655, they report
something significantly less. Is the 655 total disbursements or net?
From: Gomez
1
Gabriella [mailto:Gabriella.Gomez@ed.govl
Sent: Thursday, September 09
1
2010 6:18PM
To: Swarthout, Luke (HELP Committee)
Federal loans
2009
University of Phoenix 4,323,040,601
Western International University 16,358,239
Total 4,339,398,840
Federal Grants
(AY 2009-10)
1,503,838,027
4,672,508
1,508,510,535
From: Swarthout/ Luke (HELP Committee) '-'[m"'""a"'"'i-'-"lt <P "-__IJ ____ ...JW=-'-'h"""el""p""".s""'en,_,_,a..,te""".'-!:19.:::..0V"-'l
Sent: Thursday, September 09
1
2010 5:44PM
Subject: FW: Pell after refund
25
Campus Based
Programs (2007-08)
4,601,477
243,919
4,845,396
Question:
ED's grant volume reports forAY 08-09 say that UofP received $655m in Pel I. (We know this amounts is pre refunds.)
Link: http ://federalstudentaid.ed.gov I datacenter /program matic.html
Can you say what the University of Phoenix's Pell dollars were post refunds?
26
From:
Sent:
To:
James Kvaal @gmail.com]
Thursday, August 9, 2010 8:12AM
Kvaal, James
Subject: Fwd: Phoenix to all of their students
Begin forwarded message:
From: Michael Dannenberg
Date: August 18, 2010 4:47:18 PM EDT
To: j(tiR8) l@gmail.com" j!Ki} @gmail.com>
Subject: Fwd: Phoenix to all of their students
Sent from my iPhone
From: Michael Dannenberg flX$> l@yahoo.com>
Date: August 18, 2010 4:46:23 PM EDT-...,.------.
To: px&) t@gmail.com" fk81 t@gmail.com>
Subject: Phoenix to all of their students
Sent from my iPhone
From: Michael Dannenberg .JQ?R8J ]@gmail.com>
Date: August 18, 2010 4:41:36PMEDT
To: 'lSD @yahoo.com" ___ _, J@yahoo.com>
Subject: Fwd: Sign the Petition to President Obama
Sent from my iPhone
Subject: FW: Sign the Petition to President
Obama
A University of Phoenix student from __ just called
freaking out that Obama was trying to shut down her
school.
----------Forwarded message----------
From: Bill Pepicello, University of Phoenix
<proud@universityofphoenix.com>
27
Date: Mon, Aug 16, 2010 at 4:56 PM
Subj ect: Sign the Petition to President Obama
To:
To reply to this e-mail, click here
0 -----
Dear,
Today I'm writing to ask you to take a simple but important step in
making sure the voices of our university community are heard.
Please sign this petition asking President Obama to protect
access to higher education for all students in the nation.
As you may know, some leaders in Washington are proposing
regulations that could affect our university and restrict students'
options within higher education. ! want to make sure that the national
conversation about University of Phoenix includes the voices of the
people who know it best-- hardworking students like you.
Regulations could prevent students at for-profit schools like
University of Phoenix-- and only schools like ours-- from having the
same access to grants and student loans as traditional universities.
Under these new rules, students could still get aid for community
colleges, state schools, and private universities-- schools that don't all
share our philosophy that everyone deserves the opportunity to go to
college.
As you know better than anyone, if our students can't have equal
access to student loans, that's going to block hundreds of thousands of
Americans from getting the college education they need and deserve
Please sign this petition to President Obama. asking him to protect
access to higher education for all students, especially working adults
from diverse backgrounds like so many of our students. Join
thousands of students, alumni, staff, and faculty who are speaking out
about the value of their education at University of Phoenix and the
critical role that it is playing in your current career or in the career
you intend to pursue.
28
Sincerely,
Bill Pepicello
President
2010 University of Phoenix, Inc. All rights reserved. I 4615 E. Elwood St., Phoenix, AZ 85040
View our privacy policy I Unsubscribe
This message was sent to
29
From:
Sent:
To:
Subject:
Yeah, doesn't have to be toda
From: Gordon, Robert M. <Robert_M._Gordon@omb.eop.gov>
To: Kvaal, James
Sent: Fri Sep 03 11:46:24 2010
Subject: RE: A Message from Dr. John Sperling, Founder- University of Phoenix
Thanks. Sorry I didn't return your call the other day. Still want to talk?
From: Kvaal, James [mailto:James.Kvaal@ed.gov]
Sent: Friday, September 03, 2010 9:42AM
To: Higginbottom, Heather A.; Rodriguez, Roberto J.; Kamin, David C.; Gordon, Robert M.
Subject: FW: A Message from Dr. John Sperling, Founder- University of Phoenix
cost to taxpayers.
Senate LD). Among other points, Sperl ing says "Perhaps the most important finding of the case study is
the fact that for-profit institutions operate at no cost to taxpayers because the interest students pay on their
September 1, 2010
Senator
30
US Senate
Washington DC 20510
Dear Senator __ ,
by the U.S. Department of Education and the Senate Committee on Health, Education, Labor and Pensions. The
Department of Education, seconded by the HELP Committee, has proposed new mles that will seriously undercut the
ability of the nation to remain globally competitive by undem1ining a vital sector of our higher education system-for-
I am wri ting to you because I am confident that every Member of Congress, whether or not they are a member of a
seeks to eam a college degree. That is the stated goal of President Obama. However, we will not be able to reach the
President ' s goals without for-profit colleges. Tbe states do not have the funding needed to increase capacity whereas
ptivate sector colleges like ours can provide the necessary capacity. For-profit colleges already provide flexibility and
institution.
illustrates the strengths and weaknesses of for-profit colleges and uni versities. The NEXUS study documents the financial
system that sustains it, the quality of the University's programs, the itmovations it has brought to higher education and
Perhaps the most impottant finding of the case study is the fact that for-profit institutions operate at no cost to taxpayers
tmly benefit taxpayers, namely to require all institutions of higher education to measure the leaming outcomes of their
is presently contemplated. Only when learning outcomes are measured and published vlill taxpayers know what tl1ey are
getting for their money and tl1e "bad actors" be easily identified- nrunely tl1e institutions whose students are low
performers.
31
class.
The worst of these regulations concerns the definition of "gainful employment" and a new regulation that sets the
minimum rates at which students in a program must be repaying on the principal oftheir student loans. The new definition
of gainful employment is so onerous it would make it impossible for the sector to offer many programs that prepare
students for certification in such occupations as teachers, nurses, counselors and public safety officers. The repayment
percentage requirements, apparently arrived at with insufficient attention to their potential negative consequences, would
have a devastating impact on institutions that enroll low-income students who often require several years in the workforce
before they can begin repayi ng the principal on their student loans. For example, if these requirements were applied to
Representative Robert Andrews (New Jersey-0 l) has proposed a definition of gainful employment that would correct the
many faults oftl1e definition proposed by tl1e Department of Education. He has written to Education Secretary Arne
Dtmcan setting forth tl1e negative consequences resulting from the Department' s definition while proposing an alternative
profit sector support Congressman Andrews s initiative and we are asking all Members of the Congress to lend their
support as well. I have attached a draft of a letter of support which we hope you 'vvill use as a model for a letter from you
to Secretary Duncan with copies to Senate Majority Leader, Harry Reid and to Congressman Andrews. The University
Jolm G. Sperling
Founder
32
From: Gordon, Robert M. @omb.eop.gov]
To: Kvaal, James
Thanks. Are you free 3:30-4:00?
To: Gordon, Robert M.
Subject: Re: A Message from Dr. John Sperling, Founder- University of Phoenix
Yeah, doesn't have to be today
~ - - - - - - - - - - - - - - - - - - - - - - - - ~
From: Gordon, Robert M. @omb.eop.gov>
To: Kvaal, James
Sent: Fri Sep 03 11:46:24 2010
Subject: RE: A Message f rom Dr. John Sperling, Founder- University of Phoenix
Sent: Friday, September 03, 2010 9:42 AM
cost to taxpayers.
33
From: John Sperling [mailto gmail.com]
September 1, 2010
Senator
US Senate
Washington DC 20510
Dear Senator __ ,
As founder of the University ofPhoenix, I am writing to you and to every Member of Congress conceming recent actions
Department of Education, seconded by the HELP Committee, has proposed new rules that will seriously undercut the
ability of the nation to remain globally competitive by tmdem1ining a vital sector of our higher education system-for-
I am writing to you because I am confident that every Member of Congress, whether or not they are a member of a
committee that deals with higher education, would li ke quality higher education to be available to every American who
seeks to eam a college degree. 1l1at is the stated goal of President Obama. However, we will not be able to reach the
President's goals without for-profit colleges. The states do not have the funding needed to increase capacity whereas
private sector colleges like ours can provide the necessary capacity. For-profit colleges already provide flexibility and
access for millions ofunderserved and nontraditional students who could not complete their education in a traditional
institution.
illustrates the strengths and weaknesses offor-profit colleges and universities. The NEXUS study docwnents the financial
system that sustains it, the quali ty of the University' s programs, the innovations it has brought to higher education and
has taken to insure future compl iance with all regulatory standards.
Perhaps the most important finding of the case study is the fact that for-profit institutions operate at no cost to tah.rpayers
because the interest students pay on their federal loans plus the ta.'<es paid by the institutions is greater than the Pell Grants
truly benefit ta.-xpayers, namely to require all institutions of higher education to measure the teaming outcomes of their
34
order to expose cheating on the tests, 'vvould be a far more producti ve use of Department of Education resottrces than what
is presently contemplated. Only when learning outcomes are measured and published vvi ll taxpayers know what they are
getting for their money and the "bad actors" be easily identified-namely the institutions whose students are low
performers.
When you have finished reviewing the power point, we hope you will be persuaded that for-profit colleges and
universities are a vital sector of the American higher education system that deserve the support of the Department of
efficiency, their growth, their culture of innovation and, most importantly, their ability to deliver a quality education to
class.
minimum rates at which students in a program must be repaying on the principal of their student loans. TI1e new definition
before they can begin repaying the principal on their student loans. For example, if these requirements were appl ied to
Representati ve Robe1t Andrews (New Jersey-0 1) has proposed a definition of gainfttl employment that would correct the
Duncan setting forth the negative consequences resulting from the Department's definition while proposing an alternative
support as well. I have attached a draft of a letter of support which we hope you will use as a model for a letter from you
and every institution in the sector \vould very much appreciate your support.
John G. Sperling
Founder
35
From: Kvaal, James
Sent:
To:
iUctav Seotemher 03, 2010 3:14PM

I will call you a little before 4 if I get out of my meeting early
From: Gordon, Robert M. @omb.eop.gov>
To: Kvaal, James
Sent: Fri Sep 03 13:34:50 2010
Thanks. Are you free 3:30-4:00?
To: Gordon, Robert M.
Yeah, doesn't have to be today
From: Gordon, Robert M. gov>
To: Kvaal, James
Sent: Fri Sep 03 11:46:24 2010
cost to taxpayers.
36
September 1, 2010
Senator
US Senate
Washington DC 20510
Dear Senator __ ,
As founder of the University of Phoenix, f am writing to you and to every Member of Congress conceming recent actions
ability of the nation to remain globally competitive by tmdennining a vital sector of our higher education system-for-
seeks to eam a college degree. 1l1at is the stated goal of President Obama. However, we will not be able to reach the
President ' s goals without for-profit colleges. 1l1e states do not have the fi.mding needed to increase capacity whereas
institution.
illustrates the strengths and weaknesses offer-profit colleges and universities. The NEXUS study docwnents the financial
system that sustains it, the quality of the University' s progran1s, the innovations it has brought to higher education and
37
Perhaps the most impo1tant finding ofthe case study is the fact that for-profit institutions operate at no cost to taxpayers
It would seem wiser to restore t he status quo ante when the Department of Education was pursuing a reform that would
truly benefit taxpayers, namely to require all institutions of higher education to measure the teaming outcomes of their
order to expose cheating on the tests, would be a far more producti ve use of Department of Education resources than what
is presently contemplated. Only when learning outcomes are measured and published vlill taxpayers know what tl1ey are
getting for their money and the "bad actors" be easily identified- nrunely tl1e institutions whose students are low
performers.
class.
The worst of these regulations concems the definition of "gainful employment" and a new regulation that sets the
minimum rates at which students in a progran1 must be repaying on the principal of their student loru1s. The new definition
of gainful employment is so onerous it would make it impossible for the sector to offer mru1y programs that prepare
students for certification in such occupations as teachers, nurses, cow1selors and public safety officers. The repayment
have a devastati ng impact on insti tutions that enroll low-income students who often require several years in tl1e workforce
before they can begin repaying the principal on their student loans. For exru11ple, if these requirements were applied to
Representative Robert Andrews (New Jersey-0 1) has proposed a definition of gainful employment that would correct the
Dtmcan setting forth the negative consequences resulting from tl1e Department's definition while proposing an alternative
support as well. I have attached a draft of a letter of support which we hope you vvill use as a model for a letter from you
to Secretary Duncru1 with copies to Senate Majority Leader, Harry Reid and to Congressmru1 Andrews. The University
John G. Sperling
Founder
38
From: Little, Bethany (HELP Committee @help.senate.gov]
Sent: Thursday, September 02, 201 o 5:34 PM
To: Kvaal, James
Subject:
Attachments:
Re: A Message from Dr. John Sperling, Founder- University of Phoenix
image001.gif
De nada amigo;).
From: Kvaal, James <James.Kvaal@ed.gov>
To: Little, Bethany (HELP Committee)
Sent: Thu Sep 02 17:32:41 2010
gracias
From: Little, Bethany (HELP Committee) [mailto help.senate.gov]
To: Kvaal, James; Gomez, Gabriella
I'm assuming this has come your way, but wanted to make sure since you might find it interesting.
From: Miller, Derek (Harkin) [mailto:Derek_Miller@harkin.senate.gov]
To: Smith, Daniel (HELP Committee); Smith, Pam (HELP Committee); Stein, Beth (HELP Committee); Little, Bethany
(HELP Committee)
Cc: Cyrul, Kate (Harkin); Ahlberg, Brian (Harkin)
FYI- assume you've probably all seen this, but just in case ...
dm
From: John Sperling @gmail.com]
To: Miller, Derek (Harkin)
September I , 20 I 0
39
Senator Tom Harkin
US Senate
731 Hart Senate Office Building
Washington DC 20510
Dear Senator Harkin,
by the U.S. Department of Education and the Senate Committee on Health, Education, Labor and Pensions. TI1e
Department of Education, seconded by the HELP Committee, has proposed new mles that will seriously tmdercut the
ability of the nation to remain globally competitive by undennining a vital sector of our higher education system-for-
President's goals without for-profit colleges. TI1e states do not have the funding needed to increase capacity whereas
institution.
example the case of the University of Phoeni x, whose massive database on its operations and its academics has been
illustrates the strengths and weaknesses of for-profit colleges and uni versities. The NEXUS study docwnents the financial
system that sustains it, the quality of the University' s programs, the innovations it has brought to higher education and
where it has failed to meet regulatory standards and its own code of conduct. It also docwnents the steps the University
Perhaps the most important finding of the case study is the fact that for-profit institutions operate at no cost to taxpayers
not only ,.vi ll the proposed reforms require a major increase in Department of Education oversight staff, they will greatly
It would seem wiser to restore the status quo ante when the Department of Education was pursuing a refonn that would
tmly benefit taxpayers, namely to require all institutions of higher education to measure the learning outcomes of their
students and to publish those results on an annual basis. Overseeing the measurement protocols used by institutions in
order to eh.rpose cheating on the tests, would be a far more productive use of Department of Education resources than what
is presently contemplated. Only when learning outcomes are measured and published vvi ll taxpayers know what they are
getting for their money and the "bad actors" be easily identified-nan1ely the institutions whose students are low
performers.
40
efficiency, their growth, their culture of innovation and, most importantly, their abi lity to deliver a quality education to
class.
The worst ofthese regulations concerns the definition of "gainful employment" and a new regulation that sets the
minimum rates at which students in a program must be repaying on the principal of their student loans. The new definition
of gainful employment is so onerous it would make it impossible for the sector to offer many progran1s that prepare
before they can begin repaying the principal on their student loans. For example, if these requirements were applied to
Representati ve Robert Andrews (New Jersey-0 1) has proposed a definition of gainful employment that would correct the
Dtmcan setting forth the negative consequences resulting from the Department' s definition while proposing an alternative
profit sector support Congressman Andrews' s initiative and we are asking all Members of the Congress to lend thei r
support as well. I have attached a draft of a letter of support which we hope you wi ll use as a model for a letter from you
John G. Sperling
Founder
41
-
came C __._ ;:: , ....... .;.
For-Profit Colleges and Universities: America's
Least Cost and Most Efficient System of Higher
Education
Case Study-University of Phoenix
Linking Dialogue to Research
Case Studies on Public Policy and Higher Education
Jorge Klor de Alva, President
August, 2010
NEXUS
& Polley C,l;l f tQr
"E>Cploring the Frontiers of Higher Education"
199 Fremont Street I Suite 1400 I San Francisco, CA 94105
Mobile: 602.684.5401 I contact: jorge@nexusresearchcenter.org
Disclosures
Nexus Research and Policy Center
As an independent, nonprofit, nonpartisan organization, Nexus Research and Policy Center is organized to
conduct educational research-such as in the fields of the learning sciences, assessment and measurement-
and to prepare action-oriented analyses of pressing policy issues facing states and the nation regarding the
improvement of educational efficiency, effectiveness and degree completion success, especially on behalf of
underserved student populations and the institutions that provide them access to higher education. In
particular, Nexus seeks to do research and promote policies that improve the for-profit education sector and
that contribute to a better understanding between the for-profit and traditional sectors of higher education.
Nexus Research and Policy Center was incorporated December 15, 2009, in the state of Arizona as a nonprofit
corporation under the Arizona Revised Statues Sections 10-3101 through 10-11702. It is currently in the
process of completing its organizational plans and filing for 501(c)3 status. As of August 2010, its primary
source of funds is donations in cash and in kind from Apollo Group, Inc. and the John G. Sperling Foundation.
To avoid undue influence from its primary funding sources, Nexus has an independent board with no member
selected by either Apollo or the Foundation. The recognized importance of its independence has led both
Apollo and the Foundation to not interfere with its governance, research agenda, or editorial policy. That said,
while we acknowledge that Nexus' full independence may be questioned as a consequence of its funding
sources and in kind donations from Apollo of employee time, its research is based on government data as well
as other objective and reliable sources. These sources and the methodology used to analyze them-all
acknowledged in the endnotes of this study-have been reviewed by independent researchers and auditors
for validity.
NEXUS
... ,..::11 :r "" rott; 1 C"U 2
The reason for this case study
This is the first study by Nexus on the current predicament in which higher education in the United States
finds itself as the Department of Education and Congress initiate a new round of reforms of the
regulations governing for-profit colleges and universities.
For two years, the for-profit sector has been under what some have described as an attack by the
Department of Education, the national media, Wall Street short-sellers, and recently Congress. Although
two Government Accountability Office (GAO) studies completed in 2010 (GA0-10-370R, GA0-10-948T)
have shown a total of only 37 out of over 2,000 for-profit institutions violated investigated regulations
since 1998, the whole sector has been directly or indirectly accused of failing to adhere to regulations or
strict codes of ethics and of neglecting to redress unauthorized actions by staff or faculty in a timely
manner.
Therefore, those criticizing the sector have characterized it as corrupt based literal ly on the actions of a
few individuals. In the words of Senator Tom Harkin, Chair of the Committee on Health, Education, Labor
and Pensions ("HELP"), "It is not that there are a few bad apples among the for-profits, but rather the
entire orchard is contaminated."
This case study seeks to provide evidence that the orchard analogy not only does not hold, but that it is
itself a source of contamination that threatens to destroy what the data suggest is the most active,
efficient, and efficacious part of that sector of American higher education dedicated to teaching. In short,
we hope this case study will permit facts to replace anecdotes, research to displace preconceived
opinions, and the protection of taxpayers to trump misguided bureaucratic regulations.
NEXUS
... ,..::11 :r "" rott; 1 C"U 3
The focus on the for-profit sector is primarily a response to President Obama's laudable
call for America to lead the world in college graduates by the year 2020.
The President sees community colleges as the least cost path to achieve his goals.
For his vision to become a reality, students and institutions will need money. But the major source of
federal funds are Pel I Grants and subsidized loans, a high percent of which go to low-income students who
attend for-profit institutions.
Consequently reform efforts seek to move these funds from the for-profits to the public institutions. This
movement of money from the for-profit sector to community colleges underlies the current investigation of
the for-profit sector.
But this strategy is impossible to carry out and is bad policy.
It is financially impossible to implement because it would cost state and local governments nearly one
trillion dollars to pay for the operating and infrastructure costs required to provide access to the 22 million
students needed to produce the 5 million graduates required to meet the President's goal.*
It is bad policy because for-profit institutions now cost the taxpayers nothing and thus they could help
reach the President's goal at no cost to local, state, and federal governments and thus to the taxpayers.
The following tables and graphs will explain why the public and private institutions alone cannot meet the
President's goal and why for-profit institutions are necessary to meet the goal.
*See www. parthenon.com Parthenon Perspecti ves on Private Sector Post-Secondary Schools-Do They Deliver
Value To Students and Society, Robert Lytle, March 2010, p.2.
NEXUS
... ,..::11 :r "" rott; 1 C"U 4
What is the annual cost to taxpayers per student at a community college,
public university, private college/university and for-profit college/
university?
Figure 1
Student Grants for Tuition
1
Government Subsidies
2
Forgone Taxes3
State and Local Grants
4
Interest Paid by Students on
Loans
5
Corporate Taxes Paid
6
Net Cost I (Benefit) to Taxpayer
per student
Research Expense
Net Cost I (Benefit) to Taxpayer
Adjusted for Research Expense
per Student
Per Student Taxpayer Costs I (Benefits)
All Institutions, Academic Year 2007-0811"'
~ - - ~ - - - - ~ - - ~ - - ~ - - ~ - - ~ - - ~ -
Public Public Private
(2 Year) (4 Year) (4 Year)
$ 423 $ 5,225 $ 7,809
17 40 80
152 868 5,933
6,553 9,866 1,293
(29) (146) (377) vs.
$ 7,116 $ 15,883 $ 14,735
(O) (6,175) (8,356)
$ 6,379
Regionally Accredited
For-Profit (4-Year) , UOPX
(incl. UOPX)
'I
:!
$ 752 $ 735
77 68
105 35
(248) (218)
$ (784) $ (625)
$ (99) $ (5)
G
(5)
Net Cost to taxpayers for public community colleges and 4-yr colleges per student is on average
$8,600 higher than for-profit, regionally accredited institutions.
NEXUS
* See Appendix 1 for all endnotes, including details on endnotes 1-6 and 11.
... ,..::11 :r "" rott; 1 C"U 5
What is the annual cost to taxpayers per student at an elite
college/university?
Figure 2
Per Student Taxpayer Costs I (Benefits)
Elite Institutions, Academic Year 2007-0811
$50K Tuition
Harvard Princeton
Colleges
Student Grants for Tuition
1
$ 1,265 $ 24,390 $ 18,397
Government Subsidies
2
42 49 2
Forgone Taxes
3
11,836 69,996 62,655
State and Local Grants
4
147 160 281
Interest Paid by Students on Loans
5
(199) (280) (35)
Corporate Taxes Pa id
6
Net Cost I (Benefit) to Taxpayer $ 13,091 $ 94,315 $ 81,300
per Student
Research Expense (1,699) (25,996) (29,091)
Net Cost I (Benefit) to Taxpayer Adjusted $ 11,392 $ 68,319 $ 52,208
for Research Expense per Student
NEXUS
... ,..::11 :r "" rott; 1 C"U
'I
Yale :!
$ 39,745
51
47,079
2,123
(300)
$ 88,698
(36,585)
$ 52,113
6
Cost effective education at scale: The case of the largest for-
profit institution
The financial relationship between taxpayers and the largest for-profit university, the
University of Phoenix, and its 465,000 students:
Figure 3
Tax supported grants and subsidies
1
'
2
&
4
Interest on loans paid by students
5
Corporate taxes
6
Net receipts from the government
Per Student_ Cost to Taxpayers
NEXUS
... ,..::11 :r "" rott; 1 C"U
$461,390,166
{118,990,581)
(341,613,215)
786,370
($5.00}
7
Cost effective education at scale: The case of for-profit institutions
Average taxpayer cost of a student per year:
$8,500 at a public institution; $0 at a for-profit institution
Figure 4
~
$9,000
C!)
$8,000
:>-.
!-.
C!)
0..
$7,000
E
C!)
$6,000
"Cl
~
-
r:/J
!-.
C!)
$5,000
0..
:>-.
"Cl
$4,000
......
r:/J
.g
r:/J
$3,000
!-.
C!)
$ 2 ~ 0 0 0
~
0..
$1,000
~
$0
Public For-Profit
NEXUS
... ,..::11 :r "" rott; 1 C"U 8
Who gains the most from taxpayer subsidies?
It is evident from Figures 1-3 that taxpayer support of higher education is heavily skewed in favor of the
affluent.
Those attending the very top of the pyramid receive as much as $68,000 while those at the bottom receive
nothing if enrolled in a for-profit institution. In fact, low-income working Americans end up paying for
100% of their education while students attending public and non-profit institutions receive subsidies
ranging from $7,116 to $68,319.
For example, the case of Harvard:
The cost to taxpayers to produce a Harvard Bachelor's degree is approximately $272,000 (4 times the
$68,000 in annual subsidies). This is equivalent to the taxpayer subsidy for 9.5 public community college
students or nearly 7 students attending a public four year college.
Is this fair?
Is this efficient?
More important, from a taxpayer perspective, the $68,000 currently supporting a year's worth of
education at Harvard would yield the highest economic benefit to taxpayers if it were invested in grants
supporting students who are preparing to enter the fastest growing occupations. And as the tables and
graphs make evident, the best return for taxpayers would be in support of these students at for-profit
colleges and universities.
NEXUS
... ,..::11 :r "" rott; 1 C"U 9
Increasing capacity of public institutions to meet President Obama's 2020 degree
completion goal could cost the US taxpayer an additional $826 billion in federal and
state support over the next decade
Figure 5
Cost to Taxpayers of 2020 Degree Completion Goal Using Only
Public Institutions*
Annual Subsidy per Student
1
& 4
Time to Complete Degree
Total Subsidy per Student
Graduation Rate at Public Schools
7
Targeted #of Graduates
8
Gross New Students Enrolled
9
Average Length of Stay for Dropouts
10
Cost to Government
TOTAL
For 2-Year Students
(Associate's Degree)
$
6,976
x 2 years
$
13,952
22.0%
5,000,000
22,727,273
For 4-Year Students
(Bachelor's Degree)
$
15,121
x 4 years
$
60,484
54.9%
8,132,522
14,813,337
6 months 2 years
$ 131,592,728,224 $ 693,928,667,878
$825,521,396,102
*This does not include capital for infrastructure to accommodate 22 million
additional students. If needed capital expenditures are included, the costs are
over one trillion dollars.
NEXUS
... ,..::11 :r "" rott; 1 C"U 10
Comparing $826 billion to the cost of other major government initiatives ...
Figure 6
$1,400
$1,200
$1,000
-Ia $800
0
-
=
:c $600
-
.....
~
0
u $400
$200
$0
NEXUS
... ,..::11 :r "" rott; 1 C"U
Patient Protection
and Affordable Care
Act (2010 health care
bill )
Spending to date on
the War in Iraq
Spending to date on
the War in
Afghanistan
American Recovery
& Reinvestment Act
of2009 (fiscal
stimulus)
Milestone government programs
$826
American Graduation
Initiative and 2020
Higher Education
Goals wi thout For-
Profit Schools
11
.. .it seems unlikely taxpayers will take on the burden. Consequently,
Meeting President Obama's goal of having the largest percentage of college graduates in
the world by 2020 is not possible without the for-profit colleges and universities.
NEXUS
... ,..::11 :r "" rott; 1 C"U 12
Why, then, is there such an acrimonious call for reform of the for-profit
sector at a time when the Administration most needs its capacity?
The US DOE negotiated rule making process that began late last year opened the way for bitter allegations
against the for-profit sector. Much hostility towards for-profits that had remained under the surface-the
hate that dare not speak its name-had its release facilitated by the assaults from government, media
and Wall Street. Now everyone who wanted to vent their dislike (editors, staffers, short sellers, etc.) had
the opportunity to do so. This state of affairs has reached its crescendo with three reports that have set
the tone of the present debate:
Subprime Goes to College, Testimony Before the U.S. Senate Committee on Health, Education, Labor and
Pensions, by Steven Eisman (June 24, 2010; http://help.senate.gov/imo/media/doc/Eisman.pdf)
Emerging Risk?: An Overview of Growth, Spending, Student Debt and Unanswered Questions in For-Profit
Higher Education, prepared by the U.S. Senate HELP Committee, Senator Tom Harkin, Chairman (June 24, 2010;
http://harkin.senate.gov/documents/pdf/4c23515814dca.pdf)
For-Profit Colleges: Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and
Questionable Marketing Practices, Testimony Before the Committee on Health, Education, Labor, and Pensions,
US Senate. (GA0-10-948T, August 4, 2010; http://www.gao.gov/new.items/d10948t.pdf)
NEXUS
... ,..::11 :r "" rott; 1 C"U 13
Why the hostility towards for-profit colleges and universities?
Resentment against for-profits has a number of sources, including:
The belief that it is unethical/unjust for for-profit institutions to make a profit while public institutions are
starved for funds.
The inability (and frustration) of public institutions to meet the rising demand for higher education
especially among low-income populations.
An unwillingness to recognize that for-profit colleges and universities are helping to meet this demand
through innovation and efficiency-characteristics valued in every other sector of our economy.
Although we all recognize the critical importance of good regulation and diligent compliance, there is an
unwillingness to recognize that the inefficiencies in public and non-profit institutions cost taxpayers far
more than the occasional regulatory violations among the for-profits.
An unwillingness to recognize that growth of for-profit colleges and universities is a reflection of the
realities of our economy and that for-profit institutions, as Education Secretary Duncan has observed, are
vital to America's economic future.
NEXUS
... ,..::11 :r "" rott; 1 C"U 14
The essence of the argument against for-profit institutions
At the conclusion of the second HELP hearing (August 4, 2010L Chairman Tom Harkin summarized
the case against for-profit colleges as follows:
" ... 9% of students are in for-profits, but they are consuming almost 24% of Pell Grants, and have 44% of
the defaults."
"What we have done, what has happened, is that with the ease of availability of grants and loans, and
with incentive rates [for recruiters], and with a cloak of secrecy about graduation rates .... we have seen
the numbers of those recruited increase dramatically, but the total enrollments have not-leading us to
believe that many are dropping out with no degree or poorly educated, but with debt they cannot pay."
"So, when we look ahead, education is too important for the future of this country and our students,
and given the budget crisis over the next 10 years, we can't afford for more and more of this money to
be going to investors. We have privatized the profits and socialized the risks, and that is what happened
to the sub primes."
NEXUS
... ,..::11 :r "" rott; 1 C"U 15
A policy shift has taken place from access to degree completion at a time
of financial crisis
Quite apart from the numbers cited by Senator Harkin-to which we will return-is the fact that for over a
decade, facilitating access backed up by the availability of no-cost grants and subsidized loans was the central
policy followed by both states and the federal government.
For-profit institutions responded to this call and made access possible for millions of otherwise underserved
or neglected students, who for work and family reasons could not attend the traditional institutions whose
focus is primarily on the needs and interests of the faculty and young, single, dependent students.
The abrupt shift from access to completion, in part the result of awareness that the U.S. has fallen behind its
global peers in the percentage of adults with degrees, called for dramatic changes in education policy. For
some in the Administration this concern has been heightened by the worst financial crisis since the
Depression. For them this shift has called for a radical reconsideration of how financial aid should be
distributed; unfortunately, this is resulting in a redistribution from lower to upper income groups.
For example, although chief among these changes was the shift from private to government direct lending,
whose aim was to provide a new source of revenue for additional Pel I Grants, the other major shift was in the
desire by the Administration to redirect student aid away from non-traditional students at for-profit
institutions (those more likely to need grants and default on loans) to more traditional students at public
institutions, especially community colleges (who are either dependent on their parents or unlikely to seek
loans).
NEXUS
... ,..::11 :r "" rott; 1 C"U 16
Negative consequences of proposed reforms
In an effort to support this policy shift, attention was focused on the presumed faults of for-profit
colleges and universities. This refocus has resulted in the series of reforms that have been proposed
during the negotiated rulemaking period of 2010. Unfortunately for taxpayers and millions of
underserved, non-traditional students, these reforms will:
Redirect public funds for higher education from lower-income to higher-income students.
Reduce the availability of programs in areas such as nursing, teaching, public safety and other public service
jobs.
Greatly increase the amount of taxpayer support going to higher education.
Greatly reduce the efficiency of proprietary colleges and universities by making them easy prey to suits by
predatory law firms (see slide 40) .
Demean the hard won degrees of millions of students and wipe out billions of dollars in the human capital
they have accumulated.
Ignore, for now, any regulatory violations by public and non-profit institutions.
NEXUS
... ,..::11 :r "" rott; 1 C"U 17
Why can't traditional institutions take on the responsibility of meeting the
rising demand at a cost taxpayers are willing to bear?
Traditional Institutions: Studies in Inefficiency
D Tradition and inefficiency lie at the heart of their growth and financial problems.
D High-maintenance buildings and grounds used primarily during the day for 8 months a year drive costs
up.
D Tenured faculty generally cannot be reassigned when their area of expertise is no longer in demand and
they resist such changes as flexible scheduling and instruction delivered online rather than in costly
classrooms.
D They are caught in a prestige "arms race" forcing each to increase support of non-academic facilities and
activities, in the meantime sports costs have risen to approximately 13% of total costs.
D Meanwhile colleges and universities are increasing their expenditures on administration faster than on
instruction.
D Yet most state governments have failed to tie funding to performance measures in order to increase
accountability and productivity.
NEXUS
... ,..::11 :r "" rott; 1 C"U 18
Why can't private, non-profit institutions help meet rising
demand?
Most selective private, non-profit colleges and universities value reputation over access.
The higher the number of students rejected, the higher their reputation.
The higher the SAT scores of their student body the higher their reputation so students lacking a high
level of preparation will not be admitted.
The higher their tuition, the higher their reputation.
The higher their reputation, the higher their endowment.
The higher their endowment, the higher the taxpayer subsidy they will enjoy so in effect they profit by
staying selective and therefore small.
The cost of tuition at such private institutions has climbed so high only the affluent can afford to enroll.
For example, 58 colleges and universities now charge $50,000 or more in annual tuition.
In the meantime, non-competitive private, non-profit colleges lack the resources to grow and many find
themselves in significant financial difficulties.
NEXUS
... ,..::11 :r "" rott; 1 C"U 19
In contrast, why can for-profit colleges and universities grow to meet
demand?
They are efficient in their operations and in the delivery of instruction, otherwise they cannot survive.
They are innovative and have the capital to fund innovation, otherwise their efficiency and effectiveness
will decline.
They have access to the capital needed for expansion because they provide a cost effective education that
meets the needs of students.
They have powerful incentives to remain in compliance and produce positive educational outcomes
because if they fail to do so they will find themselves without students or financial backing.
Rather than consuming tax dollars, they return profits to taxpayers and are therefore not subject to the
limitations on capacity that traditional institutions have, especially during difficult economic times.
NEXUS
... ,..::11 :r "" rott; 1 C"U 20
However, the shift in the Administration's higher education policy is raising new
questions about the relationship between access and student debt
The increase in demand for higher education is largely driven by demand from low-income populations,
including African Americans, Latinos and Whites, who are the most in need of grants and subsidized loans.
Americans believe that a college degree is the only path from the lower to the middle class and the only way to
guarantee you don't lose your place if you are already there.
12
A recent study found that over 90% of Latino
youth were believers.
13
Because the only way to provide that access to millions of lower and middle-income students is through federal
grants and subsidized loans, these modes of aid have been under increasingly greater pressure.
But because low-income populations are the most likely to need grants, drop out and default on loans, the shift
from access to completion has been a shift from access for the most needy, who are the most likely to enroll in
for-profit institutions, to a shift in completion for the best prepared. But this in turn has raised the question: Are
for-profit institutions saddling their students with loans they can' t repay? And, if so, should USDOE intervene on
behalf of the students and taxpayers by not permitting these schools, and therefore their students, to have
access to these grants and loans?
Given that the cost to taxpayers of Pell Grants and Title IV loans is zero, the real question is: "Should access be
limited to protect low-income groups from excess debt or is access with debt better for low-income students
and for society?"
Figures 7-10 indicate:
- that given the low level of family assistance, the debt load of students in for-profit institutions is not
out of line,
- that access is valued far higher than avoidance of debt and,
- that higher education pays handsomely in terms of income and avoiding unemployment.
NEXUS
... ,..::11 :r "" rott; 1 C"U 21
Average Student Debt Levels by Institution Type
14
Figure 7
$30,000
25,000
20,000
15,000
10,000
5,000
0 -' -
4 Year Public
Average Debt
7 1%
~
..1
4 Year Private
Not-for-Profit
4 Year Private
For Profit
7%

2 Year Public
[ Average Expected Family Contribution
64%

98%

120%
100
80
60
40
20
,,,,,,,,,,, ! 0
2 Year Pnvatc
Not-for-Profit
2 Year Private
For Profit
+ % of Student Borrowing
Given the low level of family assistance available and the relatively
small amount of funds borrowed, the percentage of borrowers is high
but the debt load of students in for-profit institutions is not out of line.
NEXUS
... ,..::11 :r "" rott; 1 C"U 22
Do for-profit institutions exploit low-income students?
Americans for Democratic Action sought an answer to the question, "Does access trump debt?" In October
2009, ADA conducted a survey of 2,250 adults with oversamples of 500 African Americans, 500 Latinos and
250 lower-income Whites on their attitudes toward the for-profits and whether they valued access over
avoidance of debt.
15
Here are their responses.
Figure 8
NEXUS
... ,..::11 :r "" rott; 1 C"U
Growth of For-Profits Should be Stopped -
Exploit Low Income Students
60o/o
31/o
8%
Agree Disagree Don't know
Darker colors indicate intensity
African Americans:
Agree 36% (20% str.)
Disagree 58% (36%)
Latinos
Agree 36% (20%)
Disagree 58% (32%)
Lower-Income Whites
Agree 34% (16%)
Disagree 56% (35%)
Some people believe these for-profit universities exploit lower-income working students. They have gone to the government
education 1egulato1s to try and stop the growth of for pro!il universities and ill cases sllul tllem down Do you agree 01
that for-profit growth s110uld be stopped? 23
When it comes to access vs. avoidance of debt, access is
valued far higher
Over half of African Americans, Latinos and lower-income Whites agree that debt is
worth the price of getting access to college.
15
When it comes to students with higher risk factors, only a third of those surveyed
feel they are being exploited because they are not prepared and have to drop out,
owing money. Instead, six in ten believe these students deserve the chance to earn a
college degree even if they drop out owing money.
Figure 9
58
Lower Income Whites
32
Latinos
. 53
.. , . ~ .. ~ - - - - "
______ ss
African Americans
36
_, 60
Total
I Jr33
>
0 10 20 30 40 so 60
Everyone Deserves a Chance Feel Exploited
NEXUS
... ,..::11 :r "" rott; 1 C"U 24
Higher education pays handsomely in terms of income and avoiding
unem ment
Figure 10
Unemployment Rate and Earnings by Level of Educational Attainment
16
Unemployment Rate Median Weekly Earnings
Doctoral degree
$1,532
Professional degree $1,529
Master's degree $1,2 57
5.2% Bachelor's degree $1,025
6.8% Associate degree I $761
8.6% Some college
I $699
9.7% High school diploma I $626
14. $454 No high school diploma
- - - - - - - - - - - - - - - - - - - - ~
NEXUS
... ,..::11 :r "" rott; 1 C"U 25
Available evidence, therefore, suggests the move to limit access to higher
education for the protection of the poor from excess debt is misplaced
In effect, the survey results make evident that:
Limiting debt by denying access does not serve the interest of the poor.
Nor is it in the best interest of the taxpayer.
Therefore, Pell Grants and Title IV loans are best understood as:
CJ Preventive action aimed at both creating a competitive workforce and avoiding the much higher cost of
future unemployment and underemployment.
CJ Zero cost investments because when aggregated, the total in grants and loans is more than off-set in
interest and taxes.
NEXUS
... ,..::11 :r "" rott; 1 C"U 26
Why a case study of the University of Phoenix?

The University of Phoenix (UOPX), with nearly one half million students, is the second largest higher
education system in the U.S., second only to the State University of New York. (The even larger
collection of community colleges in California do not make up an integrated system because they
belong to different community college districts each of which is independent of the others).
With a physical presence in most states and an online presence in all states, UOPX is the first truly
national university.
Because it was among the first, UOPX pioneered most of the practices common among regionally
accredited for-profit institutions and those traditional institutions serving adult learners, including
offering accredited degree programs online (UOPX has done so since 1989, when it began with 12
students using a dial up internet conferencing service-today it enrolls well over 200,000 online
students world wide).
Because of its success in attracting and graduating students (it graduated over 90,000 students last
year) while being committed to "measuring everything that moves" and archiving it, it has
developed what may be the largest database on adult/working learners in the world.
Because it is the largest for-profit institution, it has experienced more visits by regional and
programmatic accreditation and certification teams than any other institution of higher education
in the country.
UOPX spends $50 million annually on developing and maintaining a state of the art educational
infrastructure, which many recognize as one of the world's best. No other institution, of which
Nexus is aware -public, private, non-profit or for-profit-makes investments of this size in their
instructional infrastructure and related systems.
NEXUS
27 ... ,..::11 :r "" rott; 1 C"U
What makes the University of Phoenix a relevant case study in
efficiency and innovation?
Because UOPX is designed for working students, who today make up the majority of postsecondary
students:

It recognizes that time is highly valued by working adults and efficiency is a fundamental principle
in the design and operation of its administration and teaching/learning systems.
Even as total enrollment has grown to 465,000, all classes are seminars and therefore small (face-
to-face classes average 14 students, online classes 20) with a faculty of working professionals
trained to deliver interactive learning; as a result, a faculty member can engage students
personally in substantive discussions every minute of class time.
All courses require multiple writing exercises and students must use online programs ( .. Write
Point, .... Plagiarism Check/' etc.) that provide guidance in grammar, style and originality, thereby
leaving faculty free to address student learning.
Campuses are designed to serve a student population within a 20 minute commute and online
classes are available 24/7 supported by an online library and a wide array of online learning
resources, such as simulations and eBooks, all available 24/7.
All administrative functions-enrollment, financial aid, academic advisement, etc.-are available
online.
NEXUS
28 ... ,..::11 :r "" rott; 1 C"U
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N
The charge: Students in for-profit colleges are receiving a poor education
and thus are ill prepared for the job market when they graduate

Students attending for-profit colleges and universities see them as a better choice than a public institution, that is why they are
willing to pay the higher tuition-higher for not being subsidized by taxpayers as is the case in public and non-profit institutions.
Many students, including most at a majority of for-profit universities, are already working. Therefore, they are not looking for work,
but rather a better job or a promotion. At institutions such as the University of Phoenix, the data show that during their time as
students their incomes are steadily improving-average annual salary increases range from 8.5% for bachelor's graduates to 9.7% for
master's graduates during the course of their academic program, compared to 3.8%, the national average annual salary increaseY
As Figures 11 and 12 make evident, taking into consideration the number of risk-factors they are likely to have, including the high
probability that these are first generation, low-income minorities, many of whom are single parents, the retention and graduation
rates of students at for-profit institutions suggest they are NOT receiving a substandard education.
Figure 11
NEXUS
... ,..::11 :r "" rott; 1 C"U
.....
(1)
Q)
>-
N
v
.....
(1)
Q)
>-
I
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(1)
Q)
>-
I
Percent of Beginning Postsecondary
Students with 3 or More Risk Factors
Public
Private non-profit
Career Colleges 56
Public
39
Private non-profit
I
Career Colleges 52
Public
Private non-profit i ~ 9
o::t
Career CniiPPPc;
__ .......;..............,....,. ' ..:...., - .;:.; - o::..:_ --:_ f 52
SOURCE: Educational Policy Inst itute (EPI) Analysis using the Beginning Postsecondary
70
Students Longitudinal Survey Dat a Analysis Syst em (BPS: 04/ 06), 2006, US DOE, NCES; Educational Policy Institute (EPI) Analysis using t he
Beginning Postsecondary Students Longit udinal Survey Data; Graduating At-Risk Students: A Cross-Sector Analysis (Imagine America Foundation,
2009), Figure 4, p. 15.
30
For-profit sector graduation rates are high, given how many risk factors
their students have
Figure 12
NEXUS
... ,..::11 :r "" rott; 1 C"U
2006 GRADUATION RATES BY ETHNICITY
Cll
Q,

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''J,'J,'J,'J,'J,'J,'J,'J,'J,'J,'J,'J,'J,'J,'J,'J,'J,
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Private, Not-for-Profit
Career Colleges
jo
f l I I l
AII4-Year IJ.
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l T T T Cll
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' '
Private, Not-for-Profit \l'
l l I I

Career Colleges
;,
T l T T
Grand Total All Schools
iJ J j j J
0 10 20 30 40 50 60 70
Percent
2006 GRADUATION RATES Hispanic
2006 GRADUATION RATES Black, Non-
Hispanic
2006 GRADUATION RATES White,
Non-Hispanic
SOURCE: Educational Policy Institute (EPI) Analysis using the Beginning Postsecondary Students Longitudinal Survey Data; Graduating
At-Risk Students: A Cross-Sector Analysis (Imagine America Foundation, 2009), Figure 16, p. 26.
Analysis System (2003-04) (DAS), USDOE, NCES.
NOTE: Graduation rates are calculated using only first time, full-time students graduating within 150% of regular
graduation time-as is common with I PEDS graduation rates ,which account for only 48% of 4-yr students and less
than 33% of community college students.
This analysis uses a 2000-entering cohort for 4-yr and 2003-entering cohort for 2-yr calculations. There were not enough
data points to calculate graduation rates by race/ethnicity at less-than-two-year level.
31
The call for reform of the for-profits: Students in for-profit colleges are
receiving a poor education and thus are ill prepared for the job market
when they graduate
The most comprehensive studies of graduates from for-profit institutions show that
completers are well qualified to join the workforce and actively contribute to the
American economy.

The f i rst comprehensive study of the total annual economic impact of t he for-profit postsecondary sector
showed t hat in 2005 t he t otal direct and indirect impact was $38.6 bi ll ion.
18
D Total direct impact was $18.6 billion (institutional $14.6 billion; student expenses $4.0 billion)
D Total indirect impact was $20.0 billion (increased graduate earnings $3.5 billion; resulting increased
economic activity $16.5 billion)
D The 376,560 career college completers entering the workforce in 2005 had median salaries of
$39,546 for a gross salary total of $14.9 billion.
A second study undertaken in 2010 showed that for-profit sector students "experience strong income gains
from their educational investment."
19
D For-profit sector students reported average income gains of $7,900, or 54%, exceeding public school
students' gains of $7,300.
D Over a 30-year working life, these gains are expected to translate into approximately $250,000 more
income.
NEXUS
32 ... ,..::11 :r "" rott; 1 C"U
The call for reform of the for-profits: For-profit institutions lower the
quality of higher education
o Only 25% of students attend 4 year residential colleges/universities, ranging from small liberal arts
colleges to large research universities whose faculty conduct most of the academic research.
o These institutions receive a large percentage of state and federal support and almost 100% of the positive
media coverage, but are subject to little oversight by accreditors or state and federal regulators. This
sector, viewed by many as the only education worth having, defines "quality education."
o Nearly three million of the remaining 75% study at for-profit institutions. Most of these students work and
often have families; therefore, they have specific educational needs and must study in a variety of modes:
full-time, part-time, on campus and online. Because these students do not study full -time on campus and
the institutions are mostly open admission, their education is branded by critics as inferior. Consequently,
with minimal exceptions, during this period of debate these institutions and their students are now
receiving nearly 100% of the negative media coverage.
o However, because traditional institutions cannot or will not meet the needs of most working students,
these students perceive them as ideal for young, dependent students but as substandard for them.
o The quality of education, then, is not determined by its mode of delivery, but rather by how well it
addresses the needs of students and by the learning outcomes of those students.
o As Figure 13 demonstrates, comparative studies show learning outcomes at the largest for-profit
institution are equal to or better than learning outcomes at comparable public and private institutions
for similarly situated students. Therefore, it is not the case that for-profit institutions lower the quality
of higher education.
NEXUS
... ,..::11 :r "" rott; 1 C"U 33
For-profit institutions do not lower the quality of higher education
0 On average, UOPX students enroll with lower assessment scores than the national average.
Improvement in MAPP scores demonstrates that they reduce that gap significantly by their
senior year.
0 Compared to students from other comparable institutions, UOPX students demonstrate
similar to better levels of improvement throughout the course of their education, especially
in English and mathematics.
Figure 13
PERCENTAGE IMPROVEMENT IN MAPP SCORES: FRESHMEN TO SENIORS
20
NEXUS
... ,..::11 :r "" rott; 1 C"U 34
The call for reform of the for-profits: Whether they drop out or these
students are stuck with a mountain of debt that will blight their Jives
Most students at for-profit institutions come from a lower socio-economic level than those attending
public institutions. There is no evidence that students borrow at a rate that is higher than the
average for this demographic considering comparable risks and adequate financial aid advice. (Many
public community colleges provide little to no advising on financial aid as they strive to avoid poor
default rates.)
Furthermore, at many institutions, such as UOPX, students only take one or two courses at a time
and generally pay for them at the beginning of each course. Given this, and the fact that those who
drop out typically do so after only one or two courses, UOPX students have low levels of debt.
In fact, for students graduating between July 2007 and June 2008, UOPX loan debt was comparable
with students at private, non-profit four-year institutions:
21
Figure 14
NEXUS
... ,..::11 :r "" rott; 1 C"U
60% /
50%
40%
30%
20%
10%
0% + -
No Debt <$30,500 >$30,500
2007-08 CRADUATES
Private 4-Yr
2007-08 CRADUATES UOPX
35
Further evidence that students from for-profit colleges and universities are not graduating with mountains of debt
comes from the US DOE data on the average amount of federally subsidized loans received per student in 2007-08
(the most recent period for which data is available).
22
Once again, although for-profit institutions have a higher
proportion of students borrowing, the amounts borrowed are relatively small and comparable to those found
among students in traditional institutions.
Figure 15
NEXUS
... ,..::11 :r "" rott; 1 C"U
Amount of Financial Aid Received*
$20,000
$18,000
$16,000

$14,000 ,;;
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
so
Average
AID per
recipient
Average
GRANTS per
recipient
Average
LOANS per
recipient
All undergraduates
Public 4-year doctoral
Public 4-year non-doctoral
Public 2-year
Non-profit 4-year doctoral
Non-profit 4-year non-doctoral
For-profit 2-year or more
*AID is from any source except family and friends. PLUS loans included in "AID per recipient," not in "LOANS per
recipient," which includes private (alternative) loans. Figures on loans do not include cumulative debt.
36
Of all the proposed regulations in this reform effort, the most convoluted and potentially onerous are the ones
under the label of "gainful employment." The bureaucratic complexity of these regulations is apparent from an
analysis of their requirements and consequences (see Appendix 2).
These regulations would measure students' debt-to-salary ratio after they left a for-profit institution.
Programs in which recent students are spending more on their loans as a percentage of their income
than the regulations call for would be required to limit enrollment and the institutions would have to
inform prospective students of the graduates' historical debt to income ratio. If their students also fail
to meet proposed ratio cutoffs for repayment, students of those schools could be barred from
receiving federal student aid.
Although in 40 years of its application, neither Congress nor USDOE had seen the need to spell out
what "gainful employment" meant, the current reform effort chose to define it and build regulations
around it as the most effective way to reduce the amount of Pel I Grants and subsidized loans going to
students who wish to enroll in a for-profit institution.
The significance of these employment" regulations is such that they may end up depriving
hundreds of thousands of students of access to for-profit institutions if they are interested in programs
that lead to relatively low starting wages, such as teaching, nursing, counseling, and administration of
justice.
NEXUS
... ,..::11 :r "" rott; 1 C"U 37
As part of the "gainful employment" campaign, in an unexplained, recently released list, US DOE identified
over 8,000 institutions and the debt repayment data of their students.
23
If all the institutions listed were subject to the proposed repayment rate cutoffs of 45% and 35%, the
following catastrophe for American higher education would result:
Because 50% (nearly 4,000) of the institutions had repayment rates below 45% their affected
programs would be put into a "restricted" category in which enrollment growth would be
limited. And because over 20% (more than 1,600) had repayment rates below 35%, given the
likelihood that they would also have a too high loan service to debt ratio, their new students
would be ineligible for federal student grants while aid to existing students would be
terminated by the end of the following academic year.
As for the fate of the institutions serving our nation's most underserved students, the following
would have their students ineligible for federal student grants within a year:
40% of community colleges
90% of Historically Black Colleges and Universities
45% of campuses where Hispanic students constitute more than 25% of the students
66% of schools that focus on less than four year degrees and have the highest
concentration of Pel I students
NEXUS
... ,..::11 :r "" rott; 1 C"U 38
The call for reform of the for-profits: These students are defaulting on student
loans at a rate that will cost the government billions
At UOPX dollar-based cohort default rates (CDR) are lower than borrower-based default rates because most
students who leave exit early in a program and thus incur a lower amount of debt.
24
Again, comparing simi larly
situated students, there is no evidence that dropouts have above average defaults.
Figure 16
University of Phoenix Default Rates (2-Year)
13.1%
2006 2007 2008 (Draft)
Official CDR Dollars Defaulted CDR
Further, there is no net loss to the government from UOPX student's defaulted loans. Repayments on
defaulted loans range from $1.11 to $1.22,2
5
more than enough to cover the cost of collections. Given
the cost of funds to the government, the difference between what is collected on a non-defaulted and a
defaulted loan is very small. Therefore, the claim that the government is losing billions on bad loans is
incorrect.
NEXUS
... ,..::11 :r "" rott; 1 C"U 39
The call for reform of the for-profits: The for-profits are gorging on stimulus
money by using boiler room tactics to lure students
As has been shown and as is only logical, it is in the interest of for-profit institutions to enroll those students who are
most likely to persist and ultimately graduate. As is the case with the military, who must recruit if it is to fill its ranks,
students for whom college is not an expected step need to be informed. Students respond to the advertisements of
for-profit institutions because they have either not succeeded in traditional institutions or these have made little or no
effort to address their needs. And as has been shown, their debt levels are comparable to those of students similarly
situated in traditional institutions.
Yet recruitment of at-risk students and "saddling" them with debt is the justification given for eliminating
the "safe harbor" rulings that USDOE put in place to help guide for-profit institutions as they seek to comply
with the prohibition against incentive compensation.
These rulings resolved much of the chaos surrounding the prohibition and have provided a modicum of
safety from predatory law firms that shop for, and often implant, employees or students willing to claim a
college has violated USDOE regulations. Indeed, since the announcement that they would be removed, 23
lawsuits have been filed.
The elimination of the safe harbors will make it almost impossible to reward enrollment counselors, or any
one else in the institution, for superior performance in helping to make access possible.
Relying solely on the basis of rare instances of abuse (see note 28, Appendix 1), US DOE proposes to reverse
itself in a way that will simply reintroduce the chaos of the past and open the door to more predatory law
firms. Surely that will not promote greater accountability or better student outcomes. And it bears asking,
What other American enterprise is required to bar compensation based on performance?
NEXUS
... ,..::11 :r "" rott; 1 C"U 40
The call for reform of the for-profit sector should rest on objective research,
not questionable assumptions
At the August 4, 2010 HELP hearing Gregory D. Kutz, Managing Director Forensic Audits and Special
Investigations, testified that 15 out of 15 for-profit colleges examined by the GAO in the course of a
((mystery shopper" investigation ((encouraged fraud and engaged in deceptive and questionable marketing
practices."
26
Right after the hearing the Career College Association, along with a number of for-profit institutions, made
it clear that they found the ((GAO report deeply troubling" and would ((increase emphasis on
compliance ... immediately."
27
Given the seriousness of the charges found in the GAO report (four of which were alleged to be
fraudulent), it is apparent that the for-profit sector- indeed, the non-profit and public sectors as we/1_-
are in need of better oversight mechanisms both externally, through a tightening of the accreditation
review process, and internally, through better training and closer supervision.
That said, the regulatory changes called for should rest on solid research, not questionable assumptions.
NEXUS
... ,..::11 :r "" rott; 1 C"U 41
Is the entire orchard contaminated? What is the prevalence of
11
bad
actors"?
Unlike the GAO mystery shopper study whose results concerning 15 campuses were presented at the second
HELP hearing, the GAO previously undertook a substantially more comprehensive study, that time using
sound scientific research principles, which covered thousands of colleges and universities looking for
violations of USDOE regulations between 1998-2009.
In that study of thousands of institutions the GAO found only 22 for-profit institutions in violation of
Departmental regulations.
28
Clearly, 22 out of several thousand seems to indicate a low probability
that uthe orchard is contaminated."
Almost every company has employees who violate company policy, but that is not a basis for claiming
that all employees violate policy or even that many violate company policy.
Over the past year, every media report of boiler-room tactics has been anecdotal- with no data
beyond reporting a conversation with one or two employees. The recent GAO mystery shopper probe
of 15 campuses is no exception.
NEXUS
... ,..::11 :r "" rott; 1 C"U 42
11
Bad actors" are unlikely to last long in the for-profit environment
It is difficult to objectively characterize an institution like UOPX of being a ubad actor." Why?
UOPX has 20,000 staff, 30,000 faculty and 465,000 students at 200 campuses in 40 states and online
students in all 50 states. Its size alone demands robust compliance and quality control systems-and
it experiences continuous oversight by institutional and programmatic accreditors along with over
40 state regulating bodies plus USDOE.
Between Enrollment, Academic, and Financial counselors, UOPX employs nearly 10,000 people.
Almost the totality of their contact with prospective or current students is by phone. These
counselors make approximately 25,000 recorded calls per day. A call containing a word or phrase
indicating a possible infraction is electronically tagged for immediate action.
Its 66 Quality Assurance personnel monitor, analyze and respond to these calls. If a prospective
student or students has been misinformed or is not successful in obtaining service, the student is
called within 2 hours.
Counselors who visit companies complete logs of all visits which aid Quality Assurance personnel in
the investigation of any reported infraction.
Any employee who has failed to follow policy is subject to being counseled, retrained, reprimanded,
or discharged. (The employees involved in the much ballyhooed unauthorized recruitment at a
homeless shelter did not remain for long in UOPX.
29
)
NEXUS
... ,..::11 :r "" rott; 1 C"U 43
"Bad actors" among the critics of the for-profit sector
We noted earlier that the present state of acrimony concerning the for-profit sector has reached its crescendo with
three reports that have set the tone of the present debate. One of these, Subprime Goes to College, is the testimony
at the first HELP hearing (June 24) of Steven Eisman, a well -known short seller.
It is not the purpose of this study to address the ethical and perhaps legal questions surrounding the invitation of a
short seller to testify at a Senate hearing where his testimony would (and did) help to line his pockets. The troubling
nature of this affair is well captured in a recent Huffington Post piece by Melanie Sloan, Executive Director, Citizens
for Responsibility and Ethics in Washington.
30
Having enumerated a number of cases where short sellers have sought
to manipulate the negotiated rule making process and the HELP hearings for personal gain, she goes on to note,
"These examples suggest there may be a concerted effort by those who stand to benefit financially to drive
down the stock price of certain for-profit schools. Knowing thisf how can we be sure that the new regulations
the Department of Education is proposing are really in the best interest of the Americans most likely to attend
these schools? Even more disturbing, the revelations of the hedge fund managers' efforts here raise the specter
of whether federal oversight and regulatory processes are being secretly manipulated for financial benefit in
other instances.
While for-profit colleges have been rightfully criticized for offering little transparency as to how well taxpayers
have been served by our substantial investment in that industry, some of the efforts to fuel anger against and
encourage regulation of these schools are similarly lacking in transparency. Congress and the Department of
Education should remain vigilant against the efforts of a jew opportunistic multi-millionaires to abuse the
regulatory process for their own pecuniary interests."
We will now turn to the merits of Eisman's often quoted testimony.
NEXUS
... ,..::11 :r "" rott; 1 C"U 44
Mr. Eisman's allegations made before the HELP Committee
Mr. Eisman's testimony repeated USDOE's charges of misbehavior which, as is evident from the data presented
in this study, are incorrect.
Mr. Eisman: For-Profit institutions recruit students with the greatest financial need and put them into their highest
cost institutions ... and why? To maximize the amount of Pell Grants and Title IV loans their students can receive.
For-profits are able to enroll students because students see them as a superior choice for themselves. Many have
tried other public and non-profit institutions and have found those unable to meet their needs as workers,
parents and adults.
Mr. Eisman: The entire business model of for-profit schools is centered on growing enrollment-it is the single most
important measure of growth and period.
Enrollment grows at the for-profits because students see them as the best choice, and growth and profitability
follow when students succeed in both learning outcomes and degree completion. To the extent the latter are
missing, enrollments and profitability will necessarily decline along with investor interest.
Mr. Eisman: The high default rate among students at for-profit colleges leaves poor students in debt for an education
that does not prepare them for a job that would allow them to pay their loans.
As this study shows this statement is incorrect. According to a number of studies, the type of institution attended
(for-profit or traditional) accounts for only approximately 5% of the total contribution to increased student
default for high-risk students.
31
Thus defaults among for-profit students are no higher than would be expected
given their lower level of income and the lower income of their families.
Mr. Eisman: For-Profit schools are spending only slightly more than half of revenues actually educating students, and
in several cases are shrinking the amount spent on instruction and increasing the compensation of the managers.
Revenue spent on instruction by public institutions averages 48% and for all traditional institutions (including
non-profits) 52% . At the University of Phoenix in 2009 it was nearly 55% of total expenses.
32
NEXUS
... ,..::11 :r "" rott; 1 C"U 45
Has subprime gone to college?
The most disturbing claim in Mr. Eisman's testimony is that if present lending trends continue, USDOE uwill face nearly
$275B in defaults over the next 10 years on a half-a-trillion dollars of lending to the For-Profit Industry."
Figure 17, which he presented at the HELP hearing, presents a false and misleading view of the cost to the government
from defaulted loans.
Figure 17
lf trl>nds contimtP, hPiievP the DOF w.ill fact> nearly $27:'iB in over
the next 10 year s on " hl'lli-a-t rillion dollars of lending to the f or-Profit Industry

$400
L}>U
m

! Sl<lO

.3
l!

