A growing concern: for-profit colleges prospering but face new scrutiny.

A growing concern: for-profit colleges prospering but face new scrutiny. They are the fastest-growing sector of higher education,experiencing rapid growth as the recession-wracked economy drives morepeople back to the classroom. They are renowned for their nimbleness, able to quickly adjustcurriculum to meet the employment needs of emerging businesses. They areopen-admission institutions specializing in helping non-traditionalstudents who are mostly older than 25 or are members of minority groups,specifically African Americans and Hispanics, and have family memberswho have never set foot on a college campuses. For-profit colleges--the rich cousins of the nation'scommunity colleges--now enroll an estimated 1.2 million U.S. studentspursuing degrees in such fields as nursing, computers and the culinaryarts. They enroll about 2.7 million students overall. That figure accounts for about 10 percent of total enrollment inhigher education, but it also attests to the rapid growth of thefor-profit sector. Enrollment has jumped by about 2 million studentsover the past decade. More growth is on the way. Enrollment in post-secondary educationis projected to grow by about 1.2 percent per year in the foreseeablefuture. Enrollment at proprietary colleges is projected to grow muchfaster, 5 percent to 10 percent a year. In fewer than 10 years,proprietary colleges are expected to account for 14 percent of totalhigher education enrollment. The sector is now positioned to prosper as the flow of federaldollars through the federal spigot becomes a torrent See BitTorrent. torrent - BitTorrent . The U.S. spendsabout $410 billion on post-secondary education every year, a figure thatis expected to increase as President Obama strives to reach his goals ofgetting every American to enroll in some form of education beyond highschool. A Firm Trend The trend is already well-established. More than 2,000 for profitschools take part in the federal Title IV program, allowing them todisburse dis��burse?tr.v. dis��bursed, dis��burs��ing, dis��burs��esTo pay out, as from a fund; expend. See Synonyms at spend.[Obsolete French desbourser, from Old French desborser federal loans, grants and other campus-based federal aid. Sincethe 2001-02 school year, Title IV disbursements to for-profit collegeshave increased by 164 percent, according to according toprep.1. As stated or indicated by; on the authority of: according to historians.2. In keeping with: according to instructions.3. the U.S. General AccountingOffice. A recent analysis by the Associated Press showed that a growingpercentage of both low-income students and the government aid thatfollows them are ending up at for-profit schools, from local careercollege to giant publicly traded chains such as the University ofPhoenix, Kaplan and Devry. [ILLUSTRATION OMITTED] Last year, the five institutions that received the most federalPell Grant The Pell Grant program is a type of post-secondary, educational federal grant program sponsored by the U.S. Department of Education. It is named after U.S. Senator Claiborne Pell and originally known as the the Basic Educational Opportunity Grant program. dollars were all for-profit colleges, collecting over $1billion among them. That was two-and-a-half times what those schoolshauled in just two years prior, the AP found, analyzing Department ofEducation data on disbursements from the Pell program, Washington'smain form of college aid to the poor. There are many reasons that for-profit schools are prospering.Unlike public community colleges, they don't face plunging statesubsidies. Budget crises might be bad news for governments, schools andstudents, but they are good news for for-profit institutions. Theschools also offer great flexibility to students, offering classes atnight, on weekends and online, though tuition generally is much morethan that of public schools. But even as the colleges experience an enrollment surge, they alsoare facing renewed scrutiny and criticism. Critics gripe gripev.To have sharp pains in the bowels.n.1. gripes Sharp, spasmodic pains in the bowels.2. A firm hold; a grasp. that theindustry has too many incentives simply to enroll students and tapWashington's largess lar��gessalso lar��gesse ?n.1. a. Liberality in bestowing gifts, especially in a lofty or condescending manner.b. Money or gifts bestowed.2. Generosity of spirit or attitude. , and not enough to make sure students succeed. For-profit schools long have been dogged by a reputation foroverzealous o��ver��zeal��ous?adj.Excessively enthusiastic: overzealous movie fans; an overzealous manager.o recruitment practices and high default rates among studentborrowers. Now, two recent developments seem certain to embolden em��bold��en?tr.v. em��bold��ened, em��bold��en��ing, em��bold��ensTo foster boldness or courage in; encourage. See Synonyms at encourage. federalregulators now writing rules aimed at reining Reining is a western riding competition for horses where the riders guide the horses through a precise pattern of circles, spins, and stops. All work is done at the lope (known more commonly worldwide as the canter) and gallop; the fastest of the horse gaits. in for-profit colleges andtheir recruitment practices. Last month, a report by the U.S. Department of Education showedthat more than one in five borrowers of federal student loans who attendfor-profit colleges default within three years of beginning repayment.Since the federal loans are guaranteed by the government, taxpayers windup paying for loans that can't be collected. The new data show nearly 400,000 students who entered repayment in2007 had defaulted by 2009, representing 12 percent of all students whoentered repayment that year. Nearly half of these borrowers (44 percent)attended for-profit schools, even though only 1 in 14 students attendsuch schools. A Significant Change The DOE report reflected an important change in federal policy thatcould create a burden on for-profit schools. In the past, the governmenthas reported loan default figures in terms of how many students defaultwithin two years. That figure stands at 6.7 percent of student borrowersoverall, and about 11 percent at for-profit schools. But in the belief that the three-year numbers give a fuller pictureof whether a student at a particular school will default, the governmentwill soon use the three-year standard to determine which collegesqualify for Title IV. Starting in 2012, colleges will be judged on howmany students default within three years of starting repayment. Thethreshold default rate for sanctions will be 30 percent. Any collegethat exceeds the benchmark can be disqualified dis��qual��i��fy?tr.v. dis��qual��i��fied, dis��qual��i��fy��ing, dis��qual��i��fies1. a. To render unqualified or unfit.b. To declare unqualified or ineligible.2. from Title IV. The DOE report showed that nearly 12 percent of borrowers who beganrepayment in fiscal 2007 defaulted within three years--up from 9.2percent for 2006. But at for-profit colleges, the rate was 21.2 percentwithin three years, according to The Associated Press. That was up from18.8 percent for fiscal 2006. Harris Miller Harris N. Miller is an American politician and businessman. He was formerly the president of the Information Technology Association of America and the World Information Technology and Services Alliance (WITSA). , president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of the Career College Association,which represents for-profit colleges, said the increase reflects thepoor economy. He also said high default rates don't measure aschool's quality, and noted that his group's members enrolllarge numbers of low-income students. "If you accept low-income students you're going to havehigh default rates," he told the AP. "It has nothing to dowith whether you're for-profit or not." Said Deborah Cochrane, program director at the Institute forCollege Access & Success: "While some increase in overalldefaults may be the result of unemployment and the economy, thosefactors do not explain the large numbers and percentages of defaults atcertain schools. Disturbingly dis��turb?tr.v. dis��turbed, dis��turb��ing, dis��turbs1. To break up or destroy the tranquillity or settled state of: "Subterranean fires and deep unrest disturb the whole area"high default numbers mean the educationstudents received did not give them the earning power Earning powerEarnings before interest and taxes (EBIT) divided by total assets.earning power1. The earnings that an asset could produce under optimal conditions. For example, AT&T may currently be earning $2. to repay theirstudent loans." The CCA (1) (Common Cryptographic Architecture) Cryptography software from IBM for MVS and DOS applications.(2) (Compatible Communications A last year commissioned a study which concluded that defaultrates are tied to numerous factors, including overall student debt andgraduation rates. [ILLUSTRATION OMITTED] "In sum the empirical evidence suggests that default rates arenot good vehicles for assessing the quality of institutions or ofvarious types of loans," the report said. "The causes for loandefault are rooted deeply in ever-present tensions around federalfinancial aid policy." Lawsuit Settled Days after the DOE report was released, the University of Phoenix,the nation's largest for-profit college, agreed to pay $78.5million to settle a whistleblower lawsuit over whether the school usedhigh-pressure recruiting tactics to enroll unqualified students andviolated federal law by paying salaries based on the number of studentsan employee enrolled. While the school admitted no wrongdoing in the settlement, the caseput for-profit institutions and their practices in an unwantedspotlight. Earlier in the year, in August, a report by the GAO urgedstrong government oversight of for-profit schools to ensure that onlyeligible students receive federal student aid. "Weaknesses in theDepartment of Education's oversight place students and federalfunds Federal FundsFunds deposited to regional Federal Reserve Banks by commercial banks, including funds in excess of reserve requirements.Notes:These non-interest bearing deposits are lent out at the Fed funds rate to other banks unable to meet overnight reserve at risk of potential fraud and abuse," it concluded. The CCA said "the GAO report describes the actions of a fewschool personnel and testing personnel behaving in an unethical unethicalsaid of conduct not conforming with professional ethics. manner.Nothing in the GAO report suggests that the practice of admittingunqualified students is widespread or indicative of the sector as awhole." "Our focus remains providing students with a purposeful pur��pose��ful?adj.1. Having a purpose; intentional: a purposeful musician.2. Having or manifesting purpose; determined: entered the room with a purposeful look. education designed to speed entrance to a competitive and productiveworkforce. We will continue working with our member institutions toassure that each maintains the highest level of ethical conduct, whetherin the admissions processes or any other aspect of school operations andconduct." Still, federal rules-writers appear ready to follow the GAOadmonition Any formal verbal statement made during a trial by a judge to advise and caution the jury on their duty as jurors, on the admissibility or nonadmissibility of evidence, or on the purpose for which any evidence admitted may be considered by them. . At issue are Higher Education Act rules. In 1992--the last timelawmakers moved to regulate for-profit schools--Congress barred schoolswhose students receive federal financial aid from paying recruitersbased on the number of students they enroll. Lawmakers feared recruiterswould bring in unqualified students to boost their own paychecks. In 2002, the Education Department added a series of 12 "safeharbors" to the regulations, specifying kinds of compensationpermitted under the law. Among the safe harbors are provisions allowingup to two pay raises for recruiters in any 12-month period and allowingthem to take part in profit-sharing plans. In a new round of rule-writing that will conclude later this year,DOE has recommended eliminating all of the exceptions. In a draftproposal, DOE said "the Department believes that the specificlanguage of the [1992] statute is clear, and that the elimination of allof the regulatory 'safe harbors' would best serve toeffectuate ef��fec��tu��ate?tr.v. ef��fec��tu��at��ed, ef��fec��tu��at��ing, ef��fec��tu��atesTo bring about; effect.