Responsive Document - CREW: Department of Education: Regarding For-Profit Education: 8/16/2011 - OS...

8/6/2019 Responsive Document - CREW: Department of Education: Regarding For-Profit Education: 8/16/2011 - OS Additiona

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Winters, DeborahFrom:Sent:To:

Private- Duncan, ArneMonday, June 07, 2010 9:13AMDuran, MaribelSubject: Fw: NYT: Facing Cuts in Federal Aid, For-Profit Colleges Are in a Fight

Please print

From: Kanter, MarthaTo: Rogers, Margot; Private - Duncan, Arne; Miller, TonySent: Sun Jun 06 17:33:50 2010Subject: NYT: Facing Cuts in Federal Aid, For-Profit Colleges Are in a Fight

Sent using BlackBerry

From: Pauline Abernathy To : Pauline Abernathy Sent: Sun Jun 06 15:55:02 2010Subject: NYT: Facing Cuts in Federal Aid, For-Profit Colleges Are in a Fight

FYI. Today's NYT has a good article on gainful employment.June 4, 2010Facing Cuts in Federal Aid, For-Profit Colleges Are in a FightBy TAMAR LEWIN

Any day now. the federal Department of Education will formally propose new regulations that wouldcut off federal aid to for-profit colleges whose graduates cannot earn enough to repay their studentloans.The regulations, known as the "gainful employment" rules. are an effort to rein in the high debt loadsstudents take on when they enroll in for-profit colleges that offer certificates or degrees in fields likenursing or culinary arts. Students at for-profit colleges are much more likely than others to default ontheir loans.Under the regulations, a draft ofwhich came out in February, for-profit colleges would not be eligibleto receive federal student aid if their graduates' debt load was too high to be repaid, over 10 years,with 8 percent of their starting salary.The Career College Association, which represents 1,450 for-profit colleges. is lobbying fiercelyagainst the regulations, which it argues are wrong-headed, unnecessary and likely to restrict needystudents' access to vocational training and higher education. With so many community collegesovercrowded, the for-profit colleges say, their programs represent the nation's best hope for trainingmuch-needed health care workers and technicians.

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The association criticizes almost every element of the regulations: the 8 percent debt limit, the 10-year repayment period and the underlying idea that high debt loads lead to loan default."Shouldn't the Department of Education have to present some facts and figures showing that there'sreally a problem with students who have debt-income ratios above 8 percent?" said Harris Miller,president of the association. "They haven't shown any evidence. And our own research shows thatstudents with high debt-income ratios actually default less than students with low debt-income ratios."Arne Duncan, the secretary of education, has avoided demonizing the for-profit schools. In a Mayspeech, he said that despite a "few bad apples," for-profit colleges play a vital role in helping thenation reach the Obama administration's goal of having the world's best-educated work force by2020.Advocacy groups representing students and consumers are less diplomatic. 'These programsoverpromise. underdeliver and load vulnerable students up with way too much debt," said Chrislindstrom, higher education program director at the U.S. Public Interest Research Group, part of acoalition of education, consumer, student and public interest groups supporting the regulations.In 2007, coalition members said, students at for-profit colleges made up only 7 percent of those inhigher education but 44 percent of those defaulting on federal student loans. Adding new fuel to thefire was a recent presentation at a New York conference for investors by Steven Eisman, a hedgefund manager known for having anticipated the housing market crash.Mr. Eisman, whose early awareness of structural problems in the housing market is described inMichael Lewis's bestseller 'The Big Short," said the for-profit education industry, like the subprimemortgage industry, has rested on the proliferation of loans to low-income people who would not beable to repay them.Without tighter government regulation, Mr. Eisman predicted, students at for-profit colleges willdefault on $275 billion of student loans over the next decade."Until recently I thought that there would never again be an opportunity to be involved with an industryas socially destructive and morally bankrupt as the subprime mortgage industry," said Mr. Eisman, ofFrontPoint Partners, a unit of Morgan Stanley. "I was wrong. The for-profit education industry hasproven equal to the task."tn an interview last week, Mr. Eisman said the gainful employment regulations help change the forprofits' business model of aggressively recruiting needy students eligible for maximum federal aid.For-profit colleges typically get three-quarters of their revenues from federal grants and loans- andsome, like Apollo Group, which owns the University of Phoenix, nearly 90 percent, the legal limit.Federal aid for students at for-profit colleges has more than quintupled, to $26.5 billion, since 2000."The University of Phoenix got about a billion dollars in Pell grants last year, and when you have anyinstitution growing that rapidly, it's only fiscally prudent to take a look at it," said Mark Kantrowitz ofFinaid.org, a financial aid Web site.Sara Jones, a spokeswoman for Apollo, said in a prepared statement that with 458,000 students, theUniversity of Phoenix's status as the largest recipient of federal financial aid makes sense. Thestatement also said that the university had a lower default rate than for-profits generally, and that inthe last year half its students had borrowed less than the maximum available.

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Federal law has long said that federal student aid can go only to for-profit colleges that "preparestudent for gainful employment in a recognized occupation." But this is the government's first effort todefine "gainful employment" in relation to graduates' debt-to-income loads."With a record number of students attending programs that are subject to this requirement, and arecord amount of taxpayer money being used to enable them to attend, it's more important than everto make sure they're getting their money's worth," said Pauline Abernathy, vice president of theInstitute for College Access and Success, part of the coalition supporting the regulations.A study conducted by Charles River Associates for the Career College Association estimated that 18percent of for-profit colleges' programs, serving a third of for-profits' students, would not satisfy thegainful employment regulations. But supporters of the regulations said for-profit colleges tended tohave very high operating margins and could still make healthy profits if they lowered their tuition toavoid running afoul of the new rules.The regulations' 8 percent standard is not absolute: Programs that fail it could retain eligibility for aid iftheir students achieved other standards like high levels of repayment or employment.For-profit colleges, which contribute generously to Democrats and Republicans alike, havesubstantial influence in Congress. On the Career College Association's annual Hill Day in March,members met with aides in almost every Congressional office, telling them the regulations would limitaccess to college for minority students with few other options.After the draft regulations are issued, there will be a public comment period, and final rules will beissued by Nov. 1, to take effect in July 2011.http 1/www.nvtimes.com/201 0/06/06/education/06gain. htm ? ref::;education&pagewanted=printPauline AbernathyVice PresidentThe Institute for College Access & Successwww.ticas.org and www.projectonstudentdebt.orgWe moved! TICAS' main number is now 510.318.7900. My direct line is 510.318.7903.

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Winters, DeborahFrom: Kanter, MarthaSent: Sunday, June 06, 2010 6:34PMTo: Rogers, Margot; Private- Duncan, Arne; Miller, TonySubject: NYT: Facing Cuts in Federal Aid, For-Profit Colleges Are in a Fight

Sent using BlackBerry

From: Pauline Abernathy To: Pauline Abernathy Sent: Sun Jun 06 15:55:02 2010Subject: NYT: Facing Cuts in Federal Aid, For-Profit Colleges Are in a Fight

FYI. Today's NYT has a good article on gainful employment.June 4, 2010Facing Cuts in Federal Aid, For-Profit Colleges Are in a FightBy TAMAR LEWII\I

Any day now, the federal Department of Education will formally propose new regulations that wouldcut off federal aid to for-profit colleges whose graduates cannot earn enough to repay their studentloans.The regulations, known as the "gainful employment'' rules. are an effort to rein in the high debt loadsstudents take on when they enroll in for-profit colleges that offer certificates or degrees in fields likenursing or culinary arts. Students at for-profit colleges are much more likely than others to default ontheir loans.Under the regulations, a draft of which came out in February, for-profit colleges would not be eligibleto receive federal student aid if their graduates' debt load was too high to be repaid, over 10 years,with 8 percent of their starting salary.The Career College Association , which represents 1,450 for-profit colleges, is lobbying fiercelyagainst the regulations, which it argues are wrong-headed, unnecessary and likely to restrict needystudents' access to vocational training and higher education. With so many community collegesovercrowded, the for-p rofit colleges say, their programs represent the nation's best hope for trainingmuch-needed health care workers and technicians.The association criticizes almost every element of the regulations: the 8 percent debt limit, the 10-year repayment period and the underlying idea that high debt loads lead to loan default."Shouldn't the Department of Education have to present some facts and figures showing that there'sreally a problem with students who have debt-income ratios above 8 percent?" said Harris Miller,president of the association. "They haven't shown any evidence. And our own research shows thatstudents with high debt-income ratios actually default less than students with low debt-income ratios."