- $:1<10
!
S1SO
$100
S>O
so
I
Profett d St;tfford (In $ Cumul3tlvt Dtf3u{t&d
ror ForProllt Education Stuaents. 200 7 2020
OT<AAI S1a1\'o:'CII
I Collilrs

>123
And bec: wse of fe-es ;;rssoclared wlrl!
t/111 gov.,t<lmetJ!
$350
St. 20 on every S1.00 /ant ,..
. .. me;;rn/ng For-e.ront students will owe
i!i301
BLIIton dofJIJrs oo dert1Wtf!!1. over
rhg O!!X% 10 mrs
sr.'\1
l'.'G
$21)7
197
165
$133
:)2
5106
114

s<l.'
$1d
2007 2000 2009 ?1)10 2011 2012 2014 ?010 2017 2()10 2019 2020
:.OH:-t 8<a*d, C"\:tt lerd\l,.tt
In addition, as we noted previously, there is no net loss to the government from student's defaulted loans because
repayments on defaulted loans range from $1.11 to $1.22. Given the cost of funds to the government, the difference
between what is collected on a non-defaulted and a defaulted loan is very small.
Therefore, the claim that the government is losing $330 billions as noted in the slide is false.
NEXUS
... ,..::11 :r "" rott; 1 C"U 46
Furthermore, Mr. Eisman fails to consider four crucial factors that counter his
claim that future loan defaults represent a bubble analogous to the subprime
bubble
First, this is a false analogy. Defaulted student loans only lower the Government's profit while toxic mortgages
brought bankruptcy.
Second, using his own assumptions, for-profit schools will pay $75 billion in income taxes from 2010-2020.
Third, the government receives interest income from performing Title IV loans, which would total $35 billion
from 2010-2020.
Fourth, his analysis does not include recovery rates on defaulted loans. At any recovery rate above 42%, for-
profit schools will actually generate a profit to the US taxpayer from 2010-2020 versus a taxpayer loss of
$510 billion on similar students at community colleges.
Lastly, his claim assumes that community colleges are the cheapest education option and the source of
needed future capacity. However, community colleges are very expensive for taxpayers, who must provide
approximately $7,000 in annual subsidy for every student enrolled in one. And that's assuming there is
additional capacity in community colleges (which there is not).
NEXUS
... ,..::11 :r "" rott; 1 C"U 47
n
z
0
-
n
::J
....
u
z
0
u
Conclusion #1

There are three major arguments put forth by those demanding reform of the for-profit
sector:
1. The for-profits are {I ripping off" the taxpayer as they ugorge" on the stimulus money.
2. They are loading up low-income students with debts they cannot pay.
3. The for-profits are delivering education of such low quality their students are unprepared for gainful
employment.
The statistical data presented in this study answer the first two arguments, namely:
o For-profit institutions do not cost the government billions of dollars; rather, they cost the
government nothing.
o For-profit institutions are not loading up low-income students with any more debt than could be
expected based on their risk factors, especially their low personal and family incomes.
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... ,..::11 :r "" rott; 1 C"U 49
Conclusion #2

No statistical data have been presented in defense of the argument that the for-profits are
providing poor education.
D Instead, those demanding reform accept as prime facie evidence that because of their for-profit status,
these institutions cannot possibly deliver a good education.
D The only basis upon which to judge the quality of learning outcomes delivered by the for-profits is to
compare them with the measured outcomes in traditional institutions.
D And since we know that measurement in this area is possible (see, for instance, slide 34), the question
is, why have those measurements not been undertaken?
They have not been undertaken because traditional institutions have vigorously resisted
measuring their learning outcomes for several reasons:
D Many believe there is no objective way to properly measure learning outcomes in all disciplines.
D Most are concerned about making public their learning outcomes for fear the results will be used
against them.
D Some believe that the only quantitative measures needed to affirm the learning outcomes of their
students are their inputs: quality of faculty, students and resources.
D A few argue that the learning outcomes of each professor's students are unique to the professor, and
thus comparable measurements are impossible.
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50 ... ,..::11 :r "" rott; 1 C"U
Conclusion #3

The Commission on the Future of Higher Education (operating when Margaret Spellings was Secretary of
Education), sought to rebut the arguments which the traditionals levied against measuring learning
outcomes, but to no avail. Resistance to measurement was so strong within the traditional sector that the
Commission was unable to achieve this reform. In fact, one of its reasons for supporting the for-profit
sector was their leadership in measuring the learning outcomes of their students.
For there to be any credibility in the third major argument put forth by those who demand reform, they
must provide evidence, based on generally accepted learning measurement protocols, that the learning
outcomes of for-profit students are lower than comparable students at public institutions.
If the call for (I reform" of the regionally accredited for-profit colleges and universities is to have a useful
outcome, it should be the renewal of the call for all institutions of higher education to publish data on the
learning outcomes of their students. Only then can the taxpayers have the data needed for the efficient
disbursement of local, state and federal education subsidies.
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51 ... ,..::11 :r "" rott; 1 C"U
Conclusion #4
For-profit colleges and universities would not exist if traditional institutions had organized themselves
to serve all potential students, had not raised tuition so high, and not restricted access so sharply that
America fell from first in college graduates among nations to 12th. With little money and little will,
traditional institutions cannot provide access to the 22 million new students needed to lead the world
in college graduates. As this study helps to make clear, achieving this goal is not possible without the
for-profit colleges and universities.
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... ,..::11 :r "" rott; 1 C"U 52
Appendix 1: Endnotes
1
Sum of Federal Grants, Contracts (which includes Pell) and Federal Appropriations. Details: Federal funds received by/di rected towards
institutions- includes Federal Grants, Contracts and Appropriations as reported to I PEDS. Since UOPX, the largest of the For-Profits, reports the
corresponding federal assistance received by students as revenue, to capture the same data that the other sectors capture under GASB and FASB
reporting as Federal Grants and Contracts, an assumption was made that the federal support received by this sector was comparable to the Pell,
Academic and National Smart Grants received during AY2007-08. For-profits do not receive Federal Appropriations. NOTE: Title IV loans and Gl Bill
grants are not reflected in this line item for any of the sectors. Title IV loans are subject to repayment and recipients of the Gl Bill must serve their
country in exchange for these grants.
2
Government Subsidy was calculated for the reported period by taking the average of 3-month Treasury Bill rate of 2.91% times the total subsidized
loans disbursed in AY2007-08. Details: Government Subsidized Title IV loans (FFEL and Direct Loans) are interest-free to the student while in-
school, but represent a cost to the Federal Government and thus the taxpayer. The cost of this subsidy was estimated to be the equivalent of the
average 3-month Treasury bill rate (2.91%) times the total subsidized loan disbursements made during AY2007-08.
3
Forgone Taxes include investment income which would otherwise be subject to a 40% tax rate, increases to the endowment taxed at a 25% gift tax
rate and sales and other taxes at .5% of operating revenues. Details: Public and private institutions are tax-exempt. As such, they do not pay tax
on investment income, increases to endowments (gifts), or operating revenues. For-profits pay sales tax on revenues (which include Pelland Title
IV loans) and income taxes on operating profits and investment income. In an effort to make the analysis meaningful, the position was taken that
non-payment of taxes represents a cost to the taxpayer and payment of taxes represents a benefit received by the taxpayer (see also footnote 6
below).
4
Sum of State and Local Grants, Contracts and Appropriations. Details: State and local support received by/directed towards institutions- includes
state grants, contracts and appropriations plus local/private grants, contracts and appropriations. Since UOPX, the largest of the For-profits, reports
any state and local assistance received by students as revenue, to capture the same data that the other sectors capture under GASB and FASB
reporting as State and Local Grants and Contracts, data was pulled directly from the State and Local Grants I PEDS submissions for this sector. For-
profits do not receive State Appropriations.
5
Interest that accrues on Unsubsidized Loans (6.8%) and Parent and Grad PLUS loans (8.5%) while student is in school that gets added to principal
loan balance. Details: The Federal Budget takes into account that the government collects 100% on average for each Title IV dollar loaned
("principal"), regardless of default rates. This is due to the government's ability to charge students for collection and other fees with very
aggressive collection tools (wage garnishment and offsetting tax refunds). Given that interest accrued while students are in-school is included in
the principal, the assumption was made that the taxpayer benefits by an amount equal to the interest charged on unsubsidized (6.8%) and Parent
and Grad PLUS loans (8.5%) disbursed during the period. NOTE: The position was taken that any loss incurred by the taxpayer associated with the
servicing of loans impacted profits, interest earned not dollars loaned.
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53
Appendix 1: Endnotes
6
Corporate Taxes reflect Sales Tax paid (0.5% of revenues) and Tax Paid on Net Profits (estimated at 10.8% of revenues).
7
NCES Enrollment in Postsecondary Institutions, Fa/12008, based on 2004 cohort (2-yr degree) or 2002 cohort (4-yr degree) completing in 150% of
normal program completion time.
8
Data from the National Center for Higher Education Management Systems.
9
2-yr degree: 5 million targeted graduated I 22% graduation rate; 4-yr degree: 8.1 million targeted I 54.9% graduation rate.
10
Estimated
11
Net Cost to Taxpayers Analysis
Objective: Compare for-profit, regionally accredited universities ("For-Profits") -with UOPX being a subset of that population-with their peer
group (a sample of 20 community colleges, public and private universities) to determine the net cost to taxpayers for each sector on a per student
basis. An additional comparison was made to "Elite" universities for added perspective.
Data Analyzed: Publicly available information for all reporting sectors (public, private and proprietary/for-profit). The primary source for this
information was the Integrated Postsecondary Education Data System (I PEDS) which serves as the core postsecondary education data collection
program for USDOE's National Center for Education Statistics (NCES). Unless otherwise noted, the website used as a source for I PEDS data is:
http://nces.ed.gov/ipeds/datacenter/Default.aspx.
Accounting Standards: Public-sector follows Governmental Accounting Standards Board (GASB) when reporting to I PEDS. Private and for-profit
sectors follow Financial Accounting Standards Board (FASB) when reporting to I PEDS.
Student Population: Public & Private Sector: Full-time equivalent (FTE) as reported in the IPEDS Fall 2008 submission was used given that state and
federal governments use this figure to allocate resources. For-profits: 12-Month Unduplicated Headcount- all students are considered "full-time"
for purposes of I PEDS submissions.
Research Expense: The amount of money spent on research activities was considered a benefit to society and was therefore deducted from the
cost to taxpayers for public and private institutions.
Caveat : This schedule analyzes total dollars for each relevant category in relation to the student population it serves. It is not meant to be indicative
of a typical student within the sector. Rather, it is an argument in support of for-profits playing a critical role in the President's Initiative at a limited
cost to the taxpayer, especially when compared to their peer group.
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... ,..::11 :r "" rott; 1 C"U 54
Appendix 1
OPERATIONAL DEFINITIONS AND PROCEDURES
FOR ENDNOTE 11
Institution Groupings
1. Arizona State University
2. University of Central Florida
3. California State University -Fullerton
4. University of Florida
5. Florida International University
6. University of Illinois-Urbana-Champaign
7. Florida State University
8. University of Maryland-College Park
9. Indiana University-Bloomington
10. University of Michigan-Ann Arbor
11. Michigan State University
12. University of Minnesota-Twin Cities
13. Ohio State University (The)
14. University of South Florida
15. Purdue University
16. University of Texas-Austin
17. Texas A&M University
18. University of Washington-Seattle
19. University of Arizona (The)
20. University of Wisconsin-Madison
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Austin Community College
Northern Virginia Community college
Central New Mexico Community College
Oakland Community College
Columbus State Community College
Palm Beach Community College
Cuyahoga Community College
Pima Community College
El Camino Community College
Portland Community College
El Pa,so Community College
Riverside Community College
Florida Community College-Jacksonville
Salt Lake Community College
Houston Community College
San Jacinto Community College
Mesa Community College
Tidewater Community College
Miami Dade College
Valencia Community College
55
Appendix 1
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
large Not-for-profit Institutions Considered
Boston University
National University
Brigham Young University-Provo
New York University
Columbia University in the City of NY
Northeastern University
DePaul University
Nova Southeastern University
Embry-Riddle Aeronautical University-Daytona Beach
Park University
George Washington University
Saint Leo University
Harvard University
Syracuse University
Indiana Wesleyan University
Temple University
Johns Hopkins University
usc
Liberty University
Webster University
f. VI .:,f :f I= ~ III J
large Regionally Accredited, For-Profit Institutions
Considered
Academy of Art University
American Intercontinental University
American Public University System
Argosy University
Art lnstitute(s)
Ashford University
Capella University
Colorado Technical University
DeVry University
Grand Canyon University
Heald College
Kaplan University
Keiser University
South University
Strayer University
Sullivan University
TUI University
Walden University
Western International University
56
Appendix 1
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Harvard University
Yale University
Princeton University
Sarah lawrence College
Smith College
Amherst College
Bryn Mawr College
Vassar College
Harvey Mudd College
Wellesley College
Bowdoin College
Swarthmore College
Skidmore College
*For a complete list of the 58 colleges and universities charging $50,000 or more in tuition, see
http://chronicle.com/article/Table-Dozens-More-Colleges/49002/
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Appendix 1
1 - Number of Students
IPEDS data- Full -time equivalent enrollments are derived from the fall enrollment survey for Public and Private Institutions
Path for For-Profits
1. 12 Month Enrollment
2. 12 Month Unduplicated Headcount
3. Gender
4. 2007-08
5. Level of Student- all students total
6. Select From List of Variables- Grand total
2 - Direct Government Support
IPEDS data
Path
1. Finance
2. Public institutions - GASB 34/35
3. Revenue and other additions
4. 2007-08
5. Federal operating grants and contracts
6. State operating grants and contracts
7. Local/private operating grants and contracts
8. Federal appropriations
9. State appropriations
10. Local appropriations, educational district taxes, and similar support
Note- Public institutions in Pennsylvania were excluded from this analysis because they use FASB standards.
NEXUS
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Appendix 1
Private Not-For-Profit- FASB Standards
!PEDS data
Path
1. Finance
2. Private not-for-profit institutions or Public institutions using FASB
3. Revenues and investment return
4. 2007-08
5. Federal grants and contracts
6. State grants and contracts
7. Local grants and contracts
8. Federal appropriations
9. State appropriations
10. Local appropriations
Note -It was assumed that all not-for-profit institutions accounted for Pelland other grants as part of federal grants
and contracts
NEXUS
... ,..::11 :r "" rott; 1 C"U 59
Appendix 1
Private For-Profit- FASB Standards
Website- http:/ /federalstudentaid.ed.gov/datacenter
Path
1. Programmatic Volume Reports
2. Grant Volume- Grant Program- select AY 2007-2008 Q4
3. Q4 07-08 YTD tab
4. Sum disbursements
5. Federal Pell Grant Program
6. Academic Competitiveness
7. National Smart Program
Private For-Profit- FASB Standards
IPEDS data
Path
1. Finance
2. Private not-for-profit institutions or Public institutions using FASB
3. Revenues and investment return
4. 2007-08
5. State grants and contracts
Note -It was assumed that all federal grants and contracts for for-profit institutions were Pelland all state and local grants
were as reported in IPEDS.
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Appendix 1
3- Student loan Interest Rate Subsidy
Website- http://federalstudentaid.ed.gov/datacenter
Path
1. Programmatic Volume Reports
2. Loan Volume- Direct Loan Program- AY 2007-2008 Q4, Tab 2
3. Federal Family Education Loan Program- AY 2007-2008 Q4, Tab 2
4. FFEL Subsidized-$ of disbursements
5. DL Subsidized-$ of disbursements
Note- FFEL and DL subsidized loans incur no interest while recipients are in-school. It was assumed that the interest-free
loans extended to students in-school amounted to a subsidy for higher education and the value of such subsidy was
calculated by taking the average 3-Mth Treasury Bill rates for July '07 - June '08 (estimated cost to the Government) times
the subsidized loan disbursements during AY 2007-08.
4- Expected Interest Paid on Student loans
Website- http://federalstudentaid.ed.gov/datacenter
Path- Same as in Step 3 above
Notes
The amount of money earned in interest for loans during the 2007-08 school year was calculated by multiplying the
applicable interest rate times the amount of FFEL & DL disbursements
The interest rates were
FFEL & DL Unsubsidized- 6.8%
FFEL & DL Parents Plus- 8.5%
FFEL & DL Grad Plus- 8.5%
The time value of money was not considered in the estimates
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Appendix 1
5- Taxes Foregone (Paid) on Investment Income
IPEDS data
Paths
Finance
Public institutions- GASB 34/35
Revenue and other additions
2007-2008
Investment income
Notes
Finance
Private not-for-profit institutions,
or Public institutions using FASB
Revenues and investment return
2007-2008
Investment return
Finance
Private for-profit institutions
2007-2008
Investment income and
investment gains (losses)
included in income
Investment income
It was assumed that taxes not paid on investment income were a subsidy to public and not-for-profit institutions.
Investment income taxed at the corporate rate of 40 percent was added to the cost to taxpayers for public and not-
for-profit institutions. On the other hand the taxes paid by for-profit institutions were subtracted from the cost to
taxpayers.
The I PEDS definition of investment income for not-for-profit and for-profit institutions includes unrealized gains. It
was assumed that these gains will be realized at some point in the future and therefore included in the estimate
The time value of money was not considered in the estimates
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Appendix 1
6- Taxes Foregone (Paid) on Additions to Endowments
I PEDS data
Paths
Finance
Public institutions- GASB 34/35
Revenue and other additions
2007-2008
Gifts, including contributions
from affiliated organizations; and
Capital grants and gifts
Notes
Finance
Private not-for-profit institutions,
2007-2008
Private gifts, grants, and
contracts; and Contributions from
affiliated organizations

>
The tax not paid by the contributors was considered to be a subsidy for public and not-for-profit education.
The taxes foregone by contributors was assumed to be 25 percent of the total
Additions to investment capital for for-profit institutions was not considered in the calculations
NEXUS
... ,..::11 :r "" rott; 1 C"U 63
Appendix 1
7 - Taxes (Paid) on Corporate Profits
Data Sources
IPEDS data
Apollo Group Annual Report- Fiscal 2008
IPEDS path
N/A N/A Finance
Private for-profit institutions
2007-2008
Total revenues and investment
return
Notes - The income tax paid by for-profit institutions was assumed to be the same as University of Phoenix's
10.8 percent rate for fiscal 2008. This amount was subtracted from the cost to taxpayers for the for-profit
institutions.
NEXUS
... ,..::11 :r "" rott; 1 C"U 64
Appendix 1
8 -Sales and Other Taxes Foregone (Paid)
Notes- It was assumed that .5 percent of net revenues, estimated in step 8 above, were paid for sales, real estate, and
other state and local taxes. This amount was subtracted from the cost to taxpayers for the for-profit institutions.
Conversely, this amount was added to the cost to taxpayers for public and not-for-profit institutions.
9 - Research Expense
I PEDS data
Not-for-profit institutions

institutions
Finance Finance Finance
Public institutions- GASB 34/35 Private not-for-profit institutions, Private for-profit institutions
Expenses and other deductions Expenses by function Expenses by function
N 2007-2008 2007-2008
Research- Current year total Research- Total amount Research and public service
The amount of money spent on research activities can be considered a benefit to society and was therefore deducted from
the cost to taxpayers for public and not-for-profit institutions.
NEXUS
... ,..::11 :r "" rott; 1 C"U 65
Appendix 1
12
See Other Ways To Win: Creating Alternatives for High School Graduates, Kenneth Carter Gray, Edwin L. Herr, 2"d Ed., Thousand Oaks, CA: Corwin
Press, 2000.
13
AP-Univision Poll: College Dreams for Hispanics, Ricardo Alonzo-Zaldivar and Trevor Tompson (AP), Jul 28, 2010,
http:Uwww.google.com/hostednews/ap/article/ALeqMSjUxEFfBJq40hE877S6 9 fldH3vAD9H8HQBOO
14
U.S. Department of Education- National Center for Education Statistics, 2007-08 National Postsecondary Student Aid Study (NPSAS:08).
15
See www.adaction.org/media/Report%20Summary.pdf
16
Bureau of Labor Statistics, Current Population Survey. Data are 2009 annual averages for persons age 25 and over. Earnings are for full-time wage
and salary workers. http://www.bls.gov/emp/ep chart OOl.htm . See Higher Education at the Crossroads, Apollo Group, Inc., August 2010, Exhibit 1,
p. 8; http://www.apollogrp.edu/lnvestor/Reports/Higher Education at a Crossroads FINALv2[1).pdf.
17
Source: University of Phoenix data based on institutional research on entering student income, registration survey completing student income and
end-of-program survey; national data from Culpepper and Associates compensation and benefits surveys, published in University of Phoenix
Academic Annual Report, http://www.phoenix.edu/about us/publications/academic-annual-report.html
18
Economic Impact of America's Career Colleges. Washington, D.C.: Imagine America Foundation, 2007, Table 1, Table 3, pp. 1, 9.
19
Parthenon Perspectives on Private Sector Post-Secondary Schools: Do They Deliver Value to Students and Society?, Robert Lytle, Roger Brinner, Chris
Ross, Boston: The Parthenon Group, 2010, p. 10.
20
Source: Educational Testing Service (ETSL Measure of Proficiency and Progress (MAPP). Note: Masters colleges include institutions that offer
baccalaureate through graduate ;"Educational Testing Service (ETSL Measure of Proficiency and Progress {MAPP}, results published in University of
Phoenix Academic Annual Report, http://www.phoenix.edu/about us/publications/academic-annual-report.html. See Higher Education at the
Crossroads, Apollo Group, Inc., August 2010, Exhibit 18, p. 28.
21
Higher Education at the Crossroads, Apollo Group, Inc., August 2010, p. 29.
22
Source: National Postsecondary Student Aid Study, USDOE; see Chronicle of Higher Education, Almanac Issue 2010-11, August 27, 2010, p. 40.
66
Appendix 1
23
Estimated Repayment Rates by lnstitution--FY 2009; ge-cumulative-rates.xlsx ; analysis of data performed by Mark Schneider, AIR.
24
Higher Education at the Crossroads, Apollo Group, Inc., August 2010, Exhibit 20, p. 30.
25
0ffice of Management and Budget (OMBL Federal Credit Supplement, Budget of the U.S. Government, Presidenfs FY2011 (FY2010 subsidy
estimatesL Table 3 (DIRECT LOANS: ASSUMPTIONS UNDERLYING THE 2010 SUBSIDY ESTIMATES L pages 14-15.
http://www.whitehouse.gov/omb/budget/Supplemental (p. 23).
26
For-Profit Colleges: Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices,
Testimony Before the Committee on Health, Education, Labor, and Pensions, US Senate. (GA0-10-948T, August 4, 2010;
http://www .gao.gov /new. items/ d 1 0948t. pdf )
2
7
See, for example,
http://www.career.org/iMISPublic/AM/Template.dm?Section=Home&TEMPLATE=/CM/ContentDisplay.dm&CONTENTID=21024;
http://phx.corporate-ir.net/phoenix.zhtml?c=79624&p=irol-newsArticle&ID=1457076&highlight=; http://www.sun-
sentinel.com/news/broward/pembroke-pines/fl-kaplan-for-profit-investigation-20100805,0,7297093.story.
28
Higher Education: Information on Incentive Compensation Violations Substantiated by the Department of Education, February 23, 2010.{pp. 2,
10-12} GA0-10-370R Higher Education http://www.gao.gov/new.items/d10370r.pdf.
29
See http://www.phoenix.edu/about us/media relations/for-the-record/university-of-phoenix-responds-to-good-morning-america.html.
30
Melanie Sloan, "For-Profit Education: Will We Ever Learn?", posted August 18, 2010, http://www.huffingtonpost.com/melanie-sloan/for-
profit-education-will b 686100.html.
3
1
"Factors Affecting the Probability of Default: Student Loans in California", NASFAA Journal of Student Financial Aid, Jennie Woo, 2002;
Parthenon Perspectives on Private Sector Post-Secondary Schools: Do They Deliver Value to Students and Society?, Robert Lytle, Roger
Brinner, Chris Ross, Boston: The Parthenon Group, 2010, p. 29).
3
2
U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics 2008,
http://nces.ed.gov/pubs2009/2009020.pdf; Higher Education at the Crossroads, Apollo Group, Inc., August 2010, p. 27.
67
Appendix 2: Proposed Gainful Employment Definitions, Regulations
and Potential Consequences
Program
Federal fiscal year (FFY)
3 year period (3YP)
Prior 3 Year period
(P3YP)
Earnings Year
General Definitions
A program refers to any educational program offered by the institution under 668.8(c)(3) or (d);
A Federal fiscal year (FFY) is the 12-month period starting October 1 and ending September 30;
A three-year period (3YP) is the period covering the three most recently completed award years prior to the earnings
year;
A prior three-year period (P3YP) is the period covering the fourth, fifth, and sixth most recently completed award years
prior to the earnings year (i.e., the three years preceding the 3YP);
Earnings year is the most recent calendar year for which earnings data are available
Loa Re a m t R t C I laf on _ _
Loan repayment rate
Calc
Original Outstanding
Principal Balance (OOPS)
Loans Paid in Full (LPF)
Reduced Principal Loan
(RPL)
(OOPB of LPF plus OOPB of RPL)
(OOPB of all loans for students attending the program)
The OOPS is the amount of the outstanding balance on FFEL or Direct loans owed by students who attended the
program, including capitalized interest, on the date those loans entered repayment.
The OOPS of all loans includes the FFEL and Direct loans that entered repayment for the prior four FFYs.
LPF are loans to students who attended the program that have been paid in full. However, a loan that is paid through a
consolidation loan is not counted as paid in full for this purpose until the consolidation loan is paid in full.
The OOPS of LPF in the numerator of the ratio is the total amount of OOPS for these loans.
RPL represents a loan where payments made by a borrower during the most recently completed FFY reduced the
outstanding principal balance of that loan from the beginning of that FFY. RPL also includes loans for borrowers whose
payments during that FFY qualify for the Public Service Loan Forgiveness program, even if there is no reduction during
the FFY in the outstanding principal balance of those loans.
The OOPS of RPL in the numerator of the ratio is the total amount of the OOPS for these loans.
Exclusions from the calc The following are excluded from both the numerator and the denominator of the ratio:
(i) The OOPS of borrowers on an in-school deferment or a military-related deferment status.
(ii) The OOPS of borrowers entering repayment after March 31 of the most recent FFY.
Appendix 2
Discretionary Earnings
Threshold
Total Income Threshold
Annual Loan Payment
Average annual earnings
Discretionary Income
Prior 3YP data can be
used by the Institution as
a substitute for average
earnings data if:
Debt Measures
Annual loan payment < Discretionary threshold * (Average Annual Earnings - (1.5 * Poverty Guideline))
(Discretionary threshold= either 30% (Low threshold) or 20% (high threshold))
Annual loan payment < Earnings threshold * Average Annual Earnings
(Earnings threshold= either 8% (high threshold) or 12% (low threshold))

The Secretary determines the median loan debt of students who completed the program at the institution during
the 3YP and uses this amount to calculate an annual loan payment based on a 10-year repayment schedule and
the current annual interest rate on Federal Direct Unsubsidized Loans.
o Note: No change from prior version
' If data are available, the Secretary also calculates the median loan debt of students who completed the program
during the P3YP.
In general, loan debt includes title IV, HEA program loans, other than Parent PLUS loans, and any private
educational loans or debt obligations arising from institutional financing plans.
o Note: No change from prior version
Loan debt does not include any debt obligations arising from student attendance at prior or subsequent
institutions unless the other and current institutions are under common ownership or control, or are otherwise
related entities.
o Note: Institutional debt only is calculated
The Secretary uses the most currently available actual, average annual earnings obtained from a Federal agency, of the
students who completed the program during the 3YP and, if the data are available, during the P3YP.
Notes:
We can't get these data; and it specifies that we will NOT be able to get this data in the future either
Earnings will likely come from the Social Security Administration, or some other federal entity
The difference between average annual earnings and 150 percent of the most current Poverty Guideline for a single
person in the continental U.S. The Poverty Guidelines are published annually by the U.S. Department of Health and
Human Services (HHS) and are available at http://aspe.hhs.gov/poverty
(i) The institution shows that students completing the program typically experience a significant increase in earnings
after an initial employment period and explains the basis for that earnings pattern; and
(ii) The institution provides the Secretary the information needed to calculate the annual debt measures under this
section, including the CIP code, and for each student who completed the program, the completion date, the amount
received from private educational loans, and the amount of debt incurred from institutional financing plans.
Appendix 2
Debt warning
disclosures
Restricted Programs
Ineligible program
On or after July 1, 2012, unless the program meets both the repayment requirement AND the Income
requirements, the Secretary notifies the institution that it must:
(1) Include a prominent warning in its promotional, enrollment, registration, and in all other materials,
including those on its Web site, and in all admissions meetings with prospective students, that is designed
and intended to alert prospective and currently enrolled students that they may have difficulty repaying
loans obtained for attending that program
(2) Disclose to current and prospective students, the program's most recent loan repayment rate and most
recent debt measures.
The Secretary notifies an institution whenever one of its program's is placed on a restricted status under
paragraph:
(1) The institution must provide annually to the Secretary the employer affirmations specified in paragraph
(2) The institution must make the debt warning disclosures; and
(3) Limits the enrollment of title IV, HEA program recipients in that program to the average number enrolled
during the prior three award years
Except for the transition year (2012) after July 1, 2012 a program becomes ineligible if it does not satisfy at
least one of the debt thresholds. In this case:
The Secretary notifies the institution that the program is ineligible on this basis, and the institution may
not disburse any title IV, HEA program funds to students who begin attending that program after the
date specified in the Secretary's notice.
However, the institution may disburse title IV, HEA program funds to students who began attending the
program before it became ineligible for the remainder of the award year and for the award year
following the Secretary's notice.
Appendix 2
Transition year for
Ineligible Programs
(i.e. Award year
beginning July 1, 2012)
The Secretary caps the number of ineligible programs:
(A) Sorting all programs subject to this section by category based solely on the credential awarded as
determined by the Secretary (e.g., certificate, associate degree, baccalaureate degree, and graduate and
professional degree) and then within each category, by loan repayment rate, from lowest rate to highest rate;
and
(B) For each category of programs, beginning with the ineligible program with the lowest loan repayment
rate, identifying the ineligible programs that account for a combined number of students that completed the
programs in the most recently completed award year that do not exceed five percent of the total number of
students who completed programs in that category. For each ineligible program that falls within the five
percent grouping by category during the transition period, the Secretary notifies the institution that the
program no longer qualifies as an eligible program.
For every other ineligible program (i.e. those not in the 5% category), the Secretary notifies the institution
that:
(A) It must limit the enrollment of title IV, HEA program recipients in that program to the average number of
title IV, HEA program recipients enrolled during the prior three award years;
(B) It must provide the employer affirmations; and
(C) It must provide the debt warning disclosures.
Employer Affirmations Documentation from employers not affiliated with the institution affirming that the curriculum of the
additional program aligns with recognized occupations at those employers' businesses, and that there are
projected job vacancies or expected demand for those occupations at those businesses. The number and
locations of the businesses for which affirmation is required must be commensurate with the anticipated size
ofthe program.
Appendix 2
DOE Approval for Adding
Additional Programs
Delay in Approval
Calculating the measures
for new programs
DOE A roval for Additional Pro rams
Before an institution offers an additional program that is subject to the requirements of this section, the institution
must apply to the Secretary to have that program approved as an eligible program. As part of its the
institution must provide:
(i) If the additional program constitutes a substantive change as provided under 34 CFR 602.22(a)(l), documentation
of the approval of the substantive change by its accrediting agency;
(ii) Projected student enrollment for the next five years for each location of the institution that will offer the additional
program; and
(iii) Documentation from employers not affiliated with the institution affirming that the curriculum of the additional
program aligns with recognized occupations at those employers' businesses, and that there are projected job vacancies
or expected demand for those occupations at those businesses. The number and locations of the businesses for which
affirmation is required must be commensurate with the anticipated size ofthe program.
In determining whether to approve the additional program, the Secretary may restrict the approval for an initial period
based on the projected growth estimates provided by the institution and the demonstrated ability of the institution to
offer programs subject to this section.
If the additional program constitutes a substantive change based solely on program content, the Secretary calculates
the loan repayment rate and debt measures for that program as soon as data are available. Otherwise, the Secretary:
(i) Calculates the loan repayment rate by using loan data from the additional program and, for the first three years,
loan data from all other programs currently or previously offered by the institution that are in the same job family as
the additional program. Any loans from the programs in the same job family that enter repayment after the third year
that the loan repayment rate is calculated for the additional program, are not included in that program's loan
repayment rate.
(ii) Calculates the debt measures by using the loan debt incurred by students in the additional program and in all other
programs currently or previously offered by the institution that are in the same job family as the additional program,
until loan debt data are for a 3YP solely for the additional program.
72
Appendix 2
Above
45%
35%to
45%
Below
35%
Gainful Employment Proposed Rule
Above 12% of Total Income
AND
Above 30% of Discretionary
Income
"adjusted" Fully Eligible
Restricted
Neither Other Column
Restricted
Restricted
Below 8% of Total Income
OR
Below 20% of Discretionary Income
Fully Eligible
73
Appendix 2
Overview of Consequences
Pass the Loan Repayment test (e.g. Loan repayment rate
of at least 45%)
AND
Pass the Debt Burden thresholds (e.g. either a debt to
earnings ratio of 20% or less of discretionary income OR
8% or less of average annual earnings.)
Pass the Loan Repayment test
OR
Pass the Debt Burden Thresholds
Fail the highest level of the loan repayment test (less
than 45% but more than 35%)
AND
Fail both of the highest limits of the Debt Burden
thresholds (e.g. either a debt to earnings ratio of
between 20%- 30% of discretionary income or more
than 8%, but less than 12% of average annual earnings.)
Loan repayment rate below 35%
AND
Fail either of the lower limits of the Debt Burden
thresholds (debt-earnings ratio above 30% of
discretionary income and 12% of annual earnings)
Program not in existence long enough to demonstrate
repayment and debt-earnings outcomes.
Consequences
Eligible None.
Eligible Institutions must warn consumers and current students
of high debt levels and provide the most recent debt
measures for the program.
Restricted Institutions must:
(1) demonstrate employer support for the program, and
(2) warn consumers and current students of high debt
levels and provide the most recent debt measures for
the program.
(3) Enrollment growth is subject to limits (no more than
the average new enrollment over the past 3 years)
Ineligible No new students may receive title IV aid. Current
students may continue to receive aid for the rest of the
year and one additional award year. While phasing out a
program, institutions must warn current and prospective
students of high debt loads and reduced ability to repay
their loans from projected earnings and provide the
most recent debt measures for the program.
Adding new Institution must demonstrate employer support for the
programs program, and the new program is subject to limits on
enrollment growth at the discretion of the DOE.
SAMPLE LETTER for Member of the United States Senate
Secretary Ame Duncan
400 Maryland Avenue Southwest
Dear Secretary Duncan:
I am writing to request that the Department withdraw the Notice of Proposed Rule making published on July 26,
2010, regarding Gainful Employment. If the draft mle is adopted, it will cut off access to postsecondary education
for hundreds of thousands of students at a time when our country desperatel y needs more skilled workers.
TI1e Department' s most recent proposal to make programs primarily in private sector colleges and universities
ineligible based on a complicated formula that does not tntl y measure educational quality - generally referred to as
"gainful employment" - should be rejected, because:
It will eliminate access to higher education for many working adults and lower income students.
It will eliminate programs we all deem necessary yet not impact programs that are of questionable value.
By requiring data from the IRS, it raises privacy concerns for students and graduates.
It impacts almost exclusively the proprietary sector of higher education while ignoring the same issues
conceming student debt fotmd at public and private non-profit institutions.
It is beyond the Department' s statutory authority.
JJ1 the reauthorization of the Higher Education Act of2008, Congress added numerous additional protections, but
we never once debated the Gainful Employment regulations. And it would make these dramatic changes without
Congress being directly involved, even though j ust two years ago Congress completed action on a comprehensive
updating of the HEA.
I believe Congress, the Administration ru1d the industry should take a more comprehensive look at the return on
investment of higher education for students and taxpayers. That is why we are in the process of developing a
legislative proposal that will create a Qual ity Index for postsecondary institutions that will consider various
outcomes including graduation, job placement, student loan repayments, and pass rates on various credentialing
examinations. Such a metric will also take into account the type of student being educated, understanding that
students with various "risk factors," such as the first to attend college or being a working parent, present additional
challenges to institutions that accept them.
Attached is an outline of the Quality Index prepared by Representative Robert Andrews, (CDl-New Jersey). I
strongly urge the Secretary to adopt his as the gainful employment language.
Very truly yours,
U.S. Senator
cc. Majority Leader, Harry Reid
522 Hart, Senate Office Bldg.
Rep. Rob Andrews' Proposed Quality Index for Higher Education to be issued in lieu of the present
gainful employment language
Goal: to assure that schools, irrespective of ownership, offering career preparation education are
providing value added for taxpayers.
To achieve this goal , we propose an index as follows :
A. Weighted average factors
I. Job placement in jobs paying at least the 25
111
percenti le of Bureau of Labor Statistics
reported income for that job in that region (50 percent of score)
II. Graduation from an accredited program (30 percent of score)
ITI. Loan default rate (20 percent of score)
B. Multiplier to take into account a school's effort to train those most in need. To calculate the
multiplier, take the percentage ofPell eligible students and add it to 1, so a school with 38 percent
Pell eligible has a multiplier of 1.38. Multiply the weighted average of the factors by the
multiplier in order to produce the quality index score.
Success Threshold: To determine the success threshold for this index, one would take the target return
for taxpayers on aid dollars invested, and then determine the score necessary to generate that return. This
number becomes the success threshold.
Consequences: Schools fai ling to meet the success threshold would be required to develop and
implement remediation plans for a given number of years. Schools chronical ly failing to meet the
threshold for a given number of years would lose Title IV eligibility for the program in question.
From:
Sent:
To:
Subject:
Attachments:
Higginbottom, Heather .eop.gov]
Kvaal, James
RE: A Message from Dr. John Sperling, Founder- University of Phoenix
image001 .jpg
Oh, also Larry is meeting with Don Graham today- Kaplan Univ
cost to taxpayers.
September 1, 20 I 0
Senator
US Senate
Washington DC 20510
Dear Senator __ ,
As founder of the Uni versity of Phoenix, I am writing to you and to every Member of Congress concerning recent actions
Department of Education, seconded by the HELP Committee, has proposed new mles that wiJl seriously undercut the
President' s goals without for-profit colleges. TI1e states do not have the funding needed to increase capacity whereas
private sector colleges like ours can provide the necessal)' capacity. For-profit colleges already provide flexibility and
institution.
As the largest institution in the sector- 465,000 shtdents with 90,000 graduates last year -the University of Phoenix
illustrates the strengths and weaknesses of for-profit colleges and universities. The NEXUS study documents the financial
system that sustains it, the qual ity of the University' s programs, the innovations it has brought to higher education and
Perhaps the most important finding of the case study is the fact that for-profit institutions operate at no cost to tah.-payers
because the interest students pay on their federal loans plus the ta'\.es paid by the institutions is greater than the Pell Grants
and all oftbe other state and federal subsidies received by the students and the institutions. Further, the shtdy shows that
It would seem wiser to restore the status quo ante when the Department of Education was pursuing a refo1m that would
truly benefit taxpayers, namely to require all instihttions of higher education to measure the learning outcomes of their
shtdents and to publish those results on an annual basis. Overseeing the measurement protocols used by institutions in
is presently contemplated. Only when learning outcomes are measured and published will taxpayers know what they are
getting for their money and the "bad actors" be easi ly identified-nan1ely the instihttions whose shtdents are low
performers.
class.
minimum rates at which shtdents in a program must be repaying on the principal of their shtdent loans. The nev,, definition
shtdents for certification in such occupations as teachers, nurses, counselors and public safety officers. The repayment
percentage requirements, apparently arrived at with insufficient attention to thei r potential negative consequences, v.rould
before they can begin repaying the principal on their sh1dent loans. For example, if these requirements were appl ied to
2
Representati ve Robert Andrews (New Jersey-01) has proposed a definition of gainful employment that would correct the
many faults of the defmition proposed by the Department of Education. He has written to Education Secretary Arne
Duncan setting forth the negative consequences resulting from the Department's definition while proposing aD alternative
profit sector support Congressman Andrews's initiative and we are asking aU Members of the Congress to lend their
John G. Sperling
Founder
3
From:
Sent:
Gordon, Robert M . ~ : ; _ ) @omb.eop.gov]
Friday, September , oT612:45 f5lii1
To: Kvaal, James
cost to taxpayers.
September 1, 2010
Senator
US Senate
Washington DC 20510
Dear Senator __ ,
4
As founder of the Uni versity of Phoenix, I am writing to you and to every Member of Congress concerning recent actions
profit colleges and uni versities.
seeks to earn a college degree. TI1at is the stated goal of President Obama. However, we will not be able to reach the
institution.
presents a rationale for the need to rethink the reforms proposed by USDOE and the HELP Conunittee using as an
example the case of the University of Phoeni x, whose massive database on its operations and its academics has been
As the largest institution in the sector-465,000 students with 90,000 graduates last year - the University of Phoenix
illustrates the strengths and weaknesses offor-profit colleges and uni versities. The NEXUS study documents the financial
because the interest students pay on their federal loans plus the taxes paid by the institutions is greater than the Pell Grants
truly benefit ta'\payers, namely to require all institutions of higher education to measure the leaming outcomes of their
order to expose cheating on the tests, would be a far more producti ve use of Department of Education resources than what
getting for their money and the "bad actors" be easily identified- namely the institutions whose students are low
performers.
When you have finished reviewing the power point, we hope you will be persuaded that for-profit coUeges and
efficiency, their growth, their culture of innovation and, most importantl y, tl1eir ability to deliver a quality education to
class.
The worst of these regulations concems the definition of "gainful employment" and a new regulation tl1at sets tl1e
minimum rates at which students in a program must be repaying on tl1e principal of their student loans. The new definition
of gainfi.tl employment is so onerous it would make it impossible for the sector to offer many progran1s that prepare
percentage requi rements, apparently arrived at with insufficient attention to thei r potential negative consequences, would
before tl1ey can begin repaying the principal on their student loans. For example, if these requirements were applied to
Historically Black Colleges and UDiversities, over 90% of them would have to close their doors.
5
Representative Robert Andrews (New Jersey-0 I) has proposed a definition of gainful employment that would correct the
to Secretary Dtmcan with copies to Senate Majority Leader, Harry Reid and to Congressman Andrews. TI1e University
Thank you for your time and consideration ofthis important issue.
John G. Sperling
Founder
Uni versity of Phoenix
6
From:
Sent:
To:
Subject:
Attachments:
Little, Bethany (HELP Committee) @help.senate.gov]
Thursday, September 02, 201 o 5:1 o PM
Kvaal, James; Gomez, Gabriella
System of Higher Education1.pdf; Suggested Sample Letter to Secretary Arne Duncan from
Members of Congress, Senate version.docx
From: Miller, Derek (Harkin) [mailto @harkin.senate.gov]
(HELP Committee)
Cc: Cyrul, Kate (Harki n); Ahlberg, Brian (Harkin)
dm
September 1, 20 I 0
Senator Tom Harkin
US Senate
Washington DC 20510
As founder of the University of Phoenix, I am writing to you and to every Member of Congress concerning recent actions
by the U.S. Department of Education and the Senate Conunittee on Health, Education, Labor and Pensions. The
7
ability of the nation to remain globally competitive by Ltndem1ining a vital sector of our higher education system-for-
President' s goals without for-profit colleges. 1l1e states do not have the fi.mding needed to increase capacity whereas
institution.
illustrates the strengths and weaknesses of for-profit colleges and uni versities. The NEXUS study docwnents the financial
where it has failed to meet regulatory standards and its own code of conduct. It also documents the steps the Onjversity
has taken to insure fi.tture compliance with all regulatory standards.
Perhaps the most important finding of the case study is the fact t hat for-profit institutions operate at no cost to ta>.'J)ayers
It would seem wiser to restore the status quo ante when the Department of Education was pursuing a reform that wouJd
truly benefit ta-xpayers, namely to require all institutions of higher education to measure the learning outcomes of their
is presently contemplated. Only when learning outcomes are measured and published will ta"payers know \Vhat they are
performers.
universities are a vital sector of the American higher education system that deserve the support oftl1e Department of
Education and the Congress, along with responsible oversight, rather than a set of regulations that will instead inhibit tl1eir
class.
of gainfi.!l employment is so onerous it would make it impossible for the sector to offer many programs that prepare
before they can begin repaying the principal on tl1eir student loans. For example, if these requirements were applied to
Representative Robert Andrews (New Jersey-0 1) has proposed a definition of gainful employment that would correct the
many faults of the definition proposed by the Department of Education. He has written to Education Secretary Ame
Duncan setting forth the negative consequences resulting from the Department' s definition while proposing an altemative
8
John G. Sperling
Founder
9
From:
Sent:
To:
Subject:
Attachments:
gracias
Kvaal, James
Little, Bethany (HELP Committee)
image001.gif
From: Little, Bethany (HELP Committee) [mailto help.senate.gov]
To: Kvaal, James; Gomez, Gabriella
From: Miller, Derek (Harkin) [mailto harkin.senate.gov]
(HELP Committee)
Cc: Cyrul, Kate (Harkin); Ahlberg, Brian (Harkin)
dm
September I, 201 0
Senator Tom Harkin
US Senate
Washington DC 20510
10
ability of the nation to remain globally competitive by Ltndem1ining a vital sector of our higher education system-for-
conunittee that deals with higher education, would like quality higher education to be available to every American who
access for millions of ltnderserved and nontraditional students who could not complete their education in a traditional
institution.
profit sector of higher education. Given its conurutment to fact based research, not special pleading, the power point
presents a rationale for the need to rethink the reforms proposed by US DOE and the HELP Committee using as an
illustrates the strengths and weaknesses of for-profit colleges and universities. The NEXUS study docwnents the fmancial
not only will the proposed refonns require a major increase in Department of Education oversight staff, they will greatly
It would seem wiser to restore the status quo ante when the Department of Education "vas pursuing a reforn1 that would
truly benefit ta-xpayers, namely to require all institutions of higher education to measure the learning outcomes of their
is presently contemplated. Only when learni ng outcomes are measured and published wi ll taxpayers knov,, what they are
perfom1ers.
class.
11
percentage requi rements, apparently arrived at with insufficient attention to their potential negative consequences, would
Historically Black Colleges and UDiversities, over 90% of them would have to close their doors.
Representative Robert Andrews (New Jersey-01) has proposed a definition of gainful employment that would correct the
many faults ofthe definition proposed by the Department of Education. He has written to Education Secretary Arne
Dtmcan setting forth the negative consequences resulting from the Department' s definition while proposing an alternative
which would remove these negative consequences and still gain the same objectives. Mally of the institutions in the for-
support as well . I have attached a draft of a letter of support which we hope you will use as a model for a letter from you
to Secretary Duncan \vith copies to Senate Majority Leader, Harry Reid and to Congressman Andrews. The University
Thank you for your time aDd consideration of this importaDt issue.
John G. Sperling
Founder
12
Sent:
To:
Kvaal, James; Hamilton, Justin
Attachments: image001 .gif; For_Profit Colleges and Universities_America's Least Cost and Most Efficient
System of Higher Education1.pdf; Suggested_ Sample Letter to Secretary Arne Duncan from
Members of Congress House version.docx
From: Hunter-Williams, Jill [mailto @mail.house.gov]
Jill Hunter-Williams, Ph.D.
Legislative Director
Congressman Danny K. Davis
2159 Rayburn House Office Building
(202) 225-5006
http://www.davis. house.gov/
From: John Sperling ____ _. @gmail.com]
To: Hunter-Williams, Jill
September 2, 2010
Congress Member Danny Davis
US House of Representatives
2159 Rayburn House Office Building
Washington DC 20515
13
Dear Congress Member Davis,
ability of the nation to remain globally competitive by tmdem1ining a vital sector of our higher education system- for-
access for millions of tmderserved and nontraditional students who could not complete their education in a traditional
institution.
profit sector of higher education. Given its conunitment to fact based research, not special pleading, the power point
presents a rationale for the need to rethink the reforms proposed by US DOE and the HELP Committee usi ng as an
As the largest institution in the sector-465,000 students with 90,000 graduates last year-the University of Phoenix
illustrates the strengths and weaknesses of for-profit colleges and universities. The NEXUS study docwnents the fmancial
system that sustains it, the quali ty of the University' s programs, the innovations it has brought to higher education and
Perhaps the most impo1tant finding ofthe case study is the fact that for-profit instit utions operate at no cost to taxpayers
truly benefit taxpayers, namely to require all institutions of higher education to measure the learning outcomes of their
is presently contemplated. Only when learning outcomes are measured and published will ta'<payers know what they are
getting for their money and the "bad actors" be easily identified- namely the institutions whose students are low
performers.
When you have finished reviewing the po ... ver point, we hope you will be persuaded that for-profit colleges and
Education and the Congress, along with responsible oversight, rather than a set of regulations that will instead inhibit tlleir
efficiency, their growth, their culture of innovation and, most importantly, tl1eir ability to deliver a quality education to
millions of low-income Americans now denied access to tile education they need to give tllem a chance to join tl1e middle
class.
The worst ofthese regulations concerns the definition of "gainful employment" and a new regulation that sets tl1e
minimum rates at which students in a program must be repaying on tl1e principal oftlleir student loans. The new definition
14
Reprcsentati ve Robert Andrews (New Jersey - 01) has proposed a definition of gainfitl employment that would correct the
profit sector support Congressman Andrews' s i:nitiati ve and ,.ve are asking all Members of the Congress to lend their
support as well. l have attached a draft of a letter of support which we hope you will use as a model for a letter from you
to Secretary Duncan with copies to Speaker Nancy Pelosi and to Congressman Andrews. TI1e University and every
institution in the sector would very much appreciate your support.
John G. Sperling
Founder
15
From:
Sent:
To:
Subject :
Attachments:
Kvaal, James
Kanter, Martha; Ochoa, Eduardo; Bergeron, David; Kolotos, John; Sellers, Fred; Yuan,
Georgia; Finley, Steve; Chesley, Susan
image001.gif; For_Profit Colleges and Universities_America's Least Cost and Most Efficient
The powerpoint is worth a read
September 2, 2010
Dear Congress Member,
abi lity of the nation to remain globally competitive by Ltndem1ining a vital sector of our higher education system-for-
seeks to eam a college degree. That is the stated goal of President Obama. However, we will not be able to reach the
President ' s goals without for-profit colleges. 1l1e states do not have t he fi.mding needed to increase capacity whereas
access for millions of ltnderserved and nontraditional students who could not complete their education in a traditional
institution.
1l1e attached power point has been prepared by NEXUS, a research and policy institute whose primary focus is the for-
profit sector of higher education. Given its conunitment to fact based research, not special pleading, the power point
As the largest institution in the sector- 465,000 students with 90,000 graduates last year-the University of Phoenix
illustrates the strengths and weaknesses of for-profit colleges and universities. 1l1e NEXUS study docwnents the fmancial
where it has failed to meet regulatory standards and its own code of conduct. It also docwnents the steps the Unj versity
Perhaps the most impo1tant finding of the case study is the fact that for-profit institutions operate at no cost to taxpayers
16
truly benefit ta-xpayers, namely to require all institutions of higher education to measure the leaming outcomes of their
getting for their money and tl1e "bad actors" be easily identified-namely tl1e institutions whose students are low
performers.
class.
l11e worst of these regulations concerns t he definition of "gainful employment" and a new reguJation that sets the
percentage requirements, apparently arrived at with insufficient attention to tl1eir potential negative consequences, would
Representati ve Robert Andrews (New Jersey - 01) has proposed a definition of gainful employment tl1at would correct the
Duncan setting forth the negative consequences resulting from the Department's definition while proposing all alternative
which would remove these negative consequences and still gain the same objectives. Many oftl1e institutions in the for-
profit sector support CoDgressman Andrews' s initiative and we are asking all Members of the Congress to lend their
to Secretary Duncan with copies to Speaker Nancy Pelosi and to Congressman Andrews. The University and every
John G. Sperling
Founder
17
From:
Sent:
To:
Subject:
Attachments:
From: Kvaal, James
Sellers, Fred
Kvaal, James; Kanter, Martha; Ochoa, Eduardo; Bergeron, David; Kolotos, John; Yuan,
Georgia; Finley, Steve; Chesley, Susan
image001 .gif
To: Kanter, Martha; Ochoa, Eduardo; Bergeron, David; Kolotos, John; Sellers, Fred; Yuan, Georgia; Finley, Steve;
Chesley, Susan
September 2, 2010
committee that deals with higher education, would li ke quality higher education to be available to every American who
seeks to eam a college degree. TI1at is the stated goal of President Obama. However, we will not be able to reach the
President's goals without for-profit colleges. The states do not have t he funding needed to increase capacity whereas
institution.
18
As the largest institution in the sector-465,000 students with 90,000 graduates last year-the Uni versity of Phoenix
illustrates the strengths and weaknesses offor-profit colleges and universities. The NEXUS study documents the financial
Perhaps the most important finding of the case study is the fact that for-profit institutions operate at no cost to ta>.'J)ayers
It would seem wiser to restore the status quo ante when the Department of Education "vas pursuing a reforn1 that would
truly benefit ta.-xpayers, namely to require all institutions of higher education to measure the leaming outcomes of their
is presently contemplated. Only when learning outcomes are measured and published wi ll taxpayers knov,, what they are
perforn1ers.
class.
1l1e worst of these regulations concerns the definition of "gainful employment" and a new regulation that sets the
percentage requirements, apparently arrived at with insufficient attention to thei r potential negative consequences, would
before they can begin repayi ng the principal on their student loans. For example, if these requirements were applied to
Representative Robert Andrews (New Jersey - 01) has proposed a definition of gainful employment t hat would correct the
Duncan setting forth the negative consequences resulting from the Department' s definition while proposing an alternati ve
19
John G. Sperling
Founder
20
From:
Sent:
To:
Subject:
From: James
Finley, Steve
Kvaal, James; Kanter, Martha; Ochoa, Eduardo; Bergeron, David; Kolotos, John; Sellers,
Fred; Yuan, Georgia; Chesley, Susan
To: Martha; Eduardo; David; John; Fred;
Georgia; Steve; Susan
September 2010
Dear Congress
As founder of the University of I am writing to you and to every Member of Congress
Labor and Pensions. The Department of seconded by the HELP
has proposed new rules that will seriously undercut the ability of the nation to
remain globally competitive by undermining a vital sector of our higher education system-for-
I am writing to you because I am confident that every Member of whether or not they
are a member of a committee that deals with higher would like quality higher
stated goal of President Obama. we will not be able to reach the goals
The attached power point has been prepared by a research and policy institute whose
primary focus is the for -profit sector of higher education. Given its commitment to fact
based not special the power point presents a rationale for the need to
the University of whose massive database on its operations and its academics has
As the largest institution in the students with graduates last year- the
University of Phoenix illustrates the strengths and weaknesses of for - profit colleges and
universities . The NEXUS study documents the financial system that sustains the quality of
the the innovations it has brought to higher education and where it
21
and federal subsidies received by the students and the institutions. FurtherJ the study
Education oversight staffJ they will greatly lower the efficiency and raise the costs of the
institutions in the sector-all at the expense of taxpayers.
pursuing a reform that would truly benefit taxpayersJ namely to require all institutions of
order to expose cheating on the testsJ would be a far more productive use of Department of
measured and published will taxpayers know what they are getting for their money and the <<bad
When you have finished reviewing the power pointJ we hope you will be persuaded that for-
that deserve the support of the Department of Education and the CongressJ along with
responsible oversightJ rather than a set of regulations that will instead inhibit their
efficiencyJ their growthJ their culture of innovation andJ most importantlyJ their ability to
deliver a quality education to millions of low-income Americans now denied access to the
The worst of these regulations concerns the definition of "gainful employment" and a new
certification in such occupations as teachersJ nursesJ counselors and public safety officers.
The repayment percentage requirementsJ apparently arrived at with insufficient attention to
their potential negative consequencesJ would have a devastating impact on institutions that
enroll low-income students who often require several years in the workforce before they can
begin repaying the principal on their student loans. For exampleJ if these requirements were
applied to Historically Black Colleges and UniversitiesJ over 90% of them would have to close
their doors.
consequences resulting from the DepartmentJs definition while proposing an alternative which
institutions in the for -profit sector support Congressman AndrewsJs initiative and we are
22
[cid:image001.gif]
John G. Sperling
Founder
23
From:
Sent:
To:
Subject:
September 2010
Kanter, Martha
Weiss, Joanne; Martin, Carmel; Yuan, Georgia; Rose, Charlie; Gomez, Gabriella; Ochoa,
Eduardo; Miller, Tony; peter.cunnigham@ed.gov
FYI : A Message from Dr. John Sperling, Founder- University of Phoenix
Dear Congress
whereas private sector colleges like ours can provide the necessary capacity. For- profit
As the largest institution in the students with graduates last year-the
universities. The NEXUS study documents the financial system that sustains the quality of
and federal subsidies received by the students and the institutions. the study
Education oversight they will greatly lower the efficiency and raise the costs of the
24
measured and published will taxpayers know what they are getting for their money and the ((bad
actors" be easily identified- namely the institutions whose students are low performers.
their doors.
[cid:image001.gif]
John G. Sperling
Founder
25
From:
Sent:
To:
Subject:
From: Martha
Kanter, Martha
Cunningham, Peter
To: Joanne; Carmel; Georgia; Charlie; Gabriella;
Eduardo; Tony; peter.cunnigham@ed.gov
Subject: FYI: A Message from Dr. John Founder - University of Phoenix
September 2010
Dear Congress
26
When you have finished reviewing the power pointJ we hope you will be persuaded that for -
their doors.
[cid:image001.gif]
John G. Sperling
Founder
27
28
From: Cunningham, Peter
Sent:
To:
Kanter, Martha
Cc: Kvaal, James
From: Martha
To: Peter
From: Martha
September 2010
Dear Congress
29
As the largest institution in the sector-465J000 students with 90J000 graduates last year-the
universities. The NEXUS study documents the financial system that sustains itJ the quality of
the UniversityJs programsJ the innovations it has brought to higher education and where it
efficiency) their growthJ their culture of innovation andJ most importantly) their ability to
The repayment percentage requirements) apparently arrived at with insufficient attention to
their potential negative consequences) would have a devastating impact on institutions that
applied to Historically Black Colleges and Universities) over 90% of them would have to close
their doors.
30
(cid:image001.gif]
John G. Sperling
Founder
31
From: Kvaal, James
Sent:
To:
Cunningham, Peter; Kanter, Martha
I'll look into this
From: Peter
Sent: September 2010 7:40AM
To: Martha
Cc: James
From: Martha
To: Peter
Subject: FW: A Message from Dr . John Founder - University of Phoenix
From: Martha
Eduardo; Tony; peter . cunnigham@ed.gov
September 2010
Dear Congress
32
based researchJ not special pleadingJ the power point presents a rationale for the need to
the University of PhoenixJ whose massive database on its operations and its academics has
Perhaps the most important finding of the case study is the fact that for - profit institutions
actors" be easily identified- namely the institutions whose students are low performers.
their doors .
institutions in the for-profit sector support Congressman AndrewsJs initiative and we are
33
[cid:image001.gif]
John G. Sperling
Founder
34
From: Kvaal, James
Sent:
To:
Cunningham, Peter; Kanter, Martha; Hamilton, Justin
Peter:
- - - - -Original Message- ----
From: Peter
Sent: September 2010 7:40AM
To: Martha
Cc: James
From: Martha
To: Peter
From: Martha
September 2010
Dear Congress
35
As founder of the University of Phoenix, I am writing to you and to every Member of Congress
Health, Education, Labor and Pensions. The Department of Education, seconded by the HELP
Committee, has proposed new rules that will seriously undercut the ability of the nation to
I am writing to you because I am confident that every Member of Congress, whether or not they
are a member of a committee that deals with higher education, would like quality higher
stated goal of President Obama. However, we will not be able to reach the President,s goals
The attached power point has been prepared by NEXUS, a research and policy institute whose
based research, not special pleading, the power point presents a rationale for the need to
the University of Phoenix, whose massive database on its operations and its academics has
As the largest institution in the sector-465,000 students with 90,000 graduates last year-the
universities. The NEXUS study documents the financial system that sustains it, the quality of
the University,s programs, the innovations it has brought to higher education and where it
and federal subsidies received by the students and the institutions. Further, the study
Education oversight staff, they will greatly lower the efficiency and raise the costs of the
pursuing a reform that would truly benefit taxpayers, namely to require all institutions of
order to expose cheating on the tests, would be a far more productive use of Department of
actors be easily identified-namely the institutions whose students are low performers.
When you have finished reviewing the power point, we hope you will be persuaded that for-
that deserve the support of the Department of Education and the Congress, along with
responsible oversight, rather than a set of regulations that will instead inhibit their
efficiency, their growth, their culture of innovation and, most importantly, their ability to
The worst of these regulations concerns the definition of ((gainful employment and a new
36
certification in such occupations as teachers, nurses, counselors and public safety officers.
The repayment percentage requirements, apparently arrived at with insufficient attention to
their potential negative consequences, would have a devastating impact on institutions that
begin repaying the principal on their student loans. For example, if these requirements were
applied to Historically Black Colleges and Universities, over 90% of them would have to close
their doors.
consequences resulting from the Department,s definition while proposing an alternative which
institutions in the for-profit sector support Congressman Andrews,s initiative and we are
[cid:image001.gif]
John G. Sperling
Founder
37
Sent:
To:
Tuesday, September 07, 2010 11 :36 PM
Yuan, Georgia
From: Kvaal, James
To: Cunningham, Peter; Kanter, Martha; Hamilton, Justin
Subject: RE: A Message from Dr. John Sperling, Founder - University of Phoenix
Peter:
From: Cunningham, Peter
To: Kanter, Martha
Cc: Kvaal, James
Subject: RE: A Message f rom Dr . John Sperling, Founder - University of Phoenix
To: Cunningham, Peter
Subject: FW: A Message from Dr. John Sperling, Founder - University of Phoenix
To: Weiss, Joanne; Martin, Carmel; Yuan, Georgia; Rose, Charlie; Gomez, Gabriella; Ochoa,
Subject: FYI: A Message from Dr. John Sperling, Founder - University of Phoenix
September 2, 2010
38
concerning recent actions by the u.s. Department of Education and the Senate Committee on
pursuing a reform that would truly benefit taxpayers, namely to require all institutions of
higher education to measure the learning outcomes of thei r students and to publish those
39
The worst of these regulations concerns the definition of "gainful employment and a new
their doors .
[cid:image001.gif]
John G. Sperling
Founder
From: Yuan, Georgia
Sent:
To:
Wednesday, September 08, 201 o 6:42 PM
Finley, Steve
Cc: Kanter, Martha
Steve
When you have a moment after the holidaysJ let us know what you think.
Georgia
To: YuanJ Georgia
Subject: FW: A Message from Dr. John SperlingJ Founder - University of Phoenix
From: KvaalJ James
To: CunninghamJ Peter; KanterJ Martha; HamiltonJ Justin
Subject: RE: A Message from Dr . John SperlingJ Founder - University of Phoenix
Peter:
From: CunninghamJ Peter
Sent: FridayJ September 03J 2010 7:40 AM
To: KanterJ Martha
Cc: KvaalJ James
Subject: RE: A Message from Dr. John SperlingJ Founder - University of Phoenix
Sent: ThursdayJ September 02J 2010 9:27 PM
To: CunninghamJ Peter
41
Subject: FW: A Message from Dr. John Sperling, Founder - University of Phoenix
To: Weiss, Joanne; Martin, Carmel; Yuan, Georgia; Rose, Charlie; Gomez, Gabriella; Ochoa,
Subject: FYI: A Message from Dr. John Sperling, Founder - University of Phoenix
September 2, 2010
shows that not only will the proposed reforms requi re a major increase in Department of
pursuing a reform that would truly benefit taxpayers, namely to requi re all institutions of
42
measured and published wil l taxpayers know what they are getting for their money and the rcbad
efficiency, their growth, their culture of innovation and, most importantly, their ability to
The worst of these regulations concerns the definition of rcgainful employment" and a new
certification in such occupations as teachers, nurses, counselors and public safety officers.
The repayment percentage requirements, apparently arrived at with insufficient attention to
their potential negative consequences, would have a devastating impact on institutions that
begin repaying the principal on their student loans. For example, if these requirements were
applied to Historically Black Colleges and Universities, over 90% of them would have to close
their doors.
consequences resulting from the Department,s definition while proposing an alternative which
institutions in the for-profit sector support Congressman Andrews,s initiative and we are
[cid:image001.gif]
John G. Sperling
Founder
43
From: Yuan, Georgia
Sent: Thursday, September 09, 201 o 11 :53 AM
To:
Cc:
Kvaal, James; Cunningham, Peter; Hamilton, Justin; Kanter, Martha
Finley, Steve
Here's Steve's advice.
From: Finley) Steve
Sent: Thursday) September 09J 2010 11:15 AM
To: YuanJ Georgia
Subject: RE: A Message from Dr. John Sperling) Founder - University of Phoenix
From: KvaalJ James
Sent: Tuesday) September 07J 2010 7:35 PM
To: Cunningham) Peter; Kanter) Martha; Hamilton) Justin
Subject: RE: A Message from Dr. John Sperling) Founder - University of Phoenix
Peter:
From: Cunningham) Peter
Sent: Friday) September 03J 2010 7:40AM
To: Kanter) Martha
Cc: KvaalJ James
Subject: RE: A Message from Dr . John Sperling) Founder - University of Phoenix
44
From: Martha
To: Peter
Subject: FW: A Message from Dr . John Founder - University of Phoenix
From: Martha
September 2010
Dear Congress
45
their doors.
[cid:image001.gif]
John G. Sperling
Founder
47
From:
Sent:
To:
Subject:
From: Martha
Kanter, Martha
Hamilton, Justin
FYI : A Message from Dr. John Sperling, Founder- University of Phoenix
September 2010
Dear Congress
48
their doors.
[cid:image001.gif]
John G. Sperling
Founder
49
50
From:
Sent:
To:
Subject:
Attachments:
From: KvaalJ James
Kanter, Martha
Weiss, Joanne; Martin, Carmel; Gomez, Gabriella; Miller, Tony; peter.cunnigham@ed.gov;
Hamilton, Justin
Sent: ThursdayJ September 02J 2010 6:31 PM
To: KanterJ Martha; OchoaJ Eduardo; BergeronJ David; KolotosJ John; SellersJ Fred; YuanJ
Georgia; FinleyJ Steve; ChesleyJ Susan
Subject: FW: A Message from Dr. John SperlingJ Founder - University of Phoenix
September 2J 2010
Dear Congress MemberJ
As founder of the University of PhoenixJ I am writing to you and to every Member of Congress
HealthJ EducationJ Labor and Pensions. The Department of EducationJ seconded by the HE LP
CommitteeJ has proposed new rules that will seriously undercut the ability of the nation to
I am writing to you because I am confident that every Member of CongressJ whether or not they
are a member of a committee that deals with higher educationJ would like quality higher
stated goal of President Obama. HoweverJ we will not be able to reach the PresidentJs goals
whereas private sector colleges like ours can provide the necessary capacity. For -profit
based researchJ not special pleadingJ the power point presents a rationale for the need to
rethink the reforms proposed by USDOE and the HE LP Committee using as an example the case of
the University of PhoenixJ whose massive database on its operations and its academics has
t he UniversityJs programsJ the innovations it has brought to higher education and where it
51
The worst of these regulations concerns the definition of "gainful employment" and a new
their doors.
52
[cid:image001.gif]
John G. Sperling
Founder
53
From:
Sent:
To:
Subject:
Attachments:
From: Martha
Kanter, Martha
Friday, September 03, 2010 7:31 AM
Cunningham, Peter
To: Joanne; Carmel; Gabriella; Tony; peter.cunnigham@ed.gov;
Justin
From: James
To: Martha; Eduardo; David; John; Fred;
Georgia; Steve; Susan
September 2010
Dear Congress
54
the University of Phoenix> whose massive database on its operations and its academics has
As the largest institution in the sector- 465>000 students with 90>000 graduates last year-the
universities. The NEXUS study documents the financial system that sustains it> the quality of
the University>s programs> the innovations it has brought to higher education and where it
and federal subsidies received by the students and the institutions. Further> the study
Education oversight staff> they will greatly lower the efficiency and raise the costs of the
pursuing a reform that would truly benefit taxpayers> namely to require all institutions of
order to expose cheating on the tests> would be a far more productive use of Department of
When you have finished reviewing the power point> we hope you will be persuaded that for-
that deserve the support of the Department of Education and the Congress> along with
responsible oversight> rather than a set of regulations that will instead inhibit their
efficiency> their growth> their culture of innovation and> most importantly> their ability to
certification in such occupations as teachers> nurses> counselors and public safety officers.
The repayment percentage requirements> apparently arrived at with insufficient attention to
their potential negative consequences> would have a devastating impact on institutions that
begin repaying the principal on their student loans. For example> if these requirements were
applied to Historically Black Colleges and Universities> over 90% of them would have to close
their doors.
consequences resulting from the Department>s definition while proposing an alternative which
institutions in the for -profit sector support Congressman Andrews>s initiative and we are
55
[cid:image001.gif]
John G. Sperling
Founder
56
From:
Sent:
To:
Subject:
Attachments:
William FYI attached. f'?'X.ti.l
September 2, 20 l 0
Kvaal, James
Graham, William
image001.gif; For_Profit Colleges and Universities_America's Least Cost and Most Efficient
As founder of the University ofPhoenix, I am writing to you and to every Member of Congress concerning recent actions
Department of Education, seconded by the HELP Conm1ittee, has proposed new mles that will seriously undercut the
President' s goals without for-profit colleges. 1l1e states do not have the funding needed to increase capacity whereas
institution.
As the largest institution in the sector-465,000 students with 90,000 graduates last year-the University of Phoenix
illustrates the strengths and v.reaknesses of for-profit colleges and universities. The NEXUS study documents the financial
Perhaps the most important finding of the case study is the fact that for-profit institutions operate at no cost to tah.rpayers
because the interest students pay on their federal loans plus the ta.'<es paid by the institutions is greater than the Pell Grants
57
truly benefit ta-xpayers, namely to require all institutions of higher education to measure the leaming outcomes of their
getting for their money and tl1e "bad actors" be easily identified-namely tl1e institutions whose students are low
performers.
class.
l11e worst of these regulations concerns t he definition of "gainful employment" and a new reguJation that sets the
percentage requirements, apparently arrived at with insufficient attention to tl1eir potential negative consequences, would
Representati ve Robert Andrews (New Jersey - 01) has proposed a definition of gainful employment tl1at would correct the
Duncan setting forth the negative consequences resulting from the Department's definition while proposing all alternative
which would remove these negative consequences and still gain the same objectives. Many oftl1e institutions in the for-
profit sector support CoDgressman Andrews' s initiative and we are asking all Members of the Congress to lend their
John G. Sperling
Founder
58
From:
Sent:
To:
Subject:
Attachments:
On the case
From: Kvaal, James
Graham, William
Kvaal, James
image001 .gif
To: Graham, William
William, FYI attached. r ' ~
September 2, 20 I 0
As founder of the University of Phoenix, 1 am writing to you and to every Member of Congress concem i ng recent actions
abi lity of the nation to remain globally competitive by undem1ining a vital sector of our higher education system-for-
I an1 writing to you because I an1 confident that every Member of Congress, whether or not they are a member of a
seeks to earn a college degree. That is the stated goal of President Obama. HO\-vever, we will not be able to reach the
President's goals without for-profit colleges. 1l1e states do not have the funding needed to increase capacity whereas
private sector colleges like ours can provide the necessary capacity. For-profit colleges already provide fl exibility and
institution.
59
As the largest institution in the sector-465,000 students with 90,000 graduates last year-the University of Phoeni x
illustrates the strengths and weaknesses of for-profit colleges and universities. The NEXUS study docwnents the financial
where it has failed to meet regulatory standards and its own code of conduct. It also documents the steps the Unj versity
Perhaps the most important finding of the case study is the fact that for-profit insti tutions operate at no cost to taxpayers
and all of the other state and federal subsirues received by the students and the institutions. Further, the study shows that
lower the effici ency and raise the costs of the institutions in the sector-all at the expense of taxpayers.
It would seem wiser to restore the status quo ante when the Department of Education was pursuing a refo1m that would
truly benefit taxpayers, namely to require all inst itutions of higher education to measure the learning outcomes of their
getting for their money and the " bad actors" be easi ly identified-nan1ely the institutions whose shtdents are low
performers.
Wl1en you have finished reviewing the power point, we hope you will be persuaded that for-profit coll eges and
universities are a vital sector of the Americanlugher education system that deserve the support of the Department of
millions of low-income Americans now de1ued access to the education they need to give them a chance to join the middle
class.
minimum rates at which students in a program must be repaying on the principal of their student loans. The nev,, definition
percentage requirements, apparently arrived at with insufficient attention to their potential negative consequences, v.rould
have a devastating impact on institutions that enrol! low-income students who often require several years in the workforce
Representati ve Robert Andrews (Nev,r Jersey - 0 1) has proposed a definition of gainful employment that wottld correct the
Duncan setting forth the negative consequences resulting from the Department' s definition wlule proposing an alternati ve
support as well. I have attached a draft of a letter of support which we hope you \villuse as a model for a letter from you
to Secretary Duncan with copies to Speaker Nancy Pelosi and to Congressman Andrews. The Uruversity and every
60
John G. Sperling
Founder
61
From:
Sent:
To:
Subject:
Attachments:
Attached.
Arsenault, Leigh
Kvaal, James
ran kings
Washington Monthly and U.S. News Rankings 090710.doc
Top 10 Liberal Arts College Ranking (1-10 outof252)-Washington Monthly
Liberal Arts Repayment Rate
Morehouse College
Bryn Mawr College
Swarthmore College
Berea College
Amherst College
Har-vey Mudd College
Williams College
Spelman College
Wesleyan University
Bowdoin College
Average 69
27
65
85
59
86
90
88
36
76
82
Bottom 10 Liberal Arts College Ranking (252-242 out of 252)-Washington Monthly
Liberal Aris
Tb.omas More College of Liberal Atis
Bryn Athyn College of New Church
Ne,ada College
Metroi>Oiitan State College of Denver
Brigham Young University, Hawaii
Western State College of Colorado
Brevard College
Lambuth University
CbristQ]Jber Newport University
F(H1: Lewis College
Average 58
Repayment Rate
60
73
56
43
61
62
50
50
71
56
Top 10 Baccalaureate Coll ege Ranking (1-10 out of309)-Washington Monthly
Baccalaureate College Repayment Rate
Bard College at Simon's Rocl"
Northwestern College
TayJor University
Cooper Union
Messiah Colleg_e
Augustaoa College
Claflin.Unive.rsity
Elmira College
Trinity Christian College
Benedict College
Average 63
64
88
77
79
86
81
13
64
72
8
Bottom 10 Baccalaureate Coll ege Ranking (309-299 out of 309)-Washington Monthly
Baccalaureate College
Nevada State College
Farmingdale State College, SUNY
Bethany College
Rogers State University
Reinhardt College
Urbana University
Virginia Intermont College
Aquinas College
Montreat College
Louisiana State University, Alexandria
Average 50
Repayment Rate
50
60
70
38
53
48
48
50
52
33
Top 10 National Universities Ranking (l-10 out of 258)-Washington Monthly
National Universities
University of Califo,rnia, San Diego
University of California, Berkeley
University of Califo,rnia, Los Angeles
Stanford University
University of Te.'\:as, Austin
University of California, Davis
University of Michigan, Ann Arbor
Syracuse University
Harvard University
College of William and Mary
Avemge 72
Repayment Rate
71
73
65
79
71
69
67
69
75
79
Bottom 10 National Universities Ranking (258-248 out of258)-Wasbington Monthly
University of Alas!(a, Fairbanl<s
University of New Orleans
Wichita State University
Oakland University
Treveccca Nazarene University
Long Isliwd University, C. W. Post
University of North Texas
Idaho State University
University of Wisconsin, Milwaukee
University of Colorado, Denver
Avemge 53
Re1>ayment Rate
54
40
50
54
60
53
50
52
63
58
Top 10 Community CoUeges Ranking (1- 10 out of 50)-Washington Monthly
Community Colleges
Saint Paul College
Hesston College
Carolinas College of Health Sciences
Maryland Community College
Itasca Community College
Wisconsin lndianhcad Technical College
Leech Lake Tribal College
Alexandria Technical College
Southwestern Community College
Chi1>pewa Valley Technical College
Repayment Rate
39
72
67
49
60
73
56
58
Top 10 Dropout Factories Ranking (1-10 out of 50)-Washington Monthly
Dropout Factories
Southern at New Orleans
Allen University
Miir1in University
Bellevue University
Calumet College of Saint Joseph
Bal<er College of Auburn Hills
University of the District of Columbia
East-West University
Haskell Indian Nations University
Crichton College
Repayment Rate
15
10
9
55
41
33
18
27
Top 10 Liberal Arts College Ranking (1- 10 out of 191)- U. S. News and World Report
Williams College
Amhe1-st College
Swarthmore College
Middlebury College
Wellesley College
Pomona College
Bowdoin College
Carleton College
DaYidson College
Have1ford College
Average 84
Repayment Rate
88
86
85
80
82
86
83
84
79
84
Unranked Liberal Arts Colleges-U.S. News and World Report
National Universities Repayment Rate
Mruiin University
Sarah Law1ence College
Pil<eville College
Granite State College
Thomas Edison State CC,)llcge
Western State College of Colorado
Slumer College
Burlington College
Coastal Carolina University
Concordia College
Average 44
9
71
21
49
47
62
33
46
49
51
Top lO National Universities Ranking (1- 10 out of 191)-U.S. News and World Report
National Unive1sities
Hanrard University
Princeton University
Yale University
Columbia Unive1-sity
Stanford University
University of Pennsylvania
California Institute of Technology
Massachusetts Institute of Technology
Dartmouth College
Duke University
Average 71
Repayment Rate
75
77
n
68
79
70
41
87
70
72
Unranked National Universities-U.S. News and World Report
Natiomll Universities Repavment Rate
University of Texas-El Paso 50
Wilmington University 43
Wayne State University 35
Unive1-sity of West Flo1ida. 54
tJnjon lm1itute and University 46
University of Toledo 46
W i < ; b . i ~ St<!te University 50
Wright State University 48
University of Texas--Arlington 53
University of Wisconsin--Milwaukee 63
Average 49
Unranked For-Profit 4-Year or Above
National Universities Repayment Rate
University of Phoenix:-Bohokam Camj)US
DeVry University-Diinois
Kaplan University
Strayer University
American Intercontinental.
Walden University
Keiser University-Ft. Lauderdale
ArgoS)' University-Chicago
CapelJa University
Average 35
Missouri-Washington Monthly
Libend Ar1s
William Jewell College
Westminster College
Stephens College
Evangel University
Repayment Rate
72
66
55
61
44
38
28
25
36
41
28
38
40
33
Baccalaureate College Repayment Rate
College
Missouri Westem State University
Harris-Stowe State University
Missouri Soutbem State University
Missouri Valley College Central
Methodist .. U niversity_
Hannibal LaGrange College
59
44
16
43
43
48
6:f
Washington University in St. Louis
University of Missoud
Missouri University of Science Technology
University of Missouai, St. Louis
Re1>ayment Rate
65
51
75
48
From:
Sent:
To:
Subject:
Kanter, Martha
Weiss, Joanne
Fw: First Report From U. of Phoenix Research Center Attacks Critics of For-Profit Education-
Administration - The Chronicle of Higher Education
From: Martha <kantermartha@gmail.com>
To: K a n t e r ~ Martha
Sent: Fri Sep 03 11:38:44 2010
Subject: First Report From U. of Phoenix Research Center Attacks Critics of For- Profit
Education - Administration - The Chronic l e of Higher Education
http://chronicl e . com/articl e/First-Report-From-U-of/124231/
Sent from my iPhone
From: Rose, Charlie
Sent:
To:
Kanter, Martha
Subject: Re: FYI : A Message from Dr. John Sperling, Founder- University of Phoenix
Thank you.
Charlie
- - - - - Original Message -----
From: Martha
Eduardo; Tony; peter.cunnigham@ed.gov <peter.cunnigham@ed.gov>
Sent: Thu Sep 02 21:24:24 2010
September 2010
Attn. Legisl ative Director
Dear Congress
without for -profit colleges. The states do not have the funding needed to increase capacity
nontraditional students who coul d not complete their education in a traditional institution.
rethink the ref orms proposed by USDOE and the HELP Committee using as an example the case of
universities . The NEXUS study documents the financial system that sustains the quality of
2
measured and published will taxpayers know what they are getting for their money and the ubad
their doors.
institutions in the for-profit sector support Congressman AndrewsJs initiative and we are
3
[cid:image001.gif]
John G. Sperling
Founder
4
From:
Sent:
To:
Subject:
Attachments:
Kvaal, James
Thursday, September 02, 2010 12:36 PM
Kamin, David C.
FW: JP Morgan on Gainful Employment
jpmorgan.pdf
5
J.P. Morgan
Business & Education Services
Updating Our Gainful Employment Eligibility Matrix;
Missouri Data Suggests Wider Gainful Employment
Impact - ALERT
We are updating our Gainful Employment Eligibility Matrix to account the repayment
rates (RPR) published by the Education Department (ED) last Friday. As a result, we
updated the relative position of companjes in our coverage in accordance with the
reported RPRs (see Table 1 ) . In addition, after a more detailed analysis of the Mssouri
data, we note that the impact of the current proposal to the overall sector could be
more meaningful than the ED previously portrayed with lower level programs being
more impacted than higher degree programs.
Moving companies down in the updated eligibility matrix. After updating our
eligibility matrix for the RPR data, we estimate that a higher percentage of ESI and
EDMC programs will likely end up in a "restricted" status. APOL's programs,
particularly on the bachelor's level, are likely to remain at a fully eligible status
without any additional disclosures. We have not moved any programs in our
coverage uruverse to the ineligible position, although ESI associate's programs
appear close to tlus status. We acknowledge the limitation of the data we currently
have (our estin1ates of earillngs after graduation, institution level vs. program level
data, possible inconsistencies and errors in the repayment data, and many others).
We understand that the ED is being diligent with its data quality checks and is
"stress testing" its data to make sure that inconsistencies in the repayment data
results are not a result of errors or erroneous calculations
Additional analysis of Missouri data suggests wider impact (see Table 2). Based
on the ED's analysis of the Mssouri data, 26% of for-profit programs may become
ineligible and 27% may be in a "restricted" status. On a degree level, 37% of
associate's degree programs, 22% of bachelor's degree programs, and 16% of
certificate programs at for-profit schools may become ineligible. We note that the
ED's calculations do not include cosmetology programs, whjch will likel y expand
the impact of the proposal on the certificate programs well above the current
percentage. We also note that if the ED used the national average of $1 6,245 as a
measure for 150% of poverty level (vs. $15,600 used in the Missouri study), the
percentage of fail ed programs would further increase. Trus potential in1pact is in
contrast to the ED's prior portrayal of a more modest impact to the for-profit
programs.
First glimpse at government data on post graduation income (see Table 3). The
reverse-engineered Missouri earnings data for institutions in our coverage (only
APOL, DV, and ESI are reported in the ED data) suggests that APOL's completers
earned more at master's and bachelor's levels, while DV and ESI programs were
comparable on both bachelor's and associate levels. We acknowledge that trus
comparison is based only on a few programs and may not be statistically signjficant.
However, trus revelation is the first time we see the actual earrungs reported in
context of the gainful employment regulations.
See page 3 for malyst certification and important disclosures.
North America Equity Research
19 August 201 0
Business & Education Services
Andrew C. SteinermanAc
(1-212) 622-2527
andrew.steinerman@jpmorgan.com
Jeffrey Y. Volshteyn
(1-212) 622-2940
jvotshteyn@jpmorgan .com
William W. Lee
(1-212) 622-2596
wlee2@jpmorgan.com
J.P. Morgan Inc.
SAVE THE DATE
Ultimate Services Conference
Education/Business/IT Services
Tuesday November 9, 2010
J.P. Morgan Conference Center
383 Madison Avenue
New York City
Keynote Speaker:
J ames Kvaal
Deputy Under Secretary
REPLAY A VA:aABLE
J .P. Morgan Call with
Mark Kantrowitz,
Financial Aid Expert,
Publisher of FinAid.org
Replay available until 8/23:
866-492-3857 (US)
203-369- 1746 (lnt'l)
Pwd: 2562.
J. P. Morgan does and seeks to do business with companies covered in its research reports. As a result investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
www.morganmarkets.com
Andrew C. Steinerman
(1-212) 622-2527
19 August 2010
J.P. Morgan
Table 1 Gainful Employment Eligibility Matrix of J.P. Morgan Coverage Universe (APOL, BPI. CPLA, DV, EDMC ESI, STRA)
Repaymeot Above 12%ofTotallncome Below 8% ofTotallncome
Rate AND Neither Other Column OR
Above 30% of Discretionary Income Below 20% of Discretionary Income
Above45% FULLY ELIGIBLE {Kith discbsures) FULLY ELIGIBLE (Kith discbsures) FULLY ELIGIBLE {no discbsures)
APDL Bachelol's
BPI As=iate's and Bachelor's
35%to45% RESTRICTED RESTRICTED FULLY ELIGIBLE (with lffsdosures)
EDMC South As=iate's and Bachelor's EDMC ArfPS'/ Bachelor's and APDL Associate's
EDMC AI Associate's and Bachelol's DVU Associate's and Bachelo(s
CPLA and Maste(s
Below35% INELIGIBLE RESTRICTED FULLY ELIGIBLE {Kith discbsures)
ESI Associate's and STRA ASIDaate's,Bachelor's and Maste(s
EDMC Brown Mackie Associate's
Assumptions used m th1s assessment.
We used institutionalklvel data. not program.kJvel data as proposed by the Education Dep!ltment; national program.Jevel data is not availabkl.
Debt
1. We assumed certain klvels of transferin cce<it and bans are percentage of reveoues, which are ronsistent vmh company's reports.
2. We included all types of student debt, except PLUS, but excklded transfer.in debt from external insbtutions.
3. Debt service is calculated for 1Q.year repayment ....;than annual interest rate of 6.8%
Income
4. We used fallity size of 1 for <iscretionary income calculation,
5. We used company.reported post .graduation earnings. For rompanies that cl? not <iscbse this metric. we made assumptions based on the industry averages.
Repaymeot
6. We appied the repayment rate reported by the EciJcation Dep!ltment the programklvet data is not avaitabkl.
Table 2. Impact of the Gainful Employment Proposal for Institutions in Missouri
ftbove 45% FULLY ELIGIBLE FULLY ELIGIBLE FULLY ELIGIBLE
All 3% 17% 28%
For-profit 0% 3% 3%
Public 4% 21% 35%
35%to45% RESTRICTED RESTRICTED FULLY ELIGIBLE
All 1% 7% 14%
For-profit 2% 7% 12%
Public 1% 7% 15%
Below35% INELIGIBLE RESTRICTED FULLY ELIGIBLE
All 6% 9% 14%
For-profit 26% 20% 26%
Public 0% 6% 10%
Note: The praposed gainful ellllloyment regulations apply to all programs at forprofit institutions and nondegree programs at nonprofit institutions.
Source: E<ilcation Depart J.P Mlrgan estimates.
Table 3: Average Missouri Salaries for J.P Morgan Coverage Universe (APOL, BPI, CPLA, DV, EDMC, ESI, STRA)
DeVry Associate's (1 program)
DeVry Bachelor's (7 programs)
DeVry Master' s (2 programs)
ESI Bachelor's (5 programs)
ESI Associate's (10 programs)
APOL Bachelor's (3 programs)
APOL Master' s (3 programs)
Source: E<ilcation Depart J.P Mlrgan estimates.
2
Average
Earnings
$25,451
$33,068
$51,408
$31,906
$25,963
$39,841
$68,030
(1-212) 622-2527
Analyst Cettification:
19 August 2010
J.P. Morgan
The research analyst(s) denoted by an "AC" on the cover of this report certifies (or, where multiple research analysts are primarily
responsible for tllis report, the research analyst denoted by an "AC" on the cover or within the document individually certifies, with
respect to each security or issuer that the research analyst covers in this research) that: (l) all of the views expressed in this report
accurately reflect his or her personal views about any and all oft he subject securities or issuers: and (2) no part of any of the research
analyst' s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the
research analyst(s) in this report.
lmpot1ant Disclosures
Explanation of Equity Resea1ch Ratings and AnaJyst(s) Coverage Univctse:
J.P. Morgan uses the foll owing rating system: Oven veight [Over the next six to twelve months, we expect this stock wi ll outperform the
average total return of the stocks in the analyst' s (or the analyst ' s team's) coverage universe.] Neut r al [Over the next six to twelve
months, we expect this stock vvill perform in line with the average total return of the stocks in the analyst's (or the analyst' s team' s)
coverage universe.) Underweight [Over the next six to twelve months, we expect this stock wi II underperform the average total return of
the stocks in the analyst's (or the analyst's team's) coverage universe.] J.P. Morgan Cazenove' s UK Small/Mid-Cap dedicated research
analysts use the same rating categories; however, each stock' s expected total return is compared to the expected total retum of the FTSE
All Share Index, not to those analysts' coverage universe. A list of these analysts is available on request. The analyst or analyst' s team' s
coverage universe is the sector and/or country shown on the cover of each publication. See below for the specific stocks in the certi(ying
analyst(s) coverage universe.
Coverage Universe: Andrew C. Steinerman : American Reprographics Company (ARP), Apollo Group (APOL),
Bridgepoint Education (BPD, CDI Corp. (CD1). Capella Education (CPLA), Cintas (CTAS), DeVry (DV). Education
Management (EDMC), G&K Services (GKSR). ITT Educational Services Inc (ESI). Iron Mountain (IRM). Manpower Inc
(MAN), Resources Global Professionals (RECN). Robert HaJJ: International (RHI), SFN Group (SFN), Strayer Education
(STRA). UniFirst (UNF)
,J.P. Mor gan Equity Rcscarch Ratings Distribution, liS of J une 30, 2010
Q\'CI'Wcight Neut ral Undcrwcight
(buy) (hold) (sell)
n>M Global Equity Research Coverage 46% 42% 12%
TB clients* 49% 46% 31 %
JPMS! Equity Research Coverage 44% 48% 9%
lB clients* 68% 61% 53%
*Percentage of investment banking clients in each rating category.
For purposes only ofNASDINYSE ratings distribution rules, our Overweight rating falls into a buy rating our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category.
Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology and risks on
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3
(1-212) 622-2527
Legal Entities Disclosmes
19 August 2010
J.P. Morgan
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4
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J.P. Morgan
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5
From:
Sent:
To:
Subject:
Kvaal, James
Wednesday, September 01, 2010 3:34 PM
Louis Soares
RE: FYI thought this take on gainful employment might be of interest
No worries, I say this 10 times a day
From: Louis Soares [mailto:lsoares@americanprogress.org]
Sent: Wednesday/ September 01
1
2010 3:27 PM
To: Kvaal
1
James
Subject: RE: FYI thought this take on gainful employment might be of interest
Apologies, I didn't mean to push too hard. Still developing my D.C. protocol related to policy instincts. I Should have
anticipated your concerns.
1
2010 3:05 PM
To: Louis Soares
Louis, apologies, but I can't really engage in a dialogue about the incoming materials we are getting on GE. Our lawyers
are being appropriately cautious about conversations outside the formal rulemaking process.
1
2010 9:00AM
To: Kvaal/ James
Know your impossibly busy but if you have time for a one sentence reply .... if not I understand.
Is it too much? not enough? too prescriptive? too confusing?
Trying to get my bearings on how to evolve the performance, quality and value approach.
From: Kvaal/ James [mailto:James.Kvaal@ed.gov]
Sent: Tuesday/ August 31
1
2010 2:01 PM
To: Louis Soares
Thanks, I noticed this when it came out last week
Sent: Tuesday/ August 31
1
2010 1:51 PM
To: Kvaal/ James
Subject: FYI thought this take on gainful employment might be of interest
http:/ lwww. americanprogress.org/issues/201 0/08/gainful employment. html
Gainful Employment Brings More Gainful Education
New Rule Pushes the Department of Education into a Role as Network Orchestrator
SOURCE: Flickr/pirate johnny
The new gainful employment rule requires for-profit institutions such as the University of Phoenix to prove that
they prepare students for "gainful employment in a recognized occupation." University of Phoenix offers online
classes and has locations across the country, including this one in Minnesota.
By Louis Soares I August 9, 2010
The U.S. Department of Education's recently published gainful employment rule arose during the 2009-10
regulatory review process, and is an important tool for ensuring that for-profit schools-and potentially
underperforming publi c and nonprofit schools-don' t take advantage of students. It requires these programs to
prove that they prepare students for "gainful employment in a recognized occupation." And the Department of
Education has begun to take the initial steps toward enforcing this goal by wrestling with how to measure the
quali ty and value of a college education.
This is a new role for the Education Department, outside of its traditional duties of funding coll ege access
through financial aid and regulating colleges through a series of certified regional accreditors. Funding access
and once-removed regulation may have been sufficient when the pathway to college was essentially a straight
"pipeli ne" from K-12 education. But education isn' t a pipeli ne anymore-it' s a complex web of possible
pathways and service providers-and the gainful employment rule places the Education Department in the
position of starting to orchestrate this decentralized system of higher education services providers.
Acting on this vision will require the Education Department to undertake each funding and regulatory action
with a goal of reaching America' s national postsecondary attainment goals by promoting value for the publi c
and private doll ar. The Education Department's evolution from a college education funder and regulator into a
network orchestrator may very well be the key to maintaining our national competitiveness and providing
economic opportunity to more Americans.
The Education Department' s primary role has historically been to essentially fund and regulate the education
"pipeline," ensuring that students flow effortlessly through the system with minimal public policy interventions
other than providing design specifications (regulations) to ensure the pipe stays straight and lubrication
(funding) to ensure constant flow.
But regulati on and funding are no longer enough to keep the pipeline running. There are now more than 4,800
institutions offering two- and four-year degree programs in the United States. The institutions are organized as
public, private not-for-profit, and for-profit entities. This diverse grouping is regulated in a decentralized
fashion with states certifying who can operate within their borders and the federal government adding some
regulation through the financial aid system. Qual ity control is maintained largely through a voluntary
accreditation system whereby privately run accrediting agencies review member institutions' qual ifications.
Modern-day, college-going students are as diverse as the systems. Students are entering school with very
different levels of academic preparedness; many are outside of the traditional age brackets and have attendant
work and family responsibilities; there is an emerging trend of episodic college attendance; and all this is
complicated by the high cost of tuition and complex financial assistance tools.
There is no longer a simple, linear success path to college completion, and this suggests a far more complex set
of interactions between publi c policymakers, students, and institutions. The modem-day postsecondary
education system requires a new conceptual framework.
Network theory is one potential framework. It arose as a way to describe how information and communication
technologies have changed how business and social organizations orchestrate the use of resources to produce
goods and services. Network orchestration emphasizes leveraging distributed production partners and supply
chains to deliver performance, qual ity, and value given ever-evolving market demand and increased global
competition for customers.
2
Network orchestration is used in the private sector by The Boeing Company to manufacture its jets in 19
countries with 400 suppliers using process software, communication technology, and new work organization to
manage team-based production. The National Park Service uses it in the public sector to manage the Golden
Gate National Recreation Area with a network of partners, concessionaires, contractors, cooperative
associations, and volunteers to carry out park maintenance and services. This supply network makes up 82
percent of the GGNRA workforce.
Noted "governing by network" expert Steven Goldsmith of Harvard University posits that public policymakers
and managers can deliver a complex service like postsecondary education by focusing on maximizing public
value through setting the right, high-level goals and engaging networks to deliver service. Network
orchestration simply provides a much more useful and nuanced mindset for developing policy given the
complex ways students and institutions interrelate in the modern higher education delivery system. It can help
us to re-imagine the role of federal policy makers away from that of program funder and regulator.
The federal government's role as a network orchestrator would be to set the bar for high-level public value, and
then manage the performance of suppliers in the network to achieve quality service delivery and scale
innovations that enhance effectiveness. Public value in the case of postsecondary education is generated by
graduating more students within the performance, quality, and value framework, where:
Performance = students complete their education
Quality= students demonstrate learning that is linked to career and life success
Value = performance and quality are delivered to students at a fair price in a competitive marketplace
Federal funding opportunities, regulation, and legislation within this framework are designed to optimize
students' abilities to customize learning experiences for value based on institutional performance and
educational quality. The Department ofEducation' s primary mission as the network orchestrator is to achieve
high performance by ensuring that students can move within institutions and across the network with minimum
transaction costs and optimizing the return on public and private resources.
The gainful employment rule is at its core an emergent tool to begin measuring the value of a postsecondary
education. And putting gainful employment in the context of the broader set of issues further develops the
network orchestrator evolution. These issues include an attempt to re-define the credit hour and a fresh look at
state authorization of institutions for Title IV funds. Each of these takes an additional step in trying define
quality and value measures by changing the criteria for how we fund college education. The credit hour rule, for
example is attempting to standardize the seat time that adds up to a college credit.
The Obama administration' s successful initiative to move to direct lending to students rather than depend on a
publicly subsidized but privately run market for student loans is also a step in the network-orchestrator
evolution. This places the Department of Education in a much more direct position to view the relationship
between financing higher education and income as it analyzes loan repayment first hand. New perspectives on
student success profiles will emerge from this experience that allow the federal government to formulate new
policies for how to assess value and quality.
Another shift for the Education Department is the administration' s aggressive goals to retake the lead in
postsecondary attainment among developed nations by 2020. President Obama' s charge to all Americans to get
at least one year of postsecondary education combined with a numeric goal of 5 million additional college
graduates will strain the limits of college and university productivity while maintaining quality and price. The
federal government will have no choice but to become a real-time observer and influencer of the college
experience, understanding the service delivery process at granular levels. This will allow the Department of
Education to develop data and analysis tools that actually optimize performance, quality, and value.
Performance, quality, and value in higher education service delivery add up to a gainful education. And network
orchestration provides the Department of Education with a new way to think about its role in achieving that
gainful education. The department will have to process each action through the lens of optimizing the value
produced across the network in order to successfully evolve from being a program funder and rulemaker to
3
being a network orchestrator. But the resultant performance and quality improvements will keep us competitive
with our peer nations in postsecondary attainment and once again make us a first among equals.
Louis Soares is Director of the Postsecondary Education Program at the Center for American Progress.
Louis Soares
Director - Postsecondary Education
Center for American Progress 1 1333 H Street NW
Washington, DC 1 20005
Phone: 202-478-63341 email: /soares@americanprogress.org
www. americanproaress. orq
4
From:
Sent:
To:
Subject:
Kanter, Martha
Wednesday, September 01, 2010 7:48AM
Kvaal, James; Yale, Matt; Weiss, Joanne; Cunningham, Peter; Hamilton, Justin; Yuan,
Georgia
News: Phoenix Pays to Tell Its Story- Inside Higher Ed
http://www.insidehighered.com/news/2010/09/01/phoenix
5
From:
Sent:
To:
Cc:
Subject:
Attachments:
Kvaal, James
Monday, August 30, 2010 6:33 PM
Hamilton, Justin
Arsenault, Leigh; Bergeron, David
self-regulation
industry response 08301 0 .doc
Just in please see below for indust ry responses t o recent cont roversies. thanks
Career College Association response
Strengthening the CCA Code of Conduct to ensure it addresses the major compliance problems identified
by GAO and others who have objectively studied the sector;
Expanding substantially CCA's existing compliance training program, including an increased focus on
compliance from the top down in the organization, testing, risk management, and adherence to standards
and guidelines throughout the educational institution, starting with a series ofwebinars on compliance
best practices and risk management;
Creating a summit to bring together stakeholders from government, academia, accreditation agencies,
student advocates and other areas to review and provide input on compliance best practices;
Developing a recommended "zero tolerance" company standard for misbehaving employees, regardless
of position or assignment;
Developing an on-going, sector wide mystety shopping program to assess the state of practice in
recruitment, admissions, financial advising and other critical compliance areas;
Encouraging existing oversight by federal and state governments and accrediting bodies to be increased
to ensure that the myriad existing laws, regulations, and accreditor requirements are being observed.
Westwood College response (based in Denver with 17 campuses)
Implementing a compensation policy more restrictive than the current regulations permit by converting
its admissions representatives' compensation to fixed salary effective August 21, 2010, thereby
eliminating enrollment targets as a component of compensation.
Kaplan response
Initiating its own internal investigation and, as a result, suspended enrollment at its Pembroke Pines
campus. Investigations there and at its Riverside, California, campus are ongoing.
University of Phoenix response
No longer compensating recruiters based on the number of students they enroll and whether those
numbers are on an upward trajectory starting in September. Instead, performance will be judged
entirely on factors such as teamwork and attitude when interacting with students.
6
Rolling out a free, three-week new student orientation this fall, aimed at helping students with little to
no prior postsecondary education figure out whether they'll be able to handle the work before taking on
student loans.
7
From:
Sent:
To:
Subject:
GEORGE BOGGS [gboggs@aacc.nche.edu]
Wednesday, September 01, 2010 7:18AM
GEORGE BOGGS
News: Phoenix Pays to Tell Its Story- Inside Higher Ed
FYI.
George
George R. Boggs
President and CEO
American Association of Community Colleges One Dupont Circle, NW, Suite 410 Washington, DC
Phone: 202.728.0200, ext. 235
Fax: 202.452.1461
http://www.aacc.nche.edu/
The Voice of America's Community Colleges
This email has been scanned for all viruses by the Messagelabs Email
Security System.
8
Developing an on-going, sector wide mystery shopping program to assess the state of practice in
Implementi ng a compensation policy more restrictive than the current regulations permit by converting
eliminating enroll ment targets as a component of compensation.
Kaplan response
student loans.
From:
Sent:
To:
Subject:
Attachments:
Arsenault, Leigh
Kvaal, James
RE: News: A New Leaf at Phoenix? - Inside Higher Ed
industry response 08301 o .doc
Implementing a compensati on policy more restri ctive than the current regulations permit by converting
eliminating enrollment targets as a component of compensation.
Kaplan response
student loans.
From: Kvaal, James
Sent: Monday, August 30, 2010 6:16PM
To: Arsenault, Leigh
Subject: FW: News: A New Leaf at Phoenix?- Inside Higher Ed
Could you please add t his to t he doc you just sent?
Sent: Tuesday, August 24, 2010 8:30AM
To: Kvaal, James
Subject: News: A New Leaf at Phoenix? - Inside Higher Ed
2
From:
Sent:
To:
Subject :
Attachments:
Below and attached.
Arsenault, Leigh
Kvaal, James
industry response
industry response 08301 o .doc
Implementing a compensation policy more restrictive than the current regu lations permit by converting
eliminating enroll ment targets as a component of compensation.
Kaplan response
3
From: Kvaal, James
Sent:
To:
Sunday, August 29, 2010 11 :48 PM
Kanter, Martha
Subject: Re: FYI
Thanks.
To: KvaalJ James
Sent: Sun Aug 29 20:50:05 2010
Subject: FYI
I thought you'd be interested in the petition being distributed to the University of Phoenix
Alumni.
http://proud.phoenix.edu/action/petition?cm mmc=eCRM- -EML- -UOPX- -
Info&cm mmcal=Alum&cm mmca2=Community Event&cm mmca3=AR-
181710A&cm mmca4=NAT&cm mmca5=N/A&cm mmca6=UOP&cm mmca7=all&cm mmca8=proud phoenix cta&cm mmc
a9=A&cm mmca10=annwilk20@yahoo.com&cm mmca11=N/A
Calling UOPX Alumni-Help Shape the Future of Higher Education
Dear AlumnusJ
Today I'm writing to ask you to take a simple but i mportant step in making sure the voices of
our university alumni community are heard.
Please sign this petition asking President Obama to protect access to higher education for
all students in the nation.
As you may knowJ some leaders in Washington are proposing regulations that could affect our
university and restrict students' options within higher education. I want to make sure that
the national conversation about University of Phoenix includes the voices of the people who
know it best -- alumni like you and me -- who worked hard to complete our classes and earn
our degrees.
Regulations could prevent students at for-profit schools like University of Phoenix -- and
only schools like ours -- from having the same access to grants and student loans as
traditional universities. Under these new rulesJ students could still get aid for community
collegesJ state schools and private universities -- schools that don't all share University
of Phoenix's philosophy that everyone deserves the opportunity to go to college.
If potential students can't have equal access to student loansJ that's going to block
hundreds of thousands of Americans from getting the college education they need and deserve
Please sign this petition to President ObamaJ asking him to protect access to higher
education for all studentsJ especially working adults from diverse backgrounds like so many
of us. Join thousands of fellow alumniJ studentsJ staff and faculty who are speaking out
4
about the value of our education at University of Phoenix and the critical role that it is
playing in our careers.

Alanna MBA/GM '01
Executive Alumni Relations
For additional questions regarding this please contact:
Alanna Vitucci
602-557- 3901
alanna.vitucci@phoenix.edu
Ask President Obama to support students
Please help University of Phoenix send a message to President Obama: Protect access to higher
education for ALL students.
Fill in your information and click the ''sign the petition" button. We'll deliver the complete
petition to the White House.
Subject: Please protect higher education access Dear President
Last you told us that education is "the economic issue of our times." You "It's
an economic issue when the unemployment rate for folks who've never gone to college is almost
double what it is for those who have." As a member of the University of Phoenix I
want to let you know that I agree with you.
Through my personal I know the University of Phoenix provides students with
rigorous academic degree programs that lead to real career advancement and personal
development. I am proud of what I have am accomplishing and will accomplish as
a result of receiving a degree from a university that has the same accreditation as many top
traditional colleges. Many Phoenix students are working single parents and
underserved students who need flexibility in and when they take their classes.
I understand some proposed regulations could prevent students at for-profit schools like mine
- - University of Phoenix -- from having access to grants and student loans. I believe private
colleges should be treated the same as community state and other public
especially when they share the same high standard of accreditation.
If University of Phoenix students can't have equal access to student loans and degree
that's going to block hundreds of thousands of Americans from getting the college
education they need to get ahead in their jobs or find even better jobs. That's just not fair
or right! This would be a step backwards for our country -- especially during this time of
high unemployment and I hope you agree with me.
Mr. protect the opportunity for all college students who are committed to
furthering their education to have the funding like any other student going to a traditional
school and a choice in the degree and school they choose.
Thank you.
President Barack Obama
First Name*
Last Name*
5
Email*
Zip/Postal Code
6
From: Vicki Thomas, Albert Shanker Institute [vthomas@ashankerinst.org] on behalf of Eugenia
Kemble, Albert Shanker Institute [ekemble@ashankerinst.org]
Sent: Friday, August 27, 2010 10:50 AM
Subject: Shanker Blog Weekly Digest, August 23-27, 2010
SHANKER BLOG
WEEKLY DIGEST, August 23-27, 2010
Follow us on Twitter: http://twitter.com/shankerblog
POSTS IN TIDS ISSUE:
*Accountability For Us, No Way: We're The Washington Post
* The Cost of Success in Educatin
* Selling the State
ACCOUNTABILITY FOR US, NOWAY; WE'RE THE WASHINGTON POST
Posted August 25, 2010
In his August 4th testimony before the Senate' s Committee on Health, Education, Labor and Pensions,
Government Accountability Office (GAO) official Gregory D. Kutz offered an earful of scandalous stories
about how for-profit, post-secondary institutions use misrepresentation, fraud, and generally unethical practices
to tap the federal loan and grant-making trough. One of these companies, so says the Washington Post itself, is
Kaplan Inc, a profit-making college that contributes a whopping amount to the paper's bottom line (67 percent
of the Washington Post Company' s $92 million in second quarter earnings, according to the Washington
Examiner; 62 percent according to the Post' s Ombudsman Andrew Alexander).
One might assume that the Post 's deep financial involvement in Kaplan Inc. would prompt its editorial board to
recuse itself from comment on new proposed federal regulations designed to correct the problems. Instead of
offering "point-counterpoint" op-eds on this issue, this bastion of journalistic integrity has launched a veritable
campaign in support of its corporate education interests, and offered up its op-ed page to education business
allies. It is a sad and disappointing chapter in the history of this once-great institution. Read More
THE COST OF SUCCESS IN EDUCATION
Posted August 26, 2010
Many are skeptical of the current push to improve our education system by means of test-based "accountability"
-hiring, firing, and paying teachers and administrators, as well as closing and retaining schools, based largely
on test scores. They say it won' t work. I share their skepticism, because I think it will.
There is a simple logic to this approach: when you control the supply of teachers, leaders, and schools based on
their ability to increase test scores, then this attribute will become increasingly common among these
inctividuals and institutions. It is called " selecting on the dependent variable," and it is, given the talent of the
people overseeing this process and the money behind it, a decent bet to work in the long run.
Now, we all know the arguments about the limitations of test scores. We all know they' re largely true. Some
people take them too far, others are too casual in their disregard. The question is not whether test scores provide
a comprehensive measure of learning or subject mastery (of course they don't). The better question is the extent
7
to which teachers (and schools) who increase test scores a great deal are imparting and/or reinforcing the skills
and traits that students will need after their K-12 education, relative to teachers who produce smaller gains. And
this question remains largely unanswered.
This is dangerous, because if there is an unreliable relationship between teaching essential skills and the
boosting of test scores, then success is no longer success. And by selecting teachers and schools based on those
scores, we will have deliberately engineered our public education system to fail in spite of success.
It may be only then that we truly realize what we have done. Read More
SELLING THE STATE
Posted August 26, 201 0
In a recent post, we discussed the explosive growth in privatization of public services, including one town that
recently privatized everything and everybody. Along similar lines, this week, the Wall Street Journal published
a mry about desperate state and local governments, squeezed by declining revenues, selling or leasing public
property to private interests. The reporter notes:
Cities and states across the nation are selling and leasing everything from airports to zoos-a fire sale that could
help plug budget holes now but worsen their financial woes over the long run.
The notion that we should cede public services to the private sector has assumed the status of quasi-religious
dogma in recent years. There was a brief time during the earlier, more dire days of the current recession during
which many began to question this market fundamentalism. Such dissent continues in some circles today. But
you wouldn' t know it looking at actual policy.
Things may even be getting worse. Cash-strapped governments have stepped up efforts in a new area:
privatization of public assets. Read More
8
From:
Sent:
To:
Cc:
Subject:
Attachments:
Dear Bob,
Weko, Tom
Friday, August 27, 201010:23 AM
Shireman, Robert; Madzelan, Dan
Fare, John; Kvaal , James; Miller, Elise; Arsenault , Leigh; Smith, Zakiya; Sherrer. Valerie
FSA and NCES/Data Team
Postsecondary Data Project.pdf; SEI - NSLDS data request v1. docx
Wonderful to hear from you.
Tom
Sent: Thursday, August 26, 2010 5:45 PM
To: Madzelan, Dan
Cc: Fare, John; Kvaal, James; Weko, Tom; Miller, Elise; Arsenault, Leigh; Smith, Zakiya
Subject: Data Team
Dan and team:
Let me know if there are ways that I can help.
9
-Bob
10
From: Arsenault, Leigh
Sent:
To:
Kvaal, James
Subject: FW: Industry response
Would you please resend the CCA letter to me?
From: James
Sent: August 2010 7:10AM
To: Justin
Cc: David; Leigh
Subject: Re: Industry response
Below is secret shoppers - guess my bb truncated it. Good there are some changes to
compensation practices at Phoenix and Kaplan. We will put together a tidy list.
From: Justin
To: James
Cc: David; Leigh
Sent: Mon Aug 30 05:58:48 2010
Subject: Re: Industry response
CCA announced a secret shopper kaplan announced some voluntary measure on
someone else just announced that they'd no longer do ... I totally but something (I've
slept 1hr on my way to dulles for NE bus trip).
just an we've got Brent Staples geared up to do yet another NYT editorial on the
subject this week so prepare for the incoming.
Welcome James. Thanks for being such a trooper during your trip last week.
Justin Hamilton
Press Secretary
c: 202-591-6734
From: James
To: Justin
Cc: David; Leigh
Sent: Mon Aug 30 05:53:13 2010
Subject: Industry response
This is all I'm aware of
11
----- -Original Message------
From: Suzanne Palmer
To: James Kvaal
Subject: FW: Tomorrow's Senate Hearing
Sent: Aug 2010 7:42 PM
Just and FYI - in response to GAO report/hearing to our membership from Harris.
From: Career College Association [mailto:cca@informz.net] Sent: August 2010 6:30
PM To: Suzanne Palmer Subject: Tomorrow's Senate Hearing
August 2010
Dear CCA Member:
August the Senate Labor and Pensions (HELP)
Committee will conduct the second in a series of hearings on our sector. The witness list
will once again feature those with a very negative view of our sector: David Hawkins, the
Director of Public Policy and Research for the National Association for College Admission
Counseling (NACAC) and Josh a disgruntled former employer linked to the James Hoyer
law which has tried to make a business of suing our institutions. The Republican
Committee Members have invited Dr. Michale Executive Director of ACCSC.
But most troubling and disturbing is a report that wi ll be provided by Gregory Managing
Director of the United States Government Accountability Office's (GAO) Forensic Audits and
Special Investigations Unit (FSI). GAO is the investigative arm of the and
undertakes undercover investigations when asked by appropriate Members of Congress. Over the
past few at t he request of Senate Committee Chairman Tom Harkin sent
mystery shoppers into our institutions posing as potential students. Keep in mind that this
is a time when the sector was under intense scrutiny by the
12
TO: Elise MWer, !PEDS Program Director; Thomas Weko, Associate Commissioner,
Postsecondmy Studies Division
FROM: Matthew Reed, Prot,:rram Director, The Institute for College Access & Success; Chair,
NP EC Financial Aid Data Working Group
RE: Challenges in Matching Campus-Level Datafrom U.S. Department of Education sources
Timely, accurate, and comprehensive data are critical to identifying and addressing what is and is
not working in higher education. Consumers, policymakers, and researchers all need user-
friendly access to meaningful data - data that can deepen our understanding of important issues
and inform decision-making at all levels. However, within the U.S. Department ofEducation,
different datasets use different identifiers for schools and campuses, and some datasets report
data for each campus while others group related campuses together. This makes it difficult if not
impossible to compare schools or campuses to analyze the impact of federal, state, and
institutional policies on outcomes such as enrollment, persistence, and completions. Although
other types of data are available, campus-based analyses can uniquely shed light on the
relationship between federal , state, and institutional financial aid investments and outcomes for
students with varied demographic characteristics.
This memo discusses preliminary findings and recommendations of the NPEC Financial Aid
Data Working Group (see Attachment A) regarding matching campus-level data from
Department of Education sources. It first describes the major data-matching challenges facing
users of these different data sources and their implications for research, policy and practice. It
then provides recommendations for improving the usability and accuracy of campus-level data.
The Context
Several agencies within the U.S. Department ofEducation provide higher education data. The
National Center for Education Statistics (NCES) conducts the National Postsecondary Student
Aid Survey (NPSAS) every four years, which provides representative data at the national level
and for several states. More frequently released data at the institution, state, and national levels
are available from NCES' Integrated Postsecondary Education Data System (IPEDS) surveys
and programmatic data and reports from Federal Student Aid (FSA) and the Office of
Postsecondary Education (OPE).
To make full use of these data sources, it is often necessary to combine FSNOPE data on the
usage of specific federal financial aid programs with comprehensive !PEDS data on enrollment,
completions, graduation rates, and other topics. For example, determining the percentage of all
undergraduates at a school applying for federal aid or using Pell Grants, PLUS loans, or any
other financial aid program requires combining FSA program data with IPEDS enrollment data.
The necessity of matching data from different sources in an accurate and comprehensive manner
is especially apparent in the Department's own efforts to combine data from NCES and
FSA/OPE sources, both for research and policy purposes and for public-facing consumer
information. For example:
o Graduation, transfer, and retention rates from NCES' s IPEDS appear on FSA' s FAFSA-On-
The-Web (FOTW) site alongside school information from FSA sources.
1
o Loan volume and cohort default rate data from FSA' s NSLDS appear on NCES' s College
Navigator site alongside data from IPEDS.
Without resolving the matching problem, consumer information from the Department may be
incomplete or even misleading for certain schools or campuses. For example, a student using
F AFSA-On-The-Web to apply for financial aid at the University of Phoenix would not be able to
view graduation, transfer, and retention rates for a specific campus due to mismatched levels of
reporting; the University of Phoenix only has one entry in FSA and one federal school code, but
reports its IPEDS data as 73 separate campuses.
The Root of the Problem: Inconsistent School Identifiers
Within the Department of Education, different data sources use different identifiers for schools
and campuses. IPEDS uses a unique 6-digit identifier (UNITID) for each campus included in its
surveys.
1
All schools receiving Title IV aid funds are required to report data in IPEDS, and other
postsecondary institutions have the opt1on to report.
FSA and OPE data use a separate identifier called the OPEID in their databases, though some
databases use other identifiers which are mapped to OPEIDs. At least in the datasets available on
the FSA and OPE web sites, the main campus of a school will have a 6-digit OPEID with a 2-
digit suffix of"OO," while other campuses will have the same 6-digit OPEID as the main campus,
but with a different 2-digit suffix (also called a location code
2
) . The IPEDS Header (HD) and
fnstitut1onal Characteristics (IC) files include 8-dig1t OPEIDs (which combine the 6-digit school
identifier and the 2-digit location code) in addition to the UNITIDs.
In the FSA Data Center, most datasets have 6-dig1t OPEIDs or 8-digit OPEIDs where the 2-digit
branch code is always "00", meaning data are effectively reported at the 6-digit OPEID level. It
is unclear if this is due to limitations in how the data are collected and stored in the underlying
databases, decisions about how to extract and report the data on the public data center, or some
combination of both. Data are reported at the 8-digit OPEID level, at least for some schools, in
the FSA data file on the usage of Pel I Grants and other federal financial aid grants.
While some schools process financial aid centrally across multiple campuses, in many cases it
should be possible for the FSA databases to capture information about financial aid usage based
on the campus the student attended while receiving the aid ("attending school"), as well as the
main office or location of the school ("reporting school"). This would make it easier to compare
data across campuses and combine financial aid usage data with other information about
enrollment and completion.
1
In this memo. we use "campus" to mean the institutions with mtique UNITIDs in the IPEDS HD file. wltich
generally correspond to t11e school " locations" in FSNOPE data. There may be cases where distinct UNlTIDs
represent different parts of a scl10ol t11at share a physical campus or where one UNITID represents parts of a school
tllat are not physically contiguous. As noted in the recommendations section of tllis memo, further documentation of
tl1e existing definitions for reporting mlits in botll FSA and IPEDS data would be helpful.
2
Some "locations" appear to be desi!,'llated as " bmnches" while otllers are not.
2
Data-Matching Challenges
To illustrate some of the challenges in matching IPEDS data to FSNOPE data, this section will
provide examples using the FSA grant volume data extracts available on the FSA Data Center
3
,
the FISAP data file from OPE
4
and the header (HD) and 12-month enrollment (EFFY) files
available on the IPEDS Data Center
5
for 2007-08. Similar issues arise when using other
FSA/ OPE data including the institution-level data files on loan volume, campus-based aid,
F AFSA applications, and cohort default rate data, as well as the OPE Pell data files .
6
In contrast,
other IPEDS data files can be easily matched to the IPEDS HD file via the UNITIDs.
Incomplete Matches Based on 8-digit OPEID
Even when FSA data are reported with 8-digit OPEIDs, one-to-one matches to IPEDS may not
be correct. As background, the IPEDS HD file contains 7,055 entries for postsecondary
institutions, each with a unjque UNITID and in most cases a unique 8-digit OPEID as we11.
7
Most FSA data files contain entries with unique 8-digit OPEIDs. To merge an FSA file with
IPEDS data, most users would start by matching the records based on the 8-digit OPEIDs
available in each file. However, some of these matches may not be accurate: an entry in the FSA
data extract with a given 8-digit OPEID may not refer specifically to the entry in IPEDS with
that same 8-digit OPEID.
8
To illustrate this point, the FSA data extract on federal financial aid grants has 5,505 entries with
unique 8-digit OPEIDs. Merging this FSA file with IPEDS using 8-digit OPEIDs results in 5,353
matches. However, these include 457 cases where the number of Pel/ Grant recipients reported
in the FSA Grant data is greater than the 12-month enrollment reported in IP EDS. This suggests
that these entries in the FSA data extract may actually represent data for more than one location
at a school.
9
3
See "Federal Student Aid- Data Center- Programmatic Volume Reports."
federdlstudenta id.ed. gov I datacenter/progranunatic. html
4
The FISAP is the application schools file with t11e Department annually to participate in campus-based financial
aid programs. The FISAP data file. available upon request from OPE. contains more extensive data t11an that shown
in the campus-based aid data e>.tract posted on U1e FSA Data Center.
5
See "Integrated Postsecondary Education Data System Data Center." nces.ed.gov/ipeds/datacenter/
6
See "Federal Student Aid- Data Center- Programmatic Volume Reports."
federalstudentaid.ed.gov/datacenter/programmatic.html, "Federal Student Aid- Data Center- Application Volume
Reports." federalstudentaid.ed.gov/datacenter/application. html. "Federal Student Aid- Data Center- Default
Rates: federalstudentaid.ed.gov/datacenter/cohort. ht:InL "Federal PeU Grant Program End-of-Year Report and Other
Annual Data Reports." www2.ed.gov/finaid/prof/resources/data/pell-data. html
7
There are 44 cases where the OPEID is missing and 4 cases witl1 non-unique 8-digit OPEIDs.
8
Tllis matching problem is evident in FSA files where 8-digit OPEIDs all end in "00" as well as FSA flies where
some 8-digit OPEIDs have oilier suffixes.
9
There may be additional cases where one entry in the FSA data corresponds to multiple entries in IPEDS. These
occur when the 6-digit school identifier (ftrst 6 digits of t11e OPEID) appears in only one entry in the FSA data but in
multiple entries in the IPEDS data, regardless of whether t11e Pell count is greater than the enrollment.
3
For example, the 8-digit OPEID 00467300 matches to one entry in the FSA Grant file for "Baker
College" with 22,591 Pell Grant recipients. That 8-digit OPEID matches the campus named
"Baker Coll ege of Fli nt" in IPEDS, with a 12-month undergraduate enrollment of only 7,480.
This discrepancy suggests that this entry in the FSA Grant fi le actuall y represents many if not all
of the 11 Baker College campuses listed in IPEDS with the 6-digit OPEID 004673, as listed
below.
10
However, there is no definitive documentation of which campuses in !PEDS correspond
to each ent1y in FSA data. As discussed in the recommendations section, a comprehensive
crosswalk between OPEIDs in FSA data and UNlTIDs in IPEDS data would be very helpful in
ensuring that all entries on both sides are accurately matched, whether the matches are one-to-
one, or one-to-many.
FSA Fedetal G.-ant Volume File, 2007-08
OPEID Name State Zip Code School Ty(>e Federal Pell
Grant
Recipients
00467300 Baker College MI 48507-5508 Private-nonprofit 22.591
IPEDS HD/EFFY Files, 2007-08
8-digit UNITID Institution Name State Zill Code Sector 12-month
OPEID undergraduate
enr ollment
00467300 168847 Baker College of Flint MJ 48507-9987 Private not-for-profit,
4-year or above 7,480
00467301 404648 Baker College of MI 49601-9600 Private not-for-profit,
Cadillac 4-year or above 2.444
00467302 404082 Baker College of MI 48035 Private not-for-profit,
Clinton Township 4-year or above 7.569
00467303 171298 Baker College of MJ 49442 Private not-for-profit,
Muskegon 4-year or above 6,708
Owosso 4-year or above 3,804
Auburn Hills 4-year or above 5.357
00467306 381617 Baker College of Port MI 48060 Private not-for-profit,
Huron 4-year or above 2.271
00467309 414160 Baker College of MJ 49202-1290 Private not-for-profit,
Jackson 4-year or above 2,430
00467313 414708 Baker College Center MJ 48507 Private not-for-profit,
for Graduate Studies 4-year or above 7,068
Allen Park 4-year or above 3.249
004673A2 419572 Baker College MI 48326-2642 Private not-for-profit,
Corporate Services 4-year or above 707
10
Some campuses may not be represented in the FSA file because they do not participate in campus-based aid, but it
is not possible to detenuine that from the infonuation in these two files alone.
4
Arbitrary Groupings of Campuses based on 6-digit OPEID
In the example ofBaker College (previous page), one entry in an FSA fi le appears to correspond
to a group of entries in IPEDS that share the same 6-digit OPEID. There are also cases where it
appears that a school has multiple entries in an FSA dataset, each with its own distinct 6-digit
OPEID, corresponding to one or more IPEDS entries.
For example, Vatterott College appears under four distinct OPEIDs in the FSA Grants File,
giving the impression that these are four separate schools with the same name or four campuses
of the same school. However, looking at the IPEDS file, these same four 6-digit OPEIDs cover
17 campuses in groupings of one to ten campuses per 6-digit OPEID. To illustrate, the
percentage of undergraduates with Pell Grants is calculated below, first by matching the full 8-
digit OPEID in each file and then by matching each FSA Grant File entry to the IPEDS entries
with the same 6-digit OPEID. As in the examples on the previous page, there are several cases
where matching on the 8-digit OPEID is clearly inaccurate, as the number of Pel/ recipients
greatly exceeds the enrollment. Matching on the 6-digit OPEIDs, we get more plausible figures
for the percentage receiving Pell Grants, but they are difficult to interpret. For the 6-digit OPEID
025997, the Pell Grant percentage oj73% includes many campuses in Missouri but not all the
Missouri campuses of the school, and also includes campuses in several other states.
FSA Grants File, 2007-08
8-digit 6-digit School State School type Pell Gr;mt %with Pell, %with Pell,
OPEID OPEID recillicnts 8-digit 6-digit
OPEID match OPEID match
00750100 007501 VAITEROTT NE PROPRIETARY 677 68% 68%
COLLEGE
02069300 020693 VATTEROTT IL PROPRIETARY 1111 215% 76%
COLLEGE
02599700 025997 VATTEROTT MO PROPRIETARY 5412 371% 73%
COLLEGE
02609200 026092 VATTEROTT lA PROPRIETARY 1104 271% 69%
COLLEGE
IPEDS HD and EFFY Files, 2007-08
12-mont h
8-digit 6-digit undergaduate
OPETD OPEID UNITID Institution name City State Secto enrollment
Vatterott College-
Spring Valley Private for-
00750100 007501 181756 C:uupus Omaha NE profit, 2-year 991
Private for-
02069300 020693 148140 Vatterott College Quincy IL profit, 2-year 516
Private for-
Oklahoma profit, 4-year or
02069301 020693 437060 Vatterott CoLlege City OK above 631
Private for-
Vatterott Education profit, less-than
020693AJ 020693 450553 Center Dallas TX 2-year 309
5
12-month
8-digit 6-digit undergraduate
OPEID OPEID UNITID Institution name City State Sector enrollment
Private for-
profit, 4-year or
02599700 025997 245342 Yatterott College Berkeley MO above
Private for-
02599701 025997 404383 Vaucrott College Kansas City MO profit, 2-year
Private for-
02599702 025997 404365 Yatterott College Springfield MO profit, 2-year
Private for-
02599703 025997 404374 Vatterott CoUege Joplin MO profit, 2-year
Private for-
profit, 4-year or
02599705 025997 436191 Vaucrott College Sunset Hi li s MO above
Vatterott College- Private for-
02599706 025997 440882 Tulsa Tulsa OK profit, 2-year
02599709 025997 440891 Wichita Wichita KS profit 2-year
Vatteroll College- Private for-
02599710 025997 440873 Memphis Memphis TN profit, 2-year
Yatterott College- Broadview Private for-
0259971] 025997 442408 Cleveland Heights OH profit, 2-year
Yatterot College- Private for-
025997A1 025997 445559 O'Fallon Campus O'Fallon MO profit, 2-year
Private for-
02609200 026092 373058 Vatterott CoUege Des Moines IA profit, 2-year
Private for-
02609202 026092 436182 Yatterott CoLlege Saint Joseph MO profit, 2-year
Private for-
02609203 026092 445726 Lecole Culinaire Saint Louis MO profit, 2-year
In cases llke this, there is no single variable in the FSA or IPEDS data files which clearly
indicates which entries should be grouped together as one school. However, the name, web
address, and employer identification number (EIN) is the same for all or almost of these
campuses in IPEDS, suggesting that they are all part of one school. The implication of these
groupings is that FSA data such as cohort default rates and loan volume may represent neither
an individual campus nor the entire school, but an intermediate grouping that appears to be
based on the historical assignment of OPEIDs.
Campus Groupings Across 6-digit OPEIDs
In some cases, multiple campuses (with unique 6-digit OPEIDs) may report data as a group
under one campus' 6-digit OPEID. One such case is the University of Michigan' s FISAP data.
The FISAP is the application schools file to participate in federal campus-based aid programs.
The three University of Michigan campuses fil e a single FISAP under the University of
Michigan-Ann Arbor's OPEID, as shown in the following data file excerpts:
6
1459
1220
711
538
977
256
370
868
461
531
408
406
777
OPE FISAP File, 2007-08
OPEID Name State Zip code School t)'Jle 12-month
undergraduate
enrollment
00232500 University of Michigan - Ann MI 48109-1340 Public 4 year 41,833
Arbor
!PEDS HD/EFFY Files, 2007-08
8-digit 6-digit UNITID I nstitution name State ZiJl code Sector 12-month
OPEID OPEID undergraduate
enrollment
U Diversity of
Michigru1-Ann Public, 4-year
00232500 002325 170976 Arbor MI 48109 or above 26.964
University of
Michigru1- 48128- Public, 4 - y e ~ u
00232600 002326 171137 Dearbom MI 1491 or above 7,875
University of 48502- Public, 4 - y e ~ u
00232700 002327 171146 Michigru1-Flint Ml 1950 or above 7,046
There may be other cases like the University of Michigan, but the current configuration of
federal financial aid data files make it difficult to determine which matches are appropriate. The
12-month undergraduate enrollmentfigure reported on the FISAP exceeds the equivalent figure
from !PEDS in many cases when using a 6-digit OPE!D match, even when taking into account
groupings ojcampuses in !PEDS with the same 6-digit OPE/D. There are also many campuses
in !PEDS that have 6-digit OPE!Ds that do not appear in the FISAPfile. However, it is difficult
to determine if this is because they do not participate in campus-based aid programs or if, as with
the University of Michigan campuses in Flint and Dearborn, they really should be grouped with
other campuses that file FISAP together.
Recommendations for Improving Usability of FSA/OPE and IPEDS data
In recent years, the Department has taken steps toward increased transparency by posting more
institution-level data online than ever before. To ensure that these data are fully usable to answer
questions posed by consumers, researchers, and policymakers, the Department should make its
datasets more compatible so that when combined, they provide comprehensive, comparable, and
accurate data on a] I schools and campuses. By better facilitating the matching process between
datasets, the Department would substantially improve both consumers' ability to make informed
choices about post-secondary education and training, and researchers' and policymakers ability
to identify trends and analyze the impact of federal, state, and institutional policies on student
outcomes such as enrollment, persistence, and completions.
At minimum, the Department should provide sufficient documentation to allow users to match
data from IPEDS with data extracted from FSA/OPE databases and reports:
For each data year (the academic year that a dataset describes), provide a crosswalk
mappmg:
7
o each 6 digit OPEID in FSA/OPE data to the corresponding UNITID(s) and vice
versa.
versa.
Include documentation with each dataset detailing which crosswalk to use for that dataset
and any caveats or special notes.
Clearly document any cases where data reported in one file represent more than one
campus.
Only provide the 6-digit OPEID in FSA/OPE files where data are only reported at the 6-
dig1t OPEID level , not the 8-digit OPEID for the main campus.
Format OPEIDs as text so leading zeroes appear.
Clearly document the date at which data were extracted or collected and whether the data
might be updated in the future.
fn addit1on, we urge the Department to consider these additional steps to reduce the need for
such crosswalks and improve the availabil1ty, quality and comparability of data:
Require reporting of financial aid data based on the attended campus/location (rather than
the main campus for a group of schools) for all FSA, OPE, and NCES data.
Adopt common identifiers for each school and campus/location to be used across all
datasets.
Adopt common rules and practices for adding, deleting, and changing the identifier for a
given campus or school as changes in status, control, or affiliation occur over time.
Include a consistent sector designation which is based on program level and type of
control (ex. public 4-year) in all datasets.
8
National Postsecondary Education Cooperative (NPEC)
Financial Aid Data Working Group
Mission Statement
Attachment A
Timely, accurate, and comprehensive data is critical to understanding and addressing persistent
disparities in both access and success. The NPEC Working Group on Financial Aid Data will
consider improvements to federal data on:
financial aid usage
financial need and the economic background of students
the role of financial aid in persistence and completion
The group will investigate options for improving data collection and dissemination and produce
a white paper with recommendations for how NCES could improve the IPEDS Student Financial
Aid (SFA) survey and work with Federal Student Aid (FSA) and the Office ofPostsecondary
Education (OPE) to incorporate their data to:
Maximize the accuracy and usefulness of available federal data for policymakers, consumers,
and researchers
Limit institutional burden
Provide frequent and timely updates of financial aid data between the quadrennial release of
National Postsecondary Student Aid Survey (NPSAS) data
NPSAS provides accurate and comprehensive data on financial aid, but is only conducted every
four years and provides little or no data at the state and institution levels. IPEDS and the
FSA/OPE data sets are updated at least annually and include state- and institution-level data, but
are not as comprehensive in scope. Current IPEDS SF A data cover only first-time, full-time
undergraduates and provide only annual snapshots, with no information about cumulative usage
of financial aid. Data are self-reported by thousands of campuses, leading to some differences in
the interpretation of survey questions and calculation of the figures. Programmatic data from
FSA/OPE are usually provided without important contextual information about the
demographics, fields of study, and enrollment and completion status of students at the
institutions of higher education. Matching data from FSA/OPE sources to IPEDS data is impeded
by differences in the campus identifiers used and the aggregation or disaggregation of multiple
campuses in different data sets. Using data from FSA and OPE could potentially increase the
accuracy and scope of campus-level and aggregate statistics and reduce institutional burden by
eli minating the need for certain questions in IPEDS.
2
Student Financial Aid Data Working Group
Meeting Roster
May 18,2010
Matthew Reed (Chairperson)
Program Di rector
TI1e Institute for College Access and Success
405 14th Street Suite 1100
Oakland, CA 94704
Phone: 510-318-7900
MREED@TICAS.ORG
Victor Borden
Associate Vice President
University Planning, Institutional Research and
Accountability
Indiana Uni versity
400 East 7th Street, Poplars 807
Bloomington, TN 47405
Phone: 812-856-0855
Fax: 812-856-1209
VBORDEN@INDJANA.EDU
Rita Grogan
Director
Financial Aid
Mission College
3000 Mission College Boulevard, MS#9
Santa Clara, CA 95054
Phone: 408-855-5072
Fax: 408-855-5546
RITA.GROGAN@WVM.EDU
Denise Hammon
Vice President for Policy & Research
Association of Independent Colleges &
Universities in Massachusetts
11 Beacon Street, Suite 1224
Boston, MA 02108-3093
Phone: 617-742-5147 ext. 104
Fa..x: 617-742-3089
DENISE.HAMMON@BC.EDU
Sandy Baum
Higher Education Policy Analyst
College Board
161 East Chicago A venue
Apartment 45C
Chicago, IL 60611
Phone: 518-369-3774
SBA UM@SKIDMORE.EDU
Bryan Cook
Director
Center for Policy Analysis
American Cotmcil on Education
One Dupont Circle, NW
Pbone:202-939-938l
Fa..x: 202-785-2990
BRYAN_ COOK@ACE.NCHE.EDU
Tammy Halligan
Director
Regulatory Affairs, Government Relations
Career College Association
1101 Connecticut Avenue, NW, Suite 900
Phone: 202-336-6839
Fa.. x: 202-336-6828
TAMMYH@CAREER.ORG
Gigi Jones
Senior Research and Policy Analyst
National Association oflndependent Colleges
and Universities
Phone: 202-785-8866
Fax: 202-835-0003
GIGI@NAICU.EDU
Page 1
Meeting Roster
Mark Kantrowitz
Publisher
FinAid.org and FastWeb.com
PO Box 2056
Cranberry Township, PA 16066
Phone: 724-538-4500
Fax: 724-538-4502
MKANT@F ASTWEB.COM
Lesley McBain
Government Relations and Policy Analysis
American Association of State Colleges and
Universities
1307 New York Avenue, NW, Suite 500
Phone:202-478-7831
F a,-x: 202-4 78-5491
MCBAINL@AASCU.ORG
Brian Prescott
Director of Policy Research
Policy Analysis and Research
Western Interstate Commission for Higher
Education
3035 Center Green Drive, Suite 200
Boulder, CO 80301-2204
Phone: 303-541-0255
Fax: 303-541-0243
BPRESCOIT@WICHE.EDU
NCES Staff
Elise Miller
IPEDS Program Director
Postsecondary, Adult, and Career Education
Division
National Center for Education Statistics
1990 K Street NW, Suite 8ll3A
Phone: 202-502-7318
fa,'(: 202-502-7460
ELISE.MILLER@ED.GOV
May 18,2010
Christine Keller
Director of Research & Policy Analysis and
Association of Public & Land-Grant Universities
Phone: 202-478-6043
Fa,-x: 202-478-6061
CKELLER@APLU .ORG
Shirley Ort
Associate Provost and Director
Student Aid
University ofNorth Carolina- Chapel Hill
PO Box 1080, CB #2300
Chapel Hill , NC 27514-1080
Phone: 919-962-2315
Fa,x: 919-962-2716
SAO@UNC.EDU
Dawn Geonimo Terkla
Associate Provost
Institutional Research
Tufts University
28 Sawyer Avenue
Medford, MA 02155
Phone: 617-627-3274
Fa,x: 617-627-3993
DA WN.TERKLA@TUFTS.EDU
Guest
Diane Cheng
Research Associate
The lnstitute for College Access and Success
Oakland, CA 94612
Phone: 510-318-7900
DCHENG@TICAS.ORG
Page 2
Meeting Roster
Consultants/Contractors
Brenda Albright
Consultant
Franklin Education Group
220 Countryside Drive
Franklin, TN 37069-4149
Phone: 615-790-2739
Fa,'C 6.1 5-791-6087
BNALBRlGHT@AOL.COM
May 18,2010
Patdcia Steele
Research Consultant
HigherEd Insight, LLC
5335 Wisconsin Avenue, NW, Suite 440
Phone: 202-730-1252
PSTEELE@HIGHEREDfNSIGHT.COM
Page 3
1. For each institution during the 2006-07, 2007-08 and 2008-09 academic years provide number
of students by family income for Federal Grant only recipients.
O a t ~ Reguested
SCH NM
ATI SCH CODE
ATI SCH BR CODE
RPT SCH CODE
RPT SCH CODE BR
AWARD YR
FAM INCM
of students by family income for Federal Loan only recipients.
Data Reguested
SCH NM
SCH CODE
SCH BR CODE
FAM INCM
of students by family income for Federal Aid recipients (grants and/or loans).
Data Reguested
SCH NM
ATI SCH CODE
A TI SCH BR CODE
RPT SCH CODE
RPT SCH CODE BR
AWARD YR
SCH CODE
SCH BR CODE
FAM INCM
From:
Sent:
To:
Cc:
Subject:
Attachments:
Hi John,
Arsenault, Leigh
Thursday, August 26, 2010 5:52 PM
Fare, John
Shireman, Robert; Kvaal, James
RE: Data Team
OPEID matching memo.pdf
Attached is the NPEC memo for background. More to follow, I'm sure. Look forward to working with you!
-Leigh
To: Madzelan, Dan
Cc: Fare, John; Kvaal, James; Weko, Tom; Miller, Elise; Arsenault, Leigh; Smith, Zakiya
Subject: Data Team
Dan and team:
Let me know if there are ways that I can help.
-Bob
DATE: June 21, 2010
TO: Elise Miller, !PEDS Program Director; Thomas Weko, Associate Commissioner,
Postsecondary Studies Division
FROM: Matthew Reed, Program Director, The Institute for College Access & Success; Chair,
NPEC Financial Aid Data Working Group
RE: Challenges in Matching Campus-Level Data from US. Department of Education sources
Timely, accurate, and comprehensive data are critical to identifying and addressing what is and is
not working in higher education. Consumers, policymakers, and researchers all need user-
friendly access to meaningful data- data that can deepen our understanding of important issues
and inform decision-making at all levels. However, within the U.S. Department ofEducation,
different datasets use different identifiers for schools and campuses, and some datasets report
data for each campus while others group related campuses together. This makes it difficult if not
impossible to compare schools or campuses to analyze the impact of federal, state, and
institutional policies on outcomes such as enrollment, persistence, and completions. Although
other types of data are avai lable, campus-based analyses can uniquely shed light on the
relationship between federal, state, and institutional financial aid investments and outcomes for
students with varied demographic characteristics.
This memo discusses preliminary findings and recommendations of the NPEC Financial Aid
Data Working Group (see Attachment A) regarding matching campus-level data from
Department of Education sources. It first describes the major data-matching challenges facing
users of these different data sources and their implications for research, policy and practice. It
then provides recommendations for improving the usability and accuracy of campus-level data.
The Context
Several agencies within the U.S. Department of Education provide higher education data. The
National Center for Education Statistics (NCES) conducts the National Postsecondary Student
Aid Survey (NPSAS) every four years, which provides representative data at the national level
and for several states. More frequently released data at the institution, state, and national levels
are available from NCES' Integrated Postsecondary Education Data System (IPEDS) surveys
and programmatic data and reports from Federal Student Aid (FSA) and the Office of
Postsecondary Education (OPE).
To make full use of these data sources, it is often necessary to combine FSA/OPE data on the
usage of specific federal financial aid programs with comprehensive IPEDS data on enrollment,
completions, graduation rates, and other topics. For example, determining the percentage of all
undergraduates at a school applying for federal aid or using Pel! Grants, PLUS loans, or any
other financial aid program requires combining FSA program data with IPEDS enrollment data.
The necessity of matching data from different sources in an accurate and comprehensive manner
is especially apparent in the Department' s own efforts to combine data from NCES and
FSA/ OPE sources, both for research and policy purposes and for public-facing consumer
information. For example:
1
o Graduation, transfer, and retention rates from NCES's IPEDS appear on FSA's FAFSA-On-
The-Web (FOTW) site alongside school information from FSA sources.
o Loan volume and cohort default rate data from FSA's NSLDS appear on NCES's College
Navigator site alongside data from IPEDS.
Without resolving the matching problem, consumer information from the Department may be
incomplete or even misleading for certain schools or campuses. For example, a student using
FAFSA-On-The-Web to apply for financial aid at the University ofPhoenix would not be able to
view graduation, transfer, and retention rates for a specific campus due to mismatched levels of
reporting; the University of Phoenix only has one entry in FSA and one federal school code, but
reports its !PEDS data as 73 separate campuses.
The Root of the Problem: Inconsistent School Identifiers
Within the Department of Education, different data sources use different identifiers for schools
and campuses. IPEDS uses a unique 6-digit identifier (UNTTID) for each campus included in its
surveys. All schools receiving Title IV aid funds are required to report data in IPEDS, and other
postsecondary institutions have the option to report.
FSA and OPE data use a separate identifier called the OPEID in their databases, though some
databases use other identifiers which are mapped to OPEIDs. At least in the datasets available on
the FSA and OPE web sites, the main campus of a school will have a 6-digit OPEID with a 2-
digit suffix of "OO," while other campuses will have the same 6-digit OPEID as the main campus,
but with a different 2-digit suffix (also called a location code
2
). The IPEDS Header (JID) and
Institutional Characteristics (IC) files include 8-digit OPEIDs (which combine the 6-digit school
identifier and the 2-digit location code) in addition to the UNITIDs.
fn the FSA Data Center, most datasets have 6-digit OPEIDs or 8-digit OPEIDs where the 2-digit
branch code is always "00", meaning data are effectively reported at the 6-digit OPEID level. It
is unclear if this is due to limitations in how the data are collected and stored in the underlying
databases, decisions about how to extract and report the data on the public data center, or some
combinat1on of both. Data are reported at the 8-digit OPEID level, at least for some schools, in
the FSA data file on the usage ofPell Grants and other federal financial aid grants.
While some schools process financial aid centrally across multiple campuses, in many cases it
should be possible for the FSA databases to capture information about financial aid usage based
on the campus the student attended while receiving the aid ("attending school"), as well as the
main office or location of the school ("reporting school"). This would make it easier to compare
data across campuses and combine financi al aid usage data with other information about
enrollment and completion.
1
In tllis memo. we use "campus" to mean t11e institutions with unique UNITIDs in t11e IPEDS HD file. which
generally correspond to the school "locations" in FSA/OPE data. There may be cases where distinct UNITIDs
represent different parts of a school that share a physical campus or where one UNITID represents parts of a school
that are not physically contiguous. As noted in the recommendations section of this memo. further documentation of
t11e existing definitions for reporting units in both FSA and IPEDS data would be helpful.
2
Some "locations" appear to be designated as "branches" wllile others are not.
2
Data-Matching Challenges
To illustrate some of the challenges in matching IPEDS data to FSNOPE data, this section will
provide examples using the FSA grant volume data extracts available on the FSA Data Center
3
,
the FISAP data file from OPE
4
and the header (HD) and 12-month enrollment (EFFY) files
available on the IPEDS Data Center
5
for 2007-08. Similar issues arise when using other
FSA/ OPE data including the institution-level data files on loan volume, campus-based aid,
F AFSA applications, and cohort default rate data, as well as the OPE Pell data files .
6
In contrast,
other IPEDS data files can be easily matched to the IPEDS HD file via the UNITIDs.
Incomplete Matches Based on 8-digit OPEID
Even when FSA data are reported with 8-digit OPEIDs, one-to-one matches to IPEDS may not
be correct. As background, the IPEDS HD file contains 7,055 entries for postsecondary
institutions, each with a unjque UNITID and in most cases a unique 8-digit OPEID as we11.
7
Most FSA data files contain entries with unique 8-digit OPEIDs. To merge an FSA file with
IPEDS data, most users would start by matching the records based on the 8-digit OPEIDs
available in each file. However, some of these matches may not be accurate: an entry in the FSA
data extract with a given 8-digit OPEID may not refer specifically to the entry in IPEDS with
that same 8-digit OPEID.
8
To illustrate this point, the FSA data extract on federal financial aid grants has 5,505 entries with
unique 8-digit OPEIDs. Merging this FSA file with IPEDS using 8-digit OPEIDs results in 5,353
matches. However, these include 457 cases where the number of Pel! Grant recipients reported
in the FSA Grant data is greater than the 12-month enrollment reported in IP EDS. This suggests
that these entries in the FSA data extract may actually represent data for more than one location
at a school.
9
3
See "Federal Student Aid- Data Center- Prognunmatic Volume Reports,"
federalstudentaid.ed.gov/datacenter/prof..>rdnunatic.html
4
The FISAP is the application schools file with the Department annually to participate in campus-based financial
aid programs. The FISAP data file, available upon request from OPE, contains more e>..1ensive data than that shown
in the campus-based aid data e>..trdct posted on the FSA Data Center.
5
See "Integrated Postsecondary Education Data System Data Center. " nces.ed.gov/ipeds/datacenter/
6
See "Federal Student Aid- Data Center- Prognunmatic Volume Reports,"
federalstudentaid.ed.gov/datacenter/prob,>rdnunatic.html, "Federal Student Aid- Data Center- Application Volume
Reports." federdlstudentaid.ed.gov/datacenter/application.htmL "Federal Student Aid- Data Center- Default
Rates," federdlstudentaid.ed.gov/datacenter/cohort.html. "Federal Pel! Grant Program End-of-Year Report and Other
Annual Data Reports." www2.ed.gov/:finaid/prof/resources/data/pell-data. html
7
There are 44 cases where the OPEID is missing and 4 cases with non-unique 8-digit OPEIDs.
8
This matching problem is evident in FSA files where 8-digi t OPEIDs all end in "00" as well as FSA files where
some 8-digit OPEIDs have ot11er suffixes.
9
There may be additional cases where one entry in the FSA data corresponds to multiple entries in !PEDS. These
occur when the 6-digi t school identifier (first 6 digits of the OPEID) appears in only one entty in the FSA data but in
multiple entri es in the !PEDS data, regardless of whether the Pel! count is greater than the enrollment.
3
For example, the 8-digit OPEID 00467300 matches to one entry in the FSA Grant file for "Baker
College" with 22,591 Pell Grant recipients. That 8-digit OPEID matches the campus named
"Baker Coll ege of Fli nt" in IPEDS, with a 12-month undergraduate enrollment of only 7,480.
This discrepancy suggests that this entry in the FSA Grant fi le actuall y represents many if not all
of the 11 Baker College campuses listed in IPEDS with the 6-digit OPEID 004673, as listed
below.
10
However, there is no definitive documentation ojwhich campuses in IPEDS correspond
to each ently in FSA data. As discussed in the recommendations section, a comprehensive
crosswalk between OPEIDs in FSA data and UNlTIDs in IPEDS data would be very helpful in
ensuring that all entries on both sides are accurately matched, whether the matches are one-to-
one, or one-to-many.
FSA Fedetal G.-ant Volume File, 2007-08
OPEID Name State Zi1> Code School Ty(>e Federal Pell
Grant
Recipients
00467300 Baker College Ml 48507-5508 Private-nonprofit 22,591
IPEDS HD/EFFY Files, 2007-08
8-digit UNITID Institution Name State Zit> Code Sector 12-month
OPEID undergraduate
enrollment
00467300 168847 Baker College of Flint MJ 48507-9987 Private not-for-profit,
4-year or above 7,480
Cadillac 4-year or above 2.444
Clinton Township 4-year or above 7.569
Muskegon 4-year or above 6,708
Owosso 4-year or above 3,804
Aubum Hills 4-year or above 5.357
00467306 381617 Baker College of Port MI 48060 Private not-for-profit,
Huron 4-year or above 2.271
00467309 414160 Baker College of MJ 49202-1290 Private not-for-profit,
Jackson 4-year or above 2,430
00467313 414708 Baker College Center MJ 48507 Private not-for-profit,
for Graduate Studies 4-year or above 7,068
00467317 444167 Baker College of MI 48101 Private not-for-profit
AllenPmk 4-year or above 3.249
004673A2 419572 Baker College MI 48326-2642 Private not-for-profit,
Corporate Services 4-year or above 707
10
Some campuses may not be represented in the FSA fi le because they do not participate in campus-based aid. but it
is not possible to detenuine that from the information in these two files alone.
4
Arbitrary Groupings of Campuses based on 6-digit OPEID
In the example ofBaker College (previous page), one entry in an FSA fi le appears to correspond
to a group of entries in IPEDS that share the same 6-digit OPEID. There are also cases where it
appears that a school has multiple entries in an FSA dataset, each with its own distinct 6-digit
OPEID, corresponding to one or more IPEDS entries.
For example, Vatterott College appears under four distinct OPEIDs in the FSA Grants File,
giving the impression that these are four separate schools with the same name or four campuses
of the same school. However, looking at the IPEDS file, these same four 6-digit OPEIDs cover
17 campuses in groupings of one to ten campuses per 6-digit OPEID. To illustrate, the
percentage of undergraduates with Pell Grants is calculated below, first by matching the full 8-
digit OPEID in each file and then by matching each FSA Grant File entry to the IPEDS entries
with the same 6-digit OPEID. As in the examples on the previous page, there are several cases
where matching on the 8-digit OPEID is clearly inaccurate, as the number of Pel! recipients
greatly exceeds the enrollment. Matching on the 6-digit OPEIDs, we get more plausible figures
for the percentage receiving Pell Grants, but they are difficult to interpret. For the 6-digit OPEID
025997, the Pel! Grant percentage of 73% includes many campuses in Missouri but not all the
Missouri campuses of the school, and also includes campuses in several other states.
FSA Grants File, 2007-08
8-digit 6-di git School State Scbool type Pell Grant %with Pell, % witb Pell,
OPEID OPEID reciJlicnts 8-digit 6-digit
OPEID match OPEID matcb
00750100 007501 VAITEROTT NE PROPRlETARY 677 68% 68%
COLLEGE
02069300 020693 VATIEROTT IL PROPRIETARY 1111 215% 76%
COLLEGE
02599700 025997 VATIEROTT MO PROPRIETARY 5412 371% 73%
COLLEGE
02609200 026092 VATTEROTT IA PROPRIETARY 1104 271% 69%
COLLEGE
IPEDS HD and EFFY Files, 2007-08
12-month
8-digit 6-digit undergaduate
OPETD OPEID UNITID Institution name City State Secto enrollment
Vatterotl College-
Spring VaJiey Private for-
00750100 007501 181756 Campus Omaha NE profit, 2-year 991
Private for-
02069300 020693 148140 Vatterott College Quincy lL profit, 2-year 516
Private for-
Oklahoma profit, 4-year or
02069301 020693 437060 Vatterolt College City OK above 631
Private for-
Vatterott Education profit, less-tl1<m
020693Al 020693 450553 Center Dallas TX 2-year 309
5
12-month
8-digit 6-di git undergraduate
OPEID OPEID UNITID Institution name City State Sector enrollment
Private for-
profit, 4-year or
02599700 025997 245342 Vatterott College Berkeley MO above
Private for-
02599701 025997 404383 Vattcrott College Kansas City MO profit, 2-year
Private for-
02599702 025997 404365 Vatterott College Springfield MO profit, 2-year
Private for-
02599703 025997 404374 Vatterott College Joplin MO profit 2-year
Private for-
profit, 4-year or
02599705 025997 436191 Vatterott College Sunset Hills MO above
02599706 025997 440882 Tulsa Tulsa OK profit, 2-year
Vatterotl College- Private for-
02599709 025997 440891 Wichita Wichita KS profit, 2-year
02599710 025997 440873 Memphis Memphis TN profit, 2-year
Vatterott College- Broadview Private for-
02599711 025997 442408 Cleveland Heights OH profit, 2-year
Vatterot College- Private for-
025997A1 025997 445559 O'Fallon Campus O'Fallon MO profit, 2-vear
Private for-
02609200 026092 373058 Vatterott College Des Moines IA profit 2-year
Private for-
02609202 026092 436182 Vatterott College Saint Joseph MO profit, 2-year
Private for-
02609203 026092 445726 Lecole Culinaire Saint Louis MO profit, 2-year
In cases llke this, there is no single variable in the FSA or IPEDS data files which clearly
indicates which entries should be grouped together as one school. However, the name, web
address, and employer identification number (EIN) is the same for all or almost of these
campuses in IPEDS, suggesting that they are all part of one school. The implication of these
groupings is that FSA data such as cohort default rates and loan volume may represent neither
em individual campus nor the entire school, but an intermediate grouping that appears to be
based on the historical assignment of OPEIDs.
Campus Groupings Across 6-digit OPEIDs
In some cases, multiple campuses (with unique 6-digit OPEIDs) may report data as a group
under one campus' 6-digit OPEID. One such case is the University of Michigan' s FISAP data.
The FISAP is the application schools file to participate in federal campus-based aid programs.
The three University of Michigan campuses fil e a si ngle FISAP under the University of
Michigan-Ann Arbor' s OPEID, as shown in the following data file excerpts:
6
1459
1220
711
538
977
256
370
868
461
531
408
406
777
OPE FISAP File, 2007-08
OPEID Name State Zip code School t)'Jle 12-month
undergraduate
enrollment
00232500 University of Michigan- Ann MI 48109-1340 Public 4 year 41,833
Arbor
!PEDS HD/EFFY Files, 2007-08
8-digit 6-digit UNITID I nstitution name State ZiJl code Sector 12-month
OPEID OPEID undergraduate
enrollment
University of
Michigan-Ann Public, 4-year
00232500 002325 170976 Arbor MT 48109 or above 26,964
University of
Michigan- 48128- Public, 4-year
00232600 002326 171137 Dearborn MI 1491 or above 7,875
University of 48502- Public, 4-year
00232700 002327 171146 Michigan-Flint MT 1950 or above 7,046
There may be other cases like the University of Michigan, but the current configuration of
federal financial aid data files make it difficult to determine which matches are appropriate. The
12-month undergraduate enrollmentfigure reported on the FISAP exceeds the equivalent figure
from JPEDS in many cases when using a 6-digit OPEJD match, even when tahng into account
groupings ofcampuses in !PEDS with the same 6-digit OPEID. There are also many campuses
in !PEDS that have 6-digit OPE!Ds that do not appear in the FISAP file. However, it is difficult
to determine if this is because they do not participate in campus-based aid programs or if, as with
the University of Michigan campuses in Flint and Dearborn, they really should be grouped with
other campuses that file FISAP together.
Recommendations for Improving Usability of FSA/OPE and IPEDS data
In recent years, the Department has taken steps toward increased transparency by posting more
institution-level data online than ever before. To ensure that these data are fully usable to answer
questions posed by consumers, researchers, and policymakers, the Department should make its
datasets more compatible so that when combined, they provide comprehensive, comparable, and
accurate data on all schools and campuses. By better facilitating the matching process between
datasets, the Department would substantially improve both consumers' ability to make informed
choices about post-secondary education and training, and researchers' and policymakers ability
to identify trends and analyze the impact of federal, state, and institutional policies on student
outcomes such as enrollment, persistence, and completions.
At minimum, the Department should provide sufficient documentation to allow users to match
data from IPEDS with data extracted from FSA/OPE databases and reports:
7
For each data year (the academic year that a dataset describes), provide a crosswalk
mappmg:
o each 6 digit OPEID in FSAJOPE data to the corresponding UNITID(s) and vice
versa.
versa.
Include documentation with each dataset detailing which crosswalk to use for that dataset
and any caveats or special notes.
Clearly document any cases where data reported in one file represent more than one
campus.
Only provide the 6-digit OPEID in FSA/OPE files where data are only reported at the 6-
dig1t OPEID level, not the 8-digit OPEID for the main campus.
Format OPEIDs as text so leading zeroes appear.
Clearly document the date at which data were extracted or collected and whether the data
might be updated in the future.
In addition, we urge the Department to consider these additional steps to reduce the need for
such crosswalks and improve the availability, quality and comparability of data:
Require reporting of financial aid data based on the attended campus/location (rather than
the main campus for a group of schools) for all FSA, OPE, and NCES data.
Adopt common identifiers for each school and campus/location to be used across all
datasets.
Adopt common rules and practices for adding, deleting, and changing the identifier for a
given campus or school as changes in status, control , or affiliation occur over time.
Include a consistent sector designation which is based on program level and type of
control (ex. public 4-year) in all datasets.
8
Financial Aid Data Working Group
Mission Statement
Attachment A
Timely, accurate, and comprehensive data is critical to understanding and addressing persistent
disparities in both access and success. The NPEC Working Group on Financial Aid Data will
consider improvements to federal data on:
financial aid usage
financial need and the economic background of students
the role of financial aid in persistence and completion
The group will investigate options for improving data collection and dissemination and produce
a white paper with recommendations for how NCES could improve the IPEDS Student Financial
Aid (SFA) survey and work with Federal Student Aid (FSA) and the Office ofPostsecondary
Education (OPE) to incorporate their data to:
Maximize the accuracy and usefulness of available federal data for policymakers, consumers,
and researchers
Limit institutional burden
Provide frequent and timely updates of financial aid data between the quadrennial release of
National Postsecondary Student Aid Survey (NPSAS) data
NPSAS provides accurate and comprehensive data on financial aid, but is only conducted every
four years and provides little or no data at the state and institution levels. IPEDS and the
FSA/OPE data sets are updated at least annually and include state- and institution-level data, but
are not as comprehensive in scope. Current IPEDS SF A data cover only first-time, full-time
undergraduates and provide only annual snapshots, with no information about cumulative usage
of financial aid. Data are self-reported by thousands of campuses, leading to some differences in
the interpretation of survey questions and calculation of the figures. Programmatic data from
FSA/OPE are usually provided without important contextual information about the
demographics, fields of study, and enrollment and completion status of students at the
institutions of higher education. Matching data from FSA/OPE sources to IPEDS data is impeded
by differences in the campus identifiers used and the aggregation or disaggregation of multiple
campuses in different data sets. Using data from FSA and OPE could potentially increase the
accuracy and scope of campus-level and aggregate statistics and reduce institutional burden by
eli minating the need for certain questions in IPEDS.
2
Meeting Roster
May 18,2010
Matthew Reed (Chairperson)
Program Di rector
TI1e Institute for College Access and Success
Oakland, CA 94704
Phone: 510-318-7900
MREED@TICAS.ORG
Victor Borden
Associate Vice President
University Planning, Institutional Research and
Accountability
Indiana Uni versity
400 East 7th Street, Poplars 807
Bloomington, TN 47405
Phone: 812-856-0855
Fax: 812-856-1209
VBORDEN@INDJANA.EDU
Rita Grogan
Director
Financial Aid
Mission College
3000 Mission College Boulevard, MS#9
Santa Clara, CA 95054
Phone: 408-855-5072
Fax: 408-855-5546
RITA.GROGAN@WVM.EDU
Denise Hammon
Vice President for Policy & Research
Association of Independent Colleges &
Universities in Massachusetts
11 Beacon Street, Suite 1224
Boston, MA 02108-3093
Phone: 617-742-5147 ext. 104
Fa..x: 617-742-3089
DENISE.HAMMON@BC.EDU
Sandy Baum
Higher Education Policy Analyst
College Board
161 East Chicago A venue
Apartment 45C
Chicago, IL 60611
Phone: 518-369-3774
SBA UM@SKIDMORE.EDU
Bryan Cook
Director
Center for Policy Analysis
American Cotmcil on Education
One Dupont Circle, NW
Pbone:202-939-938l
Fa..x: 202-785-2990
BRYAN_ COOK@ACE.NCHE.EDU
Tammy Halligan
Director
Regulatory Affairs, Government Relations
Career College Association
Phone: 202-336-6839
Fa.. x: 202-336-6828
TAMMYH@CAREER.ORG
Gigi Jones
National Association oflndependent Colleges
and Universities
Phone: 202-785-8866
Fax: 202-835-0003
GIGI@NAICU.EDU
Page 1
Meeting Roster
Mark Kantrowitz
Publisher
FinAid.org and FastWeb.com
PO Box 2056
Cranberry Township, PA 16066
Phone: 724-538-4500
Fax: 724-538-4502
MKANT@F ASTWEB.COM
Lesley McBain
Government Relations and Policy Analysis
American Association of State Colleges and
Universities
Phone:202-478-7831
F a,-x: 202-4 78-5491
MCBAINL@AASCU.ORG
Brian Prescott
Director of Policy Research
Policy Analysis and Research
Western Interstate Commission for Higher
Education
3035 Center Green Drive, Suite 200
Boulder, CO 80301-2204
Phone: 303-541-0255
Fax: 303-541-0243
BPRESCOIT@WICHE.EDU
NCES Staff
Elise Miller
IPEDS Program Director
Postsecondary, Adult, and Career Education
Division
National Center for Education Statistics
1990 K Street NW, Suite 8ll3A
Phone: 202-502-7318
fa,'(: 202-502-7460
ELISE.MILLER@ED.GOV
May 18,2010
Christine Keller
Director of Research & Policy Analysis and
Association of Public & Land-Grant Universities
Phone: 202-478-6043
Fa,-x: 202-478-6061
CKELLER@APLU .ORG
Shirley Ort
Associate Provost and Director
Student Aid
University ofNorth Carolina- Chapel Hill
PO Box 1080, CB #2300
Chapel Hill , NC 27514-1080
Phone: 919-962-2315
Fa,x: 919-962-2716
SAO@UNC.EDU
Dawn Geonimo Terkla
Associate Provost
Institutional Research
Tufts University
28 Sawyer Avenue
Medford, MA 02155
Phone: 617-627-3274
Fa,x: 617-627-3993
DA WN.TERKLA@TUFTS.EDU
Guest
Diane Cheng
Research Associate
The lnstitute for College Access and Success
Oakland, CA 94612
Phone: 510-318-7900
DCHENG@TICAS.ORG
Page 2
Meeting Roster
Consultants/Contractors
Brenda Albright
Consultant
Franklin Education Group
220 Countryside Drive
Franklin, TN 37069-4149
Phone: 615-790-2739
Fa,'C 6.1 5-791-6087
BNALBRlGHT@AOL.COM
May 18,2010
Patdcia Steele
Research Consultant
HigherEd Insight, LLC
5335 Wisconsin Avenue, NW, Suite 440
Phone: 202-730-1252
PSTEELE@HIGHEREDfNSIGHT.COM
Page 3
Sent: Tuesday, August 24, 201 o 2:05 PM
To: Finley, Steve; Jenkins, Harold; Wolff, Russell
Subject: RE: With Statistics-Heavy Report, Apollo Group Goes on the Defensive
From: Finley, Steve
Sent: Tuesday, August 24, 2010 9:18AM
To: Siegel, Brian; Burton, Vanessa; Scaniffe, Dawn; Morelli, Denise; Marinucci, Fred; Jenkins, Harold; Woodward,
Jennifer; Wolff, Russell; Sann, Ronald; Wanner, Sarah; Varnovitsky, Natasha
Subject: With Statistics-Heavy Report, Apollo Group Goes on the Defensive
http:/ /chronicle.com/arti cl e/With-Statistics-Heavy -Report/1241 01/
August 23, 2010
With Statistics-Heavy Report, Apollo Group Goes
on the Defensive
By Kelly Field
Washington
For-profit colleges, under scrutiny in Congress and in the press, have been on the defensive this summer,
pressed to explain aggressive recruiting practices and higher-than-average student-loan default rates.
Their latest move came on Monday, when the nation's largest for-profit higher-education company, the Apoll o
Group, parent of the University of Phoenix, released a report on "the current state of higher education in
America and the vital role of proprietary colleges and universities," and held a briefing for education reporters
here.
The 36-page report, titled "Higher Education at a Crossroads," argues that for-profi t coll eges will be critical to
meeting President Obama's goal of leading the world in college completion rates, and estimates that meeting the
goal without proprietary colleges would cost taxpayers more than $800-billion over the next 10 years.
While the statistics-heavy report does not specifically mention the Education Department's "gainful
employment" proposal-which would cut off aid to programs that saddle their students with unmanageable
debt-its message is clear: Program closures at for-profit colleges would jeopardize the president's college-
completion goals.
During the press briefing, the company's president and co-chief executives fielded questions from reporters
about Apollo's recruiting practices, its spending on marketing, and the proposed "gainful employment" rule.
Gregory W. Cappelli , a co-CEO, said the company would no longer compensate recruiters based on their
success in securing enrollments, reiterating an announcement Apollo made this month after a government
investigation uncovered recruiting abuses at several for-profit colleges.
Previously, a third of recruiter compensation was tied to enrollments, said Joseph L. D'Amico, president and
chief operating officer. He said recruiter pay was not based on "quotas, " per se, but on "improvement over
time."
Mr. Cappelli said the company had also reduced its reliance on third-party marketers who solicit information
from prospective students online, cutting its spending on "lead generators" in half over the last two years.
"We wanted to get away from not having control over our brand," he said. "Now we have control over it, we
create the message."
Mr. D'Amico said some of the third-party marketers had used "techniques we're not proud of"
Asked what effect the "gainful employment" rule would have on the company's growth and bottom line, Mr.
D'Amico said that it could "potentially eliminate programs," but didn't offer specifics. Mr. Cappelli argued that
the rule could be drafted in a way that was "not as costly to society" as the current proposal .
2
From:
Sent:
To:
Subject:
Finley, Steve
Tuesday, August 24, 2010 12:50 PM
Glickman, Jane; Martin, Phil; Arsenault, Leigh
RE: Boston Globe
we probably only have what we released) unless there is something already available to the
public about locations of schools that are approved for T4 programs.
A school may have additional locations that would not be separately reported in this listJ
but the information listed for that school would include the additional locations. The
reporter may be trying to figure out which additional locations are included in the schools
for each listing. FSA might already have a list like that available) or might not.
From: Glickman) Jane
Sent: Tuesday) August 24J 2010 12:10 PM
To: FinleyJ Steve; MartinJ Phil; Arsenault) Leigh
Subject: Boston Globe
Hi folks -
A reporter with the Boston Globe is asking for the locations of the schools listed in our
Repayment Rate data listed here:
Cumulative Four-Year Repayment Rate by Institution [cid:image001.gif@01CB4384.656A23F0] MS
Excel (5.39M)<http://www2.ed.gov/policy/highered/reg/hearulemaking/2009/ge- cumulative-
rates . xls>
Many locations are included but many arenJt - such as numerous listings for DeVry J 11 for
Platt College) and 6 for Concordia) and many other schools with only one listing but no
reference to state.
Do we have a file we can provide with the locations for these schools?
Thanks .
Jane
3
From: Kvaal, James
Sent:
To:
Friday, August 20, 2010 7:09PM
Alec MacGillis
Subject: RE: the lobby
Alec: great story - I will miss you. Hurry back.
I talked to Fred Hiatt yesterday, it was hard to tell where he is going with this. It will be interesting to watch how he is
able to balance it.
Have a great time in Ann Arbor. Will you still be writing pieces from time to time? If so I will keep bugging you.
James
From: Alec MacGillis rmailtorx-6} lruamail.coml
To: Kvaal, James
Subject: the lobby
Hey, you probably already saw but I finally got my quick hit on the higher ed lobby into the paper today, with a
nice quote from Kevin Carey to sum it all up. Hartle and Flanagan were quite defensive on the accountability
stuff. And you guys have sure set off some waves on the for-profit side and in the Post newsroom. 28 percent!!
Yikes. Makes Phoenix look like Princeton to our UNLV. I'm a bit sorry to be leaving town while this all unfolds
--it's going to be fascinating to watch, among other things to see how we handle it, our blatant self-interest in
all this versus our instinct as journalists that this is clearly a racket that needed cleaning up. Carry on, sheriff. ..
I'm outta here next week but will be on email all year, so check in anytime.
-Alec
4
From: Weko, Tom
Sent: Friday, August 20. 2010 4:58PM
To:
Cc:
Baker, Jeff; Dannenberg, Michael; Madzelan, Dan; Bergeron, David
Kvaal, James
Subject: RE: atb
From: Baker, Jeff
Sent: Friday, August 20, 2010 4:49PM
To: Dannenberg, Michael; Weko, Tom; Madzelan, Dan; Bergeron, David
Cc: Kvaal, James
Subject: Re: atb
Just a thought.
~ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~
From: Dannenberg, Michael
To: Weko, Tom; Madzelan, Dan; Bergeron, David; Baker, Jeff
Cc: Kvaal, James
Sent: Fri Aug 20 13:58:55 2010
Subject: FW: atb
From: Kvaal, James
Sent: Friday, August 20, 2010 2:58PM
To: Dannenberg, Michael
Subject: atb
Also Friday, Corinthian Colleges reported a profit of $33.9 million, or 38 cents a share. for the fourth quarter ended
June 30, up 46% from $23.2 million, or 26 cents, earned in the same period during fiscal 2009.
The company said it's "in the process of reducing the risk profile of our student population" to lessen prospects for
defaults on student loans.
As of Sept. 1, the company said it will no longer serve new students enrolled in the federal Ability to Benefit
program, known as ATB, at its Everest and WyoTech campuses.
At the end of fiscal 2010, ATB students represented 15% of the company's total student population, down from 24%
at the same point in the prior year.
5
"ATB students drop out at a higher rate, are more challenging to assist with career placement, and default on their
loans at a higher rate than high-school graduates," the company said. "Although serving ATB students has
historically been a part of Corinthian's mission ... we will no longer be able to serve these students" at two
campuses.
http://www.marketwatch.com/story/cori nthian-falls-again-on-regulatory-outlook-2010-08-20?reflink=MW news stmp
6
From: Kvaal, James
Sent:
To:
Friday, August 20, 2010 3:20PM
Woodward, Jennifer
Subject: RE: Publicly traded schools continue to fall in the market today, but report another quarter of
historical profits
Ok thanks
Sent: Friday, August 20, 2010 3:12 PM
To: Kvaal, James; Shireman, Robert
Cc: Wolff, Russell
Subject: RE: Publicly traded schools continue to fall in the market today, but report another quarter of historical profits
James and Bob,
Please disregard and delete my prior email on this subject and read this one instead. I did not intend to send you
an email with the personal email message that was included at the end of the prior message.
Thanks,
Jennifer
http://www.marketwatch.com/storv/corinthian-falls-again-on-regulatory-outlook-201 0-08-20?siteid=yhoof
By Steve Gelsi, MarketWatch
NEW YORK (MarketWatch)- Corinthian Colleges Inc. shares fell as much as 18% Friday, retreating as the
company missed Wall Street targets and said it didn't yet know the impact of possible changes in the regulatory
landscape for private-education firms.
U.S. regulators have been taking a closer look at for-profit educators because of claims that the institutions have been
preying on low-income students, setting them up with loans they cannot pay back.
Educating Tomorrow's Ethical Leaders
"We are actively monitoring proposed changes in federal regulation and congressional actions which pertain to private
sector education," the Santa Ana, Calif.-based company said. "Given the information currently available, we are unable to
gauge the full impact of these proposals on our students and the company."
Corinthian Colleges (COCO 4.55, -0.86, -15.83%) dropped 15% to $4.59 at midday, after having set a 52-week low at
$4.42 on an intraday basis. The company's shares plunged 22% on Monday on fresh concerns about tighter regulations
on student loans. See: For-profit education stocks plunge.
Shares of other private-education firms also fell to close out the week, but more modestly.
DeVry Inc. (DV 37.35, -1.47, -3.79%) lost 5.5.%, while ITT Educational Services Inc. (ESI 51.80, -2.00, -3.72%) skidded
5% and Career Education Corp. (CECO 17.53, -0.76, -4.16%) gave up 3.4%. Shares of Washington Post Co. (WPO
345.00, -0.61, -0.18%), the parent of Kaplan Inc. , fell1%.
Also Friday, Corinthian Colleges reported a profit of $33.9 million, or 38 cents a share, for the fourth quarter ended June
30, up 46% from $23.2 million, or 26 cents, earned in the same period during fiscal 2009.
4.55, -0.86, -15.83%
> -1.47, -3.79%
.80, -2.00, -3.72%
17.53, -0.76,-4.16%
40.73, +0.14, +0.34%
7
Quarterly revenue increased to $482.7 million, up from the prior year's $353.5 million.
Analysts had expected a profit of 39 cents a share, on revenue pegged at $477.3 million, according to a survey of
estimates by FactSet Research.
For the first quarter of fiscal 2011 , the company said it expects earnings of 38 cents to 41 cents a share, below the Wall
Street consensus target of 44 cents a share.
The company said it's "in the process of reducing the risk profile of our student population" to lessen prospects for defaults
on student loans.
As of Sept. 1 , the company said it will no longer serve new students enrolled in the federal Ability to Benefit
program, known as ATB, at its Everest and WyoTech campuses.
At the end of fiscal2010, ATB students represented 15% of the company's total student population, down from 24% at the
same point in the prior year.
"ATB students drop out at a higher rate, are more challenging to assist with career placement, and default on their loans
at a higher rate than high-school graduates," the company said. "Although serving ATB students has historically been a
part of Corinthian's mission ... we will no longer be able to serve these students" at two campuses.
On the regulatory front, Corinthian said it has formally responded to proposed rules from the Department of Education
on incentive compensation for admissions representatives, misrepresentation, and gainful employment disclosures.
Corinthian also plans to file a written response by Sept. 9 to a second notice of proposed rule making that focuses
exclusively on gainful employment.
It's also responding to a request for information from the Senate Health, Education, Labor and Pensions Committee,
which sent queries to 30 private-sector education companies including Corinthian.
The committee, chaired by Sen. Tom Harkin (D., Iowa), has requested that a portion of the information be provided by
Aug. 26 and the remainder by Sept. 16.
The panel has been looking into federal oversight of for-profit colleges and universities, including student default rates and
the proportion of money that private-education providers spend on education as opposed to recruitment, marketing and
administration.
Steve Gelsi is a reporter for MarketWatch in New York.
8

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