[Medieval Latin effectu congressional intent." The DOE draft proposed language to replace the current rules.Colleges "will not provide any commission, bonus, or otherincentive payment based directly or indirectly upon success in securingenrollments or financial aid to any person or entity engaged in anystudent recruiting or admission activities or in making decisionsregarding the awarding of student financial assistance." Consumer advocates and college admission officials support the newproposal, contending it would eliminate abuse. But others believecolleges of all stripes need some guidance from regulators in devisingacceptable forms of merit compensation merit compensationMedical practice A salary based on the quality and cost-effectiveness of the work being performed . Public Support If those in Washington are intent on reining in for-profit schools,the public appears to be strong supporters of for-profit schools. Arecent national poll by the liberal group America for Democratic ActionEducation Fund found that public support for for-profit colleges isgrowing as the economy falters. Conducted by Lake Research Partners, the poll surveyed 1,000adults. It found that "for-profit education empowers minoritygroups, and does not hinder them. People believe higher education ismore critical now than ever to get ahead and support for-profiteducation as a way to make Obama's goal of increasing collegegraduates possible." Specifically, the poll found that 58 percent of adults have afavorable fa��vor��a��ble?adj.1. Advantageous; helpful: favorable winds.2. Encouraging; propitious: a favorable diagnosis.3. opinion of for-profit colleges. Only one in five had aunfavorable opinion. But while those figures may appear heartening, theypale in comparison to community colleges. The same poll found that 86percent of adults have a favorable opinion of community colleges, and 84percent have a favorable view of state-supported colleges anduniversities. Other key findings of the poll included: * 78 percent of those surveyed said they were convinced for-profituniversities have an open enrollment policy that offers a post-highschool education to many undeserved un��de��served?adj.Not merited; unjustifiable or unfair.unde��serv communities. * 81 percent surveyed said online for-profit colleges anduniversities offer students the flexibility they need to be successfuland earn a college degree. * 74 percent surveyed believe for-profit colleges and universitieshave access to the money needed to expand and have developed theinfrastructure needed to grow rapidly without lowering their educationalquality. The report concluded that "the public does not buy argumentsthat for-profit colleges and universities exploit their students.Instead, they believe these institutions play a powerful role in makinga college education more accessible to non-traditional and underservedstudents." "In the end, as more and more non-traditional students returnto college, the vast majority of Americans understand that for-profitcolleges and universities are a good option for these students becausethey offer more flexibility and the opportunity to earn a degree thatthey would otherwise not have." Comments: editor@ccweek.comThree-Year Default Rates on Student LoansThe federal Department of Education made public the rates at whichstudents are defaulting on their loans three years aftergraduation, Students at the larger for-profits were defaulting at arate of about 20 percent. Those are similar to levels seen duringthe early 1990's that prompted the last major changes in howgovernment regulates the industry. Here is a snapshot of thedefaults of some of the larger for-profit schools.NAME CITY STATE ENROLLMENTWestern Int. University Phoenix Ariz. 25,591University of Phoenix Phoenix Ariz. 369,123Strayer University Washington D.C 47,138DeVry University Chicago Ill. 31,275Kaplan University Davenport Iowa 53,212NAME 2-YEAR COHORT DEFAULT RATE No. Entered No. Entered Default Into Default Into Repayment RateWestern Int. University 4,017 21,706 18.50%University of Phoenix 9,941 106,702 9.30%Strayer University 647 10,692 6.00%DeVry University 2,201 24,403 9.00%Kaplan University 2,676 19,991 13.30%NAME 3-YEAR DEFAULT RATE No. Entered No Entered Default Into Default Into Repayment RateWestern Int. University 5,757 21,696 26.50%University of Phoenix 17,016 106,594 15.90%Strayer University 1,388 10,673 13%DeVry University 4,028 23,487 17.10%Kaplan University 4,054 17,428 23.2%SOURCE: PROPUBLICAPublic ImageFavorability ratingsof for-profit collegesand universities(Percent) Unfavorable Very Favorable Very Favorable UnfavorableTotal -20 -10 24 58African American -17 -8 24 65Latinos -16 -9 31 64Low Income Whites -16 -8 20 52SOURCE: AMERICANS FOR DEMOCRATIC ACTIONNote: Table made from bar graph.Default RecordAmong two-year schools, proprietaryschools have higher default rates thanother schools Public Private non-profit Proprietary2-Year Rate 8.1 7.4 9.93-Year-Rate 12.9 12.2 19.54-Year-Rate 16.6 16.2 27.2Note: Education provided official two-year defaultrates and modeled three- and four-year defaultrates, by sector, using December 2007 studentloan data.SOURCE: GAO ANALYSISNote: Table made from bar graph.