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Arne Duncan, the secretary of education, has avoided demonizing the for-profit schools. In a Mayspeech, he said tliat despite a "few bad apples," for-profit colleges play a vital role in helping thenation reach the Obama administration's goal of having the world's best-educated work force by2020.Advocacy groups representing students and consumers are less diplomatic. "These programsoverpromise, underdeliver and load vulnerable students up with way too much debt," said ChrisLindstrom, higher education program director at the U.S. Pub lic Interest Research Group, part of acoalition of education, consumer, student and public interest groups supporting the regulations .In 2007, coalition members said, students at for-profit colleges made up only 7 percent of those inhigher education but 44 percent of those defaulting on federal student loans. Adding new fuel to thefire was a recent presentation at a New York conference for investors by Steven Eisman, a hedgefund manager known for having anticipated the housing market crash.Mr. Eisman, whose early awareness of structural problems in the housing market is described inMichael Lewis's bestseller "The Big Short," said the for-profit education industry, like the subprimemortgage industry, has rested on the proliferation of loans to low-income people who would not beable to repay them.Without tighter government regulation, Mr. Eisman predicted, students at for-profit colleges willdefault on $275 billion of student loans over the next decade."Until recently I thought that there would never again be an opportunity to be involved with an industryas socially destructive and morally bankrupt as the subprime mortgage industry," sa id Mr. Eisman, ofFrontPoint Partners, a unit of Morgan Stanley. "I was wrong . The for-profit education industry hasproven equal to the task ."In an interview last week, Mr. Eisman said the gainful employment regulations help change the forprofits' business model of aggressively recruiting needy students eligible for maximum federal aid.For-profit colleges typically get three-quarters of their revenues from federal grants and loans- andsome, like Apollo Group, which owns the University of Phoenix, nearly 90 percent, the legal limit.Federal aid for students at for-profit colleges has more than quintupled, to $26.5 billion, since 2000."The University of Phoenix got about a billion dollars in Pell grants last year, and when you have anyinstitution growing that rapidly, it's only fiscally prudent to take a look at it," said Mark Kantrowitz ofFinaid.org, a financial aid Web site.Sara Jones, a spokeswoman for Apollo, said in a prepared statement that with 458,000 students, theUniversity of Phoenix's status as the largest recipient of federal financial aid makes sense. Thestatement also said that the university had a lower default rate than for-profits generally, and that inthe last year half its students had borrowed less than the maximum available.Federal law has long said that federal student aid can go only to for-profit colleges that "preparestudent for gainful employment in a recognized occupation.'' But this is the government's first effort todefine "gainful employment" in relation to graduates' debt-to -income loads."With a record number of students attending programs that are subject to this requirement, and arecord amount of taxpayer money being used to enable them to attend, it's more important than ever

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to make sure they're getting their money's worth," said Pauline Abernathy, vice president of theInstitute for College Access and Success, part of the coalition supporting the regulations.A study conducted by Charles River Associates for the Career College Association estimated that 18percent of for-profit colleges' programs, serving a third of for-profits' students, would not satisfy thegainful employment regulations. But supporters of the regulations said for-profit colleges tended tohave very high operating margins and could still make healthy profits if they lowered their tuition toavoid running afoul of the new rules.The regulations' 8 percent standard is not absolute: Programs that fail it could retain eligibility for aid iftheir students achieved other standards like high levels of repayment or employment.For-profit colleges, which contribute generously to Democrats and Republicans alike, havesubstantial influence in Congress. On the Career College Association's annual Hill Day in March,members met with aides in almost every Congressional office, telling them the regulations would limitaccess to college for minority students with few other options.After the draft regulations are issued, there will be a public comment period, and final rules will beissued by Nov. 1, to take effect in July 2011 .http://www.nvtimes.com/201 0/06/06/education/06gain.html?ref=education&pagewanted=printPauline AbernathyVice PresidentThe Institute for College Access & Successwww.ticas.org and www.projectonstudentdebt.orgWe moved! TICAS' main number is now 510.318.7900. My direct line is 510.318.7903.

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Winters, DeborahFrom: Miller, TonySent: Thursday, April 01 , 2010 9:00AMTo: Kanter, Martha; Private- Duncan, Arne; Yuan, Georgia; Rose, Charlie; Cunningham, Peter:Subject: Shireman, Bob; Dannenberg, Michael; Plotkin, Hal; Dann-Messier, BrendaRE: For-profits vs. community colleges, report due out tomorrow

l(b)(S)

From: Kanter, MarthaSent: Thursday, April 01, 2010 12:55 AMTo: Private- Duncan, Arne; Miller, Tony; Yuan, Georgia; Rose, Charlie; Cunningham, Peter; Shireman, Bob; Dannenberg,Michael; Plotkin, Hal; Dann-Messier, BrendaSubject: FYI: For-profits. vs. community colleges, report due out tomorrow

, Martha KanterUnder SecretaryU.S. Department of Education''The future belongs to those who believe in the beauty of heir dreams!"-- Eleanor RooseveltBegin forwarded message:

From: GEORGE BOGGS Date: March 31,2010 1:53:19 PM PDTTo: GEORGE BOGGS Subject: For-profits vs. community colleges, report due out tomorrowFYI.

George

George R. BoggsPresident and CEOAmerican Association of Community Colleges

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One Dupont Circle, NW, Suite 410Washington, DC 20036

202.728.0200, ext. [email protected]

AACC: The Voice of America's Community Collegeswww.aacc.nche.edu

FYI. We will surely be dealing with this tomorrow .

FYI. The Washington Post is reporting below that a report paid for by CorinthianColleges will be released tomorrow showing "for-profit colleges do a better jobeducating students than community colleges, even while serving a more at-riskpopulation, and does so for a comparable sum of money." Of course, no one should besurprised when a report says nice things about the sector that paid for the report. Thepost notes that the contractor that wrote the report has done work for the NYC andChicago public schools, but not that most of its work is for for-profit companies,including for-profit schools and payday lenders. (The blog posting also discloses thatthe Wash Post owns Kaplan, but describes Kaplan as "a test-preparation company thatalso offers distance higher education," even though its revenues from higher educationswamp the revenues from test-prep .)For-profits vs. community collegeshttp:l/voices.washingtonpost.com/college-inc/2010/03/forprofits vs community colle.htmlA new study, scheduled for release Thursday, suggests that for-profit colleges do abetter job educating students than community colleges, even while serving a more atrisk population, and does so for a comparable sum of money.Commissioned by Corinthian Colleges, a major player in the for-profit sector, the studywas conducted by the Parthenon Group, a Boston consultancy that has done educationresearch for the New York and Chicago public schools.

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Leaders of Corinthian Colleges ordered the study "in response to the hyperbole, theinsinuations that we are not delivering value," said Mark Pelesh, executive vicepresident for legislative and regulatory affairs. The fast-growing sector has a re12utation- undeserved, the colleges say-- for charging students too much, over-selling themarket value of their services and leaving students deep in debt.(Note: The Washington Post Co. is a player in the f o r ~ p r o f i t college industry because itowns Kaplan, Inc., a test-preparation company that also offers distance highereducation.)The study examines U.S. Department of Education survey data on input and output andreaches the following conclusions:1. F o r ~ p r o f i t colleges are adding capacity at a rate of 6 percent, investing $800 million to$900 million a year, compared with a 1-percent annual growth rate among two-yearpublic institutions, whose growth is hindered by dwindling state funds.2. For-profit colleges serve a larger proportion of high-risk students (meaning at risk ofdropping out) than community colleges. Fifty-four percent of for-profit students meetthree or more "risk factors" as defined by the federal government, including parenthood,delayed enrollment and lack of a high school diploma. Thirty-six percent of communitycollege students are considered at high risk .3. For-profits h a v e arguably a higher success rate than community colleges. Sixtynine percent of students surveyed by the federal government attained the degree orcertificate they sought or transferred elsewhere within five years of enrollment in a forprofit college. The comparable rate in community colleges is 62 percent. Communitycollege students are far more likely to transfer to other schools, whereas for-profitstudents are more likely to attain certificates and then conclude their studies.4. For-profit colleges receive $26,700 in funding, on average, for every student whosuccessfully completes study or transfers. Community colleges receive $25,300 perstudent. The funding sources, of course, look entirely different: the for-profits receivemost of their funding in tuition and fees paid by students, whereas community collegesget most of their funds from state and local government.5. F o r ~ p r o f i t students start out with a lower income than community college students butyield a greater earnings gain through their studies. For-profit students earn $14,700, onaverage, when they begin their studies , and see an income boost of $7,900, or 54percent, when they leave. Community college students earn an average $20,300 whenthey start, and see a boost of $7,300, or 36 percent, when they finish .6. For-profit students are less likely than community college students to report that theywere surprised by how much they owed at the end of their studies. More than half of forprofit students report they were told how much they would have to borrow by theirinstitution, according to a survey of students by the Parthenon Group. By comparison,about 40 percent of community college students sa id their institution providedinformation on debt.Please follow College Inc. al l day, every day at washinqtonpost.com/college-inc.

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And for all our college news, campus reports and admissions advice, please see ournewHigher Education page at washingtonpost.com/higher-ed. Bookmark it!

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Winters, DeborahFrom:Sent:To:

Kanter, MarthaThursday, April 01. 2010 12:55 AMPrivate - Duncan. Arne; Miller, Tony; Yuan. Georgia; Rose. Charlie; Cunningham. Peter;Shireman, Bob; Dannenberg , Michael; Plotkin, Hal; Dann-Messier, BrendaSubject: FYI: For-profits vs. community colleges. report due out tomorrow

Martha KanterUnder SecretaryU.S. Department ofEducation"The future belongs to those who believe in the beauty of their dreams!"-- Eleanor RooseveltBegin forwarded message:

From: GEORGE BOGGS Date: March 31, 20 10 1:53: 19 PM PDTTo: GEORGE BOGGS Subject: For-profits vs. community colleges, report due out tomorrowFYI.

George

George R. BoggsPresident and CEOAmerican Association of Community CollegesOne Dupont Circle, NW, Suite 410Washington, DC 20036

202.728.0200, ext. [email protected] u

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AACC: The Voice of America's Community Collegeswww.aacc.nche.edu

FYI. We will surely be dealing with this tomorrow.

FYI. The Washington Post is reporting below that a report paid for by CorinthianColleges will be released tomorrow showing "for-profit colleges do a better jobeducating students than community colleges, even while serving a more at-riskpopulation, and does so for a comparable sum of money." Of course, no one should besurprised when a report says nice things about the sector that paid for the report. Thepost notes that the contractor that wrote the report has done work for the NYC andChicago public schools, but not that most of its work is for for-profit companies,including for-profit schools and payday lenders. (The blog posting also discloses thatthe Wash Post owns Kaplan , but describes Kaplan as "a test-preparation company thatalso offers distance higher education," even though its revenues from higher educationswamp the revenues from test-prep.)For-profits vs. community collegeshttp://vo ces.wash ngtonpos .com/coli ege-i nc/20 10/03/forprofits vs community colle.htmlA new study, scheduled for release Thursday, suggests that for-profit colleges do abetter job educating students than community colleges, even while serving a more atrisk population, and does so for a comparable sum of money.Commissioned by Corinthian Colleges, a major player in the for-profit sector, the studywas conducted by the Parthenon Group, a Boston consultancy that has done educationresearch for the New York and Chicago public schools.Leaders of Corinthian Colleges ordered the study "in response to the hyperbole, theinsinuations that we are not delivering value," said Mark Pelesh, executive vicepresident for legislative and regulatory affairs. The fast-growing sector has a reputation - undeserved, the colleges say- for charging students too much, over-selling themarket value of their services and leaving students deep in debt.(Note: The Washington Post Co. is a player in the for-profit college industry because itowns Kaplan, Inc., a test-preparation company that also offers distance highereducation.)

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The study examines U.S. Department of Education survey data on input and output andreaches the following conclusions:1. For-profit colleges are adding capacity at a rate of 6 percent, investing $800 million to$900 million a year, compared with a 1-percent annual growth rate among two-yearpublic institutions, whose growth is hindered by dwindling state funds.2. For-profit colleges serve a larger proportion of high-risk students (meaning at risk ofdropping out) than community colleges. Fifty-four percent of for-profit students meetthree or more "risk factors" as defined by the federal government, including parenthood,delayed enrollment and lack of a high school diploma. Thirty-six percent of communitycollege students are considered at high risk.3. For-profits have -- arguably -- a higher success rate than community colleges. Sixtynine percent of students surveyed by the federal government attained the degree orcertificate they sought or transferred elsewhere within five years of enrollment in a forprofit college. The comparable rate in community colleges is 62 percent. Communitycollege students are far more likely to transfer to other schools, whereas for-profitstudents are more likely to attain certificates and then conclude their studies.4. For-profit colleges receive $26,700 in funding, on average, for every student whosuccessfully completes study or transfers. Community colleges receive $25,300 perstudent. The funding sources, of course, look entirely different: the for-profits receivemost of their funding in tuition and fees paid by students, whereas community collegesget most of their funds from state and local government.5. For-profit students start out with a lower income than community college students butyield a greater earnings gain through their studies. For-profit students earn $14,700, onaverage, when they begin their studies, and see an income boost of $7,900, or 54percent, when they leave. Community college students earn an average $20,300 whenthey start, and see a boost of $7,300, or 36 percent, when they finish .6. For-profit students are less likely than community college students to report that theywere surprised by how much they owed at the end of their studies. More than half of forprofit students report they were told how much they would have to borrow by theirinstitution, according to a survey of students by the Parthenon Group. By comparison,about 40 percent of community college students said their institution providedinformation on debt.Please follow College Inc. all day, every day at washingtonpost.comlcollege-inc.And for all our college news, campus reports and admissions advice, please see ournew Higher Education page at washingtonpost.com/higher-ed. Bookmark it!

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Winters, DeborahFrom: Private - Duncan, ArneSent:To: Wednesday, June 17, 2009 9:48AMDuran, MaribelSubject: Fw: Article about For Profit FeNor

Please print

From : Rogers, MargotTo : Miller, Tony; Private- Duncan, Arne; 'Martha Kanter' ; Rose, Charlie; Cunningham, PeterCc : Hamilton, Justin; Shireman, Bobsent: Wed Jun 17 08:40:59 2009Subject: Article about For Profit FervorThought everyone would be interested in this; I think it is worth your taking 5 minutes to read it . I have pasted belowfor your convenience.http:ljwww.insidehighered.com/news/2009/06/16/cca

Ferment Over For-Profit CollegesJune 16, 2009ORLANDO -- The last few weeks have witnessed a truly remarkable discussion in Washington and on Wall Street surrounding for-profithigher education.

Reports (and sometimes rumors} about the prospect of tougher federal regulation of career colleges by the Obama administration havemade the rounds among Wall Street analysts, driving the stocks of the largest, publicly traded companies in the sector down by morethan 20 percent and prompting the U.S. Education Department two weeks ago to hold unprecedented conference calls with investorsand analysts to try to reassure them that department offiCials did not have it in for for-profit colleges .

That step did not calm the marl


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administration? And what does it say about for-profit higher education that the Education Department's leaders even care what WallStreet analysts say?Those are other questions were much discussed by at least some of those attending this week's Career College Association meeting,though hardly by most people here. While the public conception of for-profit colleges is dominated today by the handful of nationalcompanies whose campuses are found just of f the highways in many American cities-- the University of Phoenix. DeVry, KaplanHigher Education. to name several -- the vast majority of career colleges are still the mom-and-pop truck driving. beauty and,increasingly, allied health schools that have been mainstays of many towns for decades. While those institutions, too. are subject toEducation Department regulation of higher education, they have little to no stake in what Walt Street analysts say or think about theirbigger cousins.

The publicly traded companies. however, have a great deal at stake in what the analysts and investors say, and in recent months, asmall number of hem have been saying not-so -flattering things. Perhaps most prominent among them has been James Chanos. ananalyst at Kynikos Associates who, in several recent presentations at investor conferences and on television shows like JamesCramer's "Mad Money," has been comparing for-profit education companies to health care companies that make excessive profits byfeeding at the public trough (in the colleges' case, through the Pel! Grant and federal student loan programs).

Chanos's thesis. which has been embraced by several other analysts who follow the for-profit sector, is that the Obama administration(unlike its predecessor) is preparing to crack down on such corporate behavior. (A PowerPoint presentation he gave at an investorconference last month features an image of Obama in a cowboy hat under the tag line "There's a new sheriff in town."} Obama's chiefdeputy in higher education in this line of argument is Shireman, and it was his appointment to the Education Department's leadership inearly February that started the Wall Street decline .

The biggest dust-up, though, came last month when the deoartment announced that it wou ld undertake a new round of negotiationsover possible changes to federa l regulations governing policy areas, such as incentive compensation paid to student recruiters, that arepredominantly a factor among career colleges.

The announcement of the new regulatory review was made quietly (as is the norm) in the Federal Register. but after some analystscast the review as big trouble for the industry and others began bombarding the department with calls seeking clarification, Shiremandecided to hold the unprecedented conference calls.

But Shireman's insistence in the calls with for-profit investors and analysts that he would be an equal opportunity regulator was offsetfor some Wall Street watchers by a Deutsche Bank analyst's report that, in a cal l the day before with officials of raditional nonprofitcolleges, he had talked about the department's desi re to find c m who had been wronged by for-profit colleges that give incentivesto their student recruiters.

According to several accounts of the call with nonprofit college leaders, though, Shireman spoke of "victims and lawyers for thosevictims" only in response to a question that used that phrase. saying that the department would seek to protect students who werewronged by unscrupulous practices wherever they occurred.

Department officials have expressed increasing frustration that their assertions that they do not plan to single out for-profit colleges arekeep getting ignored or twisted in meaning. Experts on career colleges o ffer differing reasons why.

Some believe it's because the thesis just makes sense, given the backgrounds of he p layers and of the sector. Obama has made nosecret of his disgust wi th the larger corporate culture that contributed mightily to last fall's financial me ltdown, and Shireman, as aformer Congressional and Cl inton White House aide and as an advocate for low-income students. has long fought for policies thatprotect students from excessive debt and seek to ensure that they get a meaningful education.

While he has not been openly critical of for-profit colleges to any significant degree in the past, he can fairly be said to see himself as aprotector of the type of needy students that predominate at for-profit colleges. and to be simpatico with consumer protection groups thatsee themselves as watchdogs of the for-profit sector. which went through a wrenching scandal in the late 1980s that flushed many badactors out of business.

Trace Urdan. who analyzes for-profit colleges for Signal Hill, describes this line of th ink ing about the career college sector as being amicrocosm of fears about the Obama administration's overa ll approach to corporate Ame rica. "It's as much about Wall Street's paranoiaabout Obama as about the Education Oepartment .n he said. "The fear isn't about the details of ncentive compensation. The fear is thatSh ireman thinks that somehow Apollo is robbing students and taxpayers."

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But other analysts and many leaders in the career college sector offer a more nefarious explanation for the drumbeat of assertions thatthe department is gunning for for-profit colleges. They attribute the stream of analyst reports to "short sellers" (investors who buy andsell stocks in patterns that reward them when the stocks tumble) who have been trying {unsuccessfully) for several years to drive downthe price of shares of the publicly t raded higher education companies, which have generally outperformed the overall stock market formore than a decade.

At a time when the enrollments of for-profit co lleges are growing and the government is pouring billions more dollars into Pell Grantsand other programs that aid the low-income students who populate career colleges, these investors are turning to "nonsense like theassertions about increased regulatory scrutiny to drive down the institutions' stocks, Harris N. Miller, pres ident of the Career CollegeAssociation, said in an interview Monday after Madzelan's speech.

"I don't know how the department could be any clearer in its public statements" than 1t has been, Miller said . ''To me you just have totake them at their face:'We've been working well wi th the department,'' said Arthur Keiser, president of Keiser Colleges. a Florida-based chain of colleges thatis privately held and therefore not subject to the recent stock swoon. "There's a lot of paranoia out here. but I think we're all focused onthe same thing: making sure students succeed. They want that and we want that."

Jeffrey Volshteyn, a vice president at J.P. Morgan, is among the analysts who thinks that "people are just reading way too much intothis," and that the department will "enforce the rules just like it always has," for the for-profit colleges and all others.Jeffrey Silber of BMO Capital Markets, who is among the longest-serving analysts of the career college sector. tends to agree withVolshteyn that the department is not taking particular aim at for-profit colleges. But he also said that the uncertainty about thedepartment's agenda for rule making (an agenda that will take shape. in part, out of public hearings that begin this week) and thegeneral inclination toward regulation of a Democratic administration are likely to provide plenty of fodder for those who seek to keep forprofrt colleges -- and their stocks -- on the defensive."Could you see increased regulation" of for-profit colleges? he asked rhetorically. "Sure, though probably on the margins. But th is thingis not going to be resolved for months. and there's no telling what kind of noise will be generated in the m e a n t m e

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Winters, DeborahFro m:Sent:To:Cc:Subject:

Rogers, MargotWednesday, June 17, 2009 9:41AMMiller, Tony; Private - Duncan, Arne; 'Martha Kanter'; Rose, Charlie; Cunningham, PeterHamilton, Justin; Shireman, BobArticle about For Profit Fervor

Thought everyone would be interested in this; I think it is worth your taking 5 minutes to read it. 1have pasted belowfo r your convenience.http:ljwww insidehighered .com/news/2009/06/16/cca

Ferment Over For-Profit CollegesJune 16, 2009ORLANDO -- The last few weeks have witnessed a truly remarkable discussion in Washington and on Wall Street surrounding for-profithigher education.

Reports (and sometimes rumors} about the prospect of ougher federal regulation of career colleges by the Obama administration havemade the rounds among Wall Street analysts, driving the stocks of the largest. publicly traded companies in the sector down by morethan 20 percent and prom pt ing the U.S. Education Department two weeks ago to hold unprecedented conference calls with investorsand analysts to try to reassure them that department officials did not have it in for for-profit colleges.

That step did not calm the markets, though, in large part, many observers of the for-profit market assert. because several "short sellers"-- investors who bet that the value of a certain stock or group of stocks will fall -- have been doing their best to promote uncertainty onWall Street. On Monday, a leading department official took another shot at it at the annual meeting here of the Career CollegeAssociation, which represents most of the country's for-profit institutions.

'' I can stand here and tell you that I've been at the Department of Education for 30 years, and 1have never heard any one of our policyofficials say. 'We've got to get that sector. Let's put it to the for-profits. '" said Dan Madzelan , who is the acting assistant secretary fo rpostsecondary education. "That is not how any of our pol icy officials operate. They're concerned about what's best for students andtaxpayers, and agnostic with respect to the kind of nstitution affected. They are not interested in singling out any one sector.That language differed little from the words that Robert Shireman -- the deputy under secretary for education and the person whosealleged an imu s fo r for-profit higher education has been the primary bogeyman for those predicting the sector's downfall in recent weeks- used in last month's calls with investors.

"Our overall goal at the Department of Education in postsecondary education is to make sure that students -- potential students -whether young or old, have access to college, they have the information they need to make good choices, and that they have goodqua lity postsecondary education that serves both them as students and taxpayers as well." Shireman said. "If that's not the case, ifthere is not quality , we want to know about it and if we can , we want to do something about it. Whether that involves a public institution.a nonprofit. a for-profit, a two-year. a four-year. a trade program, whatever type or sector of ns titution , we want to do all we can to makesure that we good quality and get the degrees and certificates that we need in this country."

So why haven't department officials' repealed assertions that they aren't out to get for-profit colleges managed to reassure somepeople in the sector? Do most career college officials believe that their institutions have a target sign on their back in the Obamaadministration? And what does it say about fo r-profit higher education that the Education Department's leaders even care what WallStreet analysts say?

Those are other questions were much discussed by at least some of those attending th is week's Career College Association meeting.though hardly by most people here. While the pub lic conception of for-profit colleges is dominated today by the handful of nationalcompanies whose campuses are found just of f the highways in many American cities-- the University of Phoenix, DeVry. KaplanHigher Education, to name several - -the vast majority of career colleges are still the mom-and-pop truck driving, beauty and.increasingly, allied health schools that have been mainstays of many towns for decades. While those institutions. too, are subject toEducation Department regulation of higher education. they have little to no stake in what Wall Street analysts say or think about theirbigger cousins.

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The publicly traded companies, however, have a great deal at stake in what the analysts and investors say, and in recent months, asmall number of them have been saying not-so-flattering things. Perhaps most prominent among them has been James Chanos, ananalyst at Kynikos Associates who , in several recent presentat ions at investor conferences and on television shows like JamesCramer's "Mad Money." has been comparing for-profit education companies to health care companies that make excessive profits byfeeding at the public trough (in the colleges' case. through the Pell Grant and federal student loan programs}.Chanos's thesis, which has been embraced by several other analysts who follow the for-profit sector, is that the Obama administration. (unlike its predecessor} is preparing to crack down on such corporate behavior. {A PowerPoint presentation he gave at an investorconference last month features an image ofObama in a cowboy hat under the tag line "There's a new sheriff in town.") Obama's chiefdeputy in higher education in this line of argument is Shireman, and it was his appointment to the Education Department's leadership inearly February that started the Wall Street decline.The biggest dust-up, though, came last month when the department announced that it would undertake a new round of negotiationsover possible changes to federal regulations governing policy areas. such as incentive compensation paid to student recruiters, that arepredominantly a factor among career colleges.

The announcement of the new regulatory review was made quietly (as is the norm) in the Federal Register, but after some analystscast the review as big trouble for the industry and others began bombarding the department with calls seeking clarification, Shiremandecided to hold the unprecedented conference calls.But Shireman's insistence in the calls with for-profit investors and analysts that he would be an equal opportunity regulator was offsetfor some Wall Street watchers by a Deutsche Bank analyst's report that, in a call the day before with officials of traditional nonprofitcolleges, he had talked about the department's desire to find xvictims who had been wronged by for-profit colleges that give incentivesto their student recruiters.According to several accounts ot the call with nonprofit college leaders, though , Shireman spoke of "victims and lawyers for thosevictims only in response to a question that used that phrase, saying that the department would seek to protect students who werewronged by unscrupulous practices wherever they occurred.Department officials have expressed increasing frustration that their assertions that they do not plan to single out for-profit colleges arekeep getting ignored or twisted in meaning. Experts on career colleges of fer differing reasons why.

Some believe it's because the thesis just makes sense, given the backgrounds of the players and of the sector. Obama has made nosecret of his disgust with the larger corporate culture that contributed mightily to last fa ll' s financial meltdown, and Shireman, as aformer Congressional and Clinton White House aide and as an advocate tor low-income students, has long fought for policies thatprotect students from excessive debt and seek to ensure that they get a meaningful education.While he l'las not been openly critical of for-profit colleges to any significant degree in the past, he can fa irly be said to see himself as aprotector of the type of needy students that predominate at for-profit colleges, and to be simpatico with consumer protection groups thatsee themselves as watchdogs of the for-profit sector, which went through a wrenching scandal in the late 1980s that flushed many badactors out of business.

Trace Urdan. who analyzes tor-profit colleges for Signal Hill , describes this line of thinking about the career co llege sector as being amicrocosm of fears about the Obama administration's overall approach to corporate America. "It's as much about Waf Street's paranoiaabout Obama as about the Education Department," he said. "The fear isn 't about the details of incentive compensation. The fea r is thatShireman thinks that somehow Apollo is robbing students and taxpayers."But other analysts and many leaders in the career college sector offer a more nefarious explanation for the drumbeat of assertions thatthe department is gunning tor for-profit colleges. They attribute the stream of analyst reports to "short sellers" (investors who buy andsell stocks In patterns that reward them when the stocks tumble) who have been trying (unsuccessfully) for several years to drive downthe price of shares of the publicly traded higher education companies, which have generally outperformed the overall stock market tormore than a decade.At a time when the enrollments of for-profit colleges are growing and the government is pouring billions more dollars into Pell Grantsand other programs that aid the low-income students who populate career colleges, these investors are turning to nonsense like theassertions about increased regulatory scrutiny to drive down the institutions' stocks, Harris N. Miller, president of the Career Co lleg eAssociation, sa id in an interview Monday after Madzelan's speech.

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"I don't know how the department could be any clearer in its public statements'' than it has been, Miller said. ''To me you just have totake them at their face.

"We've been wor-Xing well with the department," said Arthur Keiser, president of Keiser Colleges, a Florida-based chain of colleges thatis privately held and therefore not subject to the recent stock swoon. "There's a lot of paranoia out here, but I think we're all focused onthe same thing: making sure students succeed. They want that and we want that."

Jeffrey Volshteyn, a vice president at J.P. Morgan, is among the analysts who thinks that "people are just reading way too much intothis." and that the department will "enforce the rules just like it always has , for the for-profit colleges and all others.

Jeffrey Silber of BMO Capital Markets. who is among the longest-serving analysts of the career college sector, tends to agree withVolshteyn that the department is not taking particular aim at for-profit colleges. But he also said that the uncertainty about thedepartment 's agenda for rule making (an agenda that will take shape, in part. out of public hearings that begin this week) and thegeneral inclination toward regulation of a Democratic administration are likely to provide plenty of fodder for those who seek to keep forprofit colleges -- and their stocks -- on the defensive."Could you see Increased regulation" of for-profit colleges? he asked rhetorically. "Sure. though probably on the margins. But this thingis not going to be resolved for months, and there's no telling what kind of noise will be generated in the meantime."

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Winters, DeborahFrom:Sent:To:Cc:Subject:

Yuan , GeorgiaWednesday , May 19 , 2010 8:54AMRose , Charlie; Miller, Tony; Rogers, MargotHamilton, JustinToday's Chronicle of Higher Education article on lobbyinghttp://chronicle.com/article/To-Battle-a-ProposedRule/65616/?sid=at&utm_source=at&utm_medium=enMay 19 , 2eHlIn a fight to Preserve Their Market, For-Profit Colleges Lobby Hard Against a Proposed RuleBy Goldie Blumenstyk and Kelly Fieldfor-profit colleges, faced with the threat of program closures, have gone on a lobbying andpublic - relations bli tz, spending hundreds of thousands of dollars in an attempt to beat backan Education Department proposal to cu t off federal student aid to for-profit programs whosegraduates carry high debt- to-income loads.In the five months since the department offered i ts controversial "gainful employmentproposal," for-profit colleges and their chief association have spent at least $62e,eeelobbying members of Congress, the Education Department, and the Office of Management andBudget, which is reviewing the department's proposed rule (see related article, with tables).The University of Phoenix, the nation's largest for-profit institution, has taken out ads inmajor publications, including The Chronicle, defending the sector and arguing against therule, while for-profit colleges are urging their students to sign on to a petition opposingthe plan.For-profit lobbyists and executives are swarming Capitol Hill and federal agencies, pushingan alternative plan that would require programs only to provide prospective students withmore information about their graduates ' debt levels and salaries. During the Career CollegeAssociation ' s annual "Hill Day" in March, members of the organization met with aides fromnearly every Congressional office. Their message: The proposal would cost jobs and limitaccess to college at a time when the president is pushing education as a so lution to highunemployment.In an attempt to discredit the proposal, some opponents have tried to paint Robert M.Shireman, who as deputy under secretary is the department ' s top political appointee onhigher-education issues , as a rogue actor. But even critics of th e plan acknowledge that Mr.Shireman, who is stepping down this summer, was not the sole author of the proposal.Lobbyists for the for-profit sector say the last time there was a lobbying push of thismagnitude was in 1992, when the Education Department was crafting rules governing commissionsfor college recruiters. The fight extends all the way to the top, with the chief executivesof major for-profit companies like ITT Educational Services, Career Education Corporation andCorinthian Colleges holding meetings with agency heads.For-profit lobbyists and Congressional aides say Education Department officials have beensurprised by th e amount of pushback they ' ve gotten on their proposal.Backing From BusinessThe for-profits have gotten a boost from the U.S. Chamber of Commerce, which represents bothfor-profit colleges and the employers who hire their graduates. In recent weeks, Arthur J.

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Rothkopf, executive vice president of the Chamber's Institute for a Competitive Workforce anda former president of Lafayette College, has met with Secretary of Education Arne Duncan andother department officials to voice concerns about the "gainful employment" rule, said RolfLundberg Jr. , the Chamber's chief lobbyist."Employers are keenly interested in the continuing ability of the for -profit industry tothrive," he said.Consumer and student groups, meanwhile, have launched a counteroffensive, urging thedepartment to stand firm and issuing briefs challenging the sector's claims about th e impactof th e proposal. In April, the Career College Association released a report on a study ofmore than 10,000 for-profit college programs. It estimates that nearly a fifth of thoseprograms would become ineligible for federal student aid and forced to close under theproposed rule, which would bar a program's students from taking on loan payments that exceed8 percent of the expected earnings for graduates in that program, based on a 10-yearrepayment plan. The association has extrapolated from those findings to predict that morethan five million students could be displaced over the next 10 years i f the rule is adopted.Supporters of the rule say the study demonstrates that the rule would hardly devastate thefor-profit college industry because 82 percent of programs would be unaffected."What is truly troubling," said Pauline M. Abernathy, vice president of the Institute forCollege Access &Success, is the Career College Association's response to the study. Ratherthan fighting the rule, she said, i ts members should shut down programs that require studentsto take on more debt than their likely earnings would allow them to repay.The study was conducted by a Jonathan Guryan, an associate professor of economics at theUniversity of Chicago Booth School of Business, along with a colleague from Charles RiverAssociates, a consulting firm with offices around the world. Neither Mr. Harris nor Mr.Guryan would reveal how much the association paid for the research or for the professor'strips to Washington to explain the findings to staff members on Capitol Hill and the ObamaAdministration. But both insisted that the association had no say over how the study wasconducted or in interpreting the results.An Appeal to Minority GroupsThough for-profit colleges are, in the words of one college lobbyist, "leaving no stoneunturned" in their effort to build Congressional opposition to th e plan, they areparticularly targeting minority lawmakers and members with for-profit colleges in theirdistr icts. In April, the Career College Association held a briefing for aides to members fromthe "Tri-Caucus"-the Congressional Black Caucus, the Congressional Hispanic Caucus, and theCongressional Asian Pacific American Caucus-in wh i ch association leaders warned that theproposal would harm minority students attending for-profit institutions. At the hearing, theassociation circulated charts showing that for-profit colleges educate, and graduate, moreAfrican -American and Hispanic students than public two- and four-year colleges.The sector's effort to appeal to minority groups has met with mixed success. While the Leagueof United Latin American Citizens and the National Black Chamber of Commerce have come outagainst the plan, members of the Tri-Caucus groups are spl i t over the proposal. In the u.s.House of Representatives, African-American lawmakers Rep. Alcee L. Hastings, Democrat ofFlorida, and Rep. Donald M. Payne, Democrat of New Jersey, sent a let ter signed by 18lawmakers to Mr. Duncan warning that the department's proposal would "disproportionately harmnontraditional and lower- income students" and "lead to educational capacity cutbacks incritically important fields." The letter urged the secretary to consider expandingdisclosures instead.But other members of the Tri-Caucus groups are suspicious of the sector. At the CareerCollege Association's briefing, some aides to minority lawmakers raised doubts about the

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value that for-profit institutions are providing students, with one aide calling proprietarycolleges "the Toyota" of education, according to an individual who attended the meetings. Anaide to one of the Hispanic lawmakers said that roughly seven of the 1e or so questionsraised by the two dozen attendees ranged from "somewhat skeptical to very skeptical.""We agree that the colleges provide the access," said another aide to a Hispanic lawmaker."Our concern is that the quality of the education is not what it needs to be."The aide suggested that the rules should be even stronger, calling the department's proposal"actually pretty wimpy."He called the association's appeal to minority members "cynical.""Minority status is always used to ge t away with s0111ething," the aide said .Lobbying and PR BlitzFor-profit colleges have also been hiring lobbyists with ties to the Congressional BlackCaucus, the Education Department, and Congressional leaders. Both the Career CollegeAssociation and the Career Education Corporation have retained the Podesta Group, a powerfullobbying shop led by Tony Podesta, who is a top Democratic fund raiser with longstanding t iesto members of Congress.Among the lobbyists working for the colleges are Paul Brathwaite, a former executive directorfor the Congressional Black Caucus; Lauren M a d d o x ~ a former assistant secretary ofcommunications for the Education Department, and former aides to Sen. Richard J . Durbin,Democrat of Illinois and the assistant majority leader, and Rep. Al Green, Democrat of Texasand a member of the Congressional Black Caucus.During the f i rs t three months of 2e1e, the association and Career Education Corporation paidthe Podesta Group about $14e,eee in lobbying fees, making the Podesta Group No. 1 among 14lobbying firms hired by the largest for-profit college groups, according to a Chronicleanalysis of lobbying disclosure forms. (Podesta Group has represented both for severalyears.) Another lobbying firm led by Mr. Podesta's wife, Heather, received approximately$2e,eee each from Concorde Career Colleges, DeVry Inc, and Education Management LLC duringthat time period.M e a n w h i l e ~ Kaplan Inc. has hired Dezenhall Resources, a Washington-based public-relationsfirm known in political circles (and a 2ee6 Business Week story) as the "pit bull of publicrelations" for i ts secretive work for interests seeking to undermine environmental groups andadvocates for open access to research findings.Kaplan officials declined to comment on Dezenhall's entire role, but did acknowledge that thefirm has been helping i t to place op-ed articles that question th e proposed rule. (One ofthose, by Robert H. Atwell, a former president of the American Council on Education and alsoa former board member Education Management Corporation, which owns for-profit colleges,recently appeared as a letter to the editor in The Chronicle.)For -profit colleges are being "undeservedly lambasted" by news media and others and "insituations like t h i s ~ companies hire outside experts like D e z e n h a l l ~ " said Ronald H. Iori, aspokesman for Kaplan Higher Education, which runs Kaplan University and other for-profitcolleges.Calls and e-mails to Dezenhall from The Chronicle were not returned. On its Web site,Dezenhall describes i ts chief product as "crisis management" and notes that i t is "typicallybrought in during times of intense scrutiny, risk, or competition."

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In addition to the personal visits to lawmakers and regulators, the colleges and companieshave been trying to make their case in the news media, both with op-ed commentariescriticizing the rule, and paid advertisements.This week, for example, the University of Phoenix, ran advertisements aimed at discreditingthe proposed gainful-employment rule as a policy that could "limit access to the education somany Americans desire." One of the ads uses a quote from Mr. Shireman praising the for-profitsector. MThe ads will or have run in newspapers widely read on Capitol Hill-Politico, CQToday, Roll Call, The washington Post, and The Chronicle.Terri C. Bishop, executive vice-president for external affairs for the university's parentcompany, the Apollo Group, would not say how much the company is spending on the ads.On the other side of the fight over the gainful employment rule are groups representingstudents, consumers and civil -rights organizations. They have also held meetings withCongressional aides and agency heads, and, later this week, a coalition of more than 20groups will announce their support for "strong and effective regulation.""CCA is much louder than we are because they have way more to lose," said ChristineLindstrom, higher-education program director for u.s. Public Interest Research Group, aconsumer organization."They have just been a force on the Hill and in the media," she said. "Now we're feeling theneed to amp it up ourselves."Ms. Lindstrom said the association's message, and in particular its argument that i t servesminority students, is disingenuous. "They keep saying, 'We serve this population. We servethis population."' But th e reality is , i f you're serving a financially needy population,"then you need to care about debt and defaults and job placement."An association of Florida community-college presidents has already publicly endorsed theproposed rule, calling i t "a fair measure' in a letter to Mr. Duncan, and a Texas communitycollege association is considering doing so.Student PetitionOne unusual piece of the lobbying effort is the online petition drive from an organizationcalling i tself students for Academic Choice.For more than two weeks, the self-described organization of "proud students and graduates ofprivate, postsecondary career oriented institutions" has been seeking signatures from atleast 1ee,eee fellow students and graduates for their petition opposing th e proposed rule.(As of Tuesday, the counter on the si te showed under 32,eee signers.)"This new regulation would treat career-college students as separate and inherently unequal,"the petition reads, invoking language of the segregation era.The site was established with the technical and financial help of the Career CollegeAssociation, and a number of colleges have put up links to i t on their own Web sites. Atleast one of those pages with the link invites readers with questions to contact a CareerCollege Association lobbyist, Bruce Leftwich.Advocates for the proposed rule call the petition a classic example of "astroturfing,"-anattempt by the association to create the appearance of grass-roots opposition.The career college's president, Mr. Miller, said the idea for the petition came from some ofthe same 150 students who participated in the association's March 11 "Hill Day," an annual

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event that brings hundreds of college officials to lobby their representatives and senators .The association3 he said 1 helped out at the students' request."These are not wealthy middle-class students who have lots of free time/' he said. "We makeno apologies for assisting the group getting set up."He said the language of the petition was not an attempt by his association to make allusionsto the civil-rights battles overturning racial segregation. "I'm not clever enough to usecode words," said Mr. Harris.Another group, the Business Industry Political Action Committee1 has created Web sites forthe Education Management Corporation that urge the company's 29 1 999 employees and 136,eeestudents to weigh in with Congress on the gainful -employment rule.With the department's decision on the rule expected to affect the stocks of publicly tradedfor -profits, Wall Street analysts have also been closely watching the debate over theproposal . One of them, Trace A. Urdan, an analyst with Signal Hill Capital Group, has evenoffered for-profits some advice on fighting the proposal: "Embrace the media, control themessage3" he urged in an April 27 note to clients and others. "Go on cable television (rightand left) and make the case fo r more-rigorous disclosure and student choice over governmentprice controls."He also suggested that the companies appeal to their supporters within the CongressionalBlack Caucus and to the alternative media outlets that serve minority communities and otherinterests. "Industry has a great story to tel l in terms of expanding educational accesswithin minority communities and in terms of a government policy that seeks to rob thesestudents of choice and condescends to their ability to make informed choices," he said.Congressional PushbackThe colleges' arguments appear to be getting some traction in Congress. In addition to theletter sponsored by Representatives Hastings and Payne, at least two Democratic S\senatorsBill Nelson of Florida and Bob Casey of Pennsylvania-have sent letters to th e EducationDepartment opposing the proposal. Sen. Lamar Alexander3 Republican of Tennessee, hassuggested that the department consider applying caps on default rates to for-profit collegeprograms rather than adding another layer of regulation. The existing rules penalize collegeswhose default rates over all exceed certain levels.Mr. Alexander3 a former secretary of education3 and a member of the Senate education andappropriations committees, has warned that he will offer an amendment to withhold funds toput th e rule into effect i f the department follows through with i ts original proposal.One senior Republican aide says that the Education Department has fa iled to make a case fo rits proposal. Education Department officials have so far refused to provide opponents of therule with the data they say they used in drafting the rules."The department hasn't presented a factual case," the aide said. "Before you can legislate3you have to have a factual case."Meanwhile, on th e House side, Rep. Robert E. Andrews 1 Democrat of New Jersey, is preparing tooffer legislation that would substitute the debt-to-income ratio for a "matrix" of variablesused to measure the value that for-profit colleges add. The matrix, he said in an interview3would apply to al l colleges, nonprofit and for-profit3 and assess four things: job placementin th e advertised field, graduation rates, default rates, and success in serving low-income,high -need populations. His goal, he said, is to measure students' "actual outcomes," ratherthan their "projected incomes."

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"I think the department has chosen the wrong method to measure value-added," Mr. Andrews saidin an interview. Pif we want to measure whether people get a job and how much money theymake, let ' s measure whether people get a job and how much money they make."Comments1. handley - May 19, 2e1e at es:29 amAs the father of two recent graduates of non-profit colleges, both of whom are strugglingwith debt far above 8% of their income, I am in favor of applying the same regulations to allinstitutions of higher ed. Student debt is student debt, regardless of whether the collegepays taxes or not. I t is irrational to suggest that this is the basis fo r the proposedgainful employment regulation and not apply i t across the board.Once we admit that, we can start talking about disclosure as the most sensible solutionrather than program elimination. I hasten to add that disclosure should also apply to allinstitutions, not just for -profits.

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Winters, DeborahFrom:Sent;To :Cc:Subject:Attachments:

Folks:(b)(5)

Peter

From: Rogers, Margot

Cunningham, PeterFriday, April30, 2010 1:34PMRogers, M a r ~ Miller, Tony; Kanter, Martha; Rose, Charlie; Gomez, GabriellaHaro, Adrian; )(6) [email protected]: Mtg tomorrow03_24_10_Frontline_lnterview_Briefing[1].doc; 4-28 Statement regarding fo r profits.doc; 4-28Statement regarding for profits.doc; 4-30 media.doc; AD on AOL.doc; analyst overview ofShireman remarks. pdf; frontline press release and other info.doc;Gainfui_Employment_T alking_Points_-_MD[1 .doc; Harris miller 04-28-1 OOuncanLetter[ 1 .pdf;Homeless Dropouts Lured by For-Profits.doc; Notes on frontline.doc; Shireman Speech andQ&A.pdf

Sent: Friday, April 30, 2010 11:58 AMTo: Miller, Tony; K a n t e r ~ Martha; Cunningham, Peter; Rose, Charlie; Gomez, Gabriella1


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Cc: Haro, AdrianSubject: Mtg tomorrowPeter ha s put together a set of materials for us to review re : Frontline etc. Those will becoming to you later today. In the meantime, I 'd like to schedule a short call for tomorrowso that we can touch base about what, i f anything, we want to roll out on Monday.Pls send Adrian any preferences you have for tomorrow morning/afternoon. Thx

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PRESS RELEASEFRONTLINE INVESTIGATES THE RISE OF FOR-PROFIT UNIVERSITIES AND THETENSIONS BETWEEN THEIR WALL STREET BACKERS AND REGULATORSFRONTLINE PresentsCollege, Inc.Tuesday, May 4, 2010, at 9 P.M. ET on PBSwww.pbs.org/frontline/collegeincwww.facebook.com/frontlinepbsTwitter: @frontlinepbsEven in lean times, the $400 billion business of higher education is booming. Nowhere is thismore true than in one of the fastest-growing- and most controversial- sectors of the industry:for-profit colleges and universities that cater to non-traditional students, often confer degreesover the Internet, and, along the way, successfully capture billions of federal financial aiddollars.In College, Inc., airing Tuesday, May 4, 2010, at 9 P.M. ET on PBS (check local listings),FRONTLINE correspondent Martin Smith investigates the promise and explosive growth of thefor-profit higher education industry. Through interviews with school executives, governmentofficials, admissions counselors, former students and industry observers, this film explores thetension between the industry-which says it's helping an underserved student population obtaina quality education and marketable job skills- and critics who charge the for-profits withchurning out worthless degrees that leave students with a mountain ofdebt.At the center of t all stands a vulnerable population of potential students, often working adultseager for a university degree to move up the career ladder. FRONTLINE talks to a former stafferat a California-based for-profit university who says she was under pressure to sign up growingnumbers of new students. "I didn't realize just how many students we were expected to recruit,"says the former enrollment counselor. "They used to tell us, you know, 'Dig deep. Get to theirpain. Get to what's bothering them. So, that way, you can convince them that a college degree isgoing to solve all their problems.mGraduates of another for-profit school-a college nursing program in California-tellFRONTLINE that they received their diplomas without ever setting foot in a hospital. Graduatesat other for-profit schools report being unable to find a job, or make their student loan payments,because their degree was perceived to be of little worth by prospective employers. One womanwho enrolled in a for-profit doctorate program in Dallas later learned that the school neveracquired the proper accreditation she would need to get the job she trained for. She is nowsinking in over $200,000 in student debt.The biggest player in the for-profit sector is the University of Phoenix-now the largest collegein the US with total enrollment approaching half a million students. Its revenues of almost $4billion last year, up 25 percent from 2008, have made it a darling of Wall Street. Former topexecutive of he University of Phoenix Mark DeFusco told FRONTLINE how the company's


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business-approach to higher education has paid off: "lf you think about any business in America,what business would give up two months of business-just essentially close down?" he asks."[At the University of Phoenix], people go to school all year round. We start classes every fiveweeks. We built campuses by a freeway because we figured that's where the people were.""The education system that was created hWldreds ofyears ago needs to change," says MichaelClifford, a major education entrepreneur who speaks with FRONTLINE. Clifford, a formermusician who never attended college, purchases struggling traditional colleges and turns theminto for-profit companies. "The big opportunity," he says, "is the inefficiencies of some of thestate systems, and the ability to transform schools and academic programs to better meet theneeds of the people that need jobs."''From a business perspective, it's a great story," says JeffSilber, a senior analyst at BMOCapital Markets, the investment banking arm of the Bank ofMontreal. "You're serving a marketthat's been traditionally underserved ... And it's a very profitable business-it generates a lot offree cash flow."And the cash cow of the for-profit education industry is the federal government. Though theyenroll 10 percent ofall post-secondary students, for-profit schools receive almost a quarter offederal financial aid. But Department ofEducation figures for 2009 show that 44 percent of thestudents who defaulted within three years of graduation were from for-profit schools, leading toserious questions about one of the key pillars of the profit degree college movement: that theirdegrees help students boost their earning power. This is a subject of increasing concern to theObama administration, which, last month, remade the federal student loan program, and is nowproposing changes that may make it harder for the for-profit colleges to qualify."One of the ideas the Department ofEducation has put out there is that in order for a college tobe eligible to receive money from student loans, it actually has to show that the education ifsproviding has enough value in the job market so that students can pay their loans back," saysKevin Carey of the Washington think tank Education Sector. "Now, the for-profit colleges, lthink this makes them very nervous," Carey says. "They're worried because they know thatmany of their members are charging a lot ofmoney; that many of their members have studentswho are defaulting en masse after they graduate. They're afraid that this rule will cut them out ofthe program. But in many ways, that 's the point."FRONTLINE also finds that the regulators that oversee university accreditation are lookingcloser at the for-profits and, in some cases, threatening to withdraw the required accreditationthat keeps them eligible for federal student loans. ' 'We've elevated the scrutiny tremendously,"says Dr. Sylvia Manning, president of the Higher Learning Commission, which accredits manypost-secondary institutions. "lt is really inappropriate for accreditation to be purchased the way ataxi license can be purchased ...When we see any problematic institution being acquired andbeing changed we put it on a short leash."College, Inc. is a FRONTLINE co-production with RAIN Media, lnc., produced by ChrisDurrance and John Maggio and written by John Maggio and Martin Smith. The correspondent isMartin Smith. FRONTLINE is produced by WGBH Boston and is broadcast nationwide on PBS.Funding for FRONTLINE is provided through the support ofPBS viewers. Major funding for


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FRONTLINE is provided by The John D. and Catherine T. MacArthur Foundation. Additionalfunding is provided by the Park Foundation and by the FRONTLINE Journalism Fund. Majorfunding for College, Inc. is provided by the Bill & Melinda Gates Foundation. Additionalfunding is provided by Lumina Foundation for Education. FRONTLINE is closedcaptioned fordeaf and hard-of-hearing viewers and described for people who are blind or visually impaired bythe Media Access Group at WGBH. FRONTLINE is a registered trademark of the WGBHEducational Foundation. The senior producer of FRONTLINE is Raney Aronson-Rath. Theexecutive producer of FRONTLINE is David Fanning.pbs.org/pressroomPromotional photography can be downloaded from the PBS pressroom.Press contactDiane Buxton (617) 300-5375 diane [email protected] [email protected]: 1212 579 7781c: 1 646 236 5492Gwen SchroederAssociate ProducerRAINmedia for PBS/FRONTLINE(212} 579-7781 Phonegschroeder@rainmedla .net


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Random quote from Shireman in recent interview"Targeting vulnerable populations who are not likely to benefit is one example of overzealous recruitingthat can be driven by paying based on enrollment numbers," says Robert Shireman, Deputy UnderSecretary of the U.S. Education Department, which is pushing to tighten the rules.Todav's clips 4-3010Education Stocks Drop On Comments By DOE Official (AP)By Erin ConroyAssociated Press, April30, 2010Shares of for-profit schools fell Thursday following a report that a Department of Education officialcriticized oversight of the industry in aspeech Wednesday to state regulators.Deputy Undersecretary of Education Robert Shireman compared the insmutions to the Wall Streetfirms whose behavior led to the financial meltdown, according to Inside Higher Ed, a trade publication.The growing for-profit education sector is drawing heavy sums of federal student aid money, andseveral for-profit schools saw their share of Pell Grant money rise by more than a third this year, Shiremanreportedly said.The publication relied on the reports of people in the audience to produce its coverage of Shireman'sspeech.The sector has been criticized as leaving students with overwhelming debt for questionable training.Federal grants cover only a small portion of any student's tuition and other expenses.Shares of DeVry Inc. dropped $4.09, or 6.1 percent, to $62.61 on Thursday. And stock in ApolloGroup Inc.-- which runs the University of Phoenix chain, the nation's largest for-profit school-- slid $3.56,or 5.8 percent, to $57.94.Shares of Corinthian Colleges Inc. fell 87 cents, or 5.1 percent, to $16.04; Career Education Corp.sank 3.36 cents, or 10.1 percent, to $30.05 and Strayer Education Inc. lost $3.04, or 1.2 percent, to$243.71. ITT EducaUonal Services Inc. shed $7.09, or6.4 percent, to $103.61.

Signal Hill analyst Trace Urdan called the drops "overdone.""The challenge in this case would be to show that the academic rigor was inferior to that ofcomparable institutions which, in our opinion, would be extremely difficult," Urdan wrote in a note toinvestors.He was responding to Shireman's reported comment that there is aconflict of interest inherent in theway higher education is regulated.NoUng that accrediting agencies depend on financial contributions from the programs they rate,Shireman questioned whether the tradition of joint oversight by the federal government, state governmentsand accrediting groups can guarantee school quality, the publication said.Urdan was among the readers who posted comments about the event and the report on Inside HigherEducation's website Thursday.Several commenters said Shireman's comments included positive statements about for-profit schools-- including that they performed the important function of meeting fast-rising demand for higher education.DeVry, Career Education Drop On Federal Official's Criticism (BLM)Bloomberg News, April30, 2010(Bloomberg} - Apollo Group Inc., the biggest U.S. for-profit education provider; Career EducationCorp.; Grand Canyon Education Inc., and DeVry Inc. fell in stock trading after a trade joumal report thatU.S. Education Deputy Undersecretary Robert Shireman criticized the companies.


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Career Education, based in Hoffman Estates, dropped $3.41, or 10 percent, to $30. DeVry, based inOakbrook Terrace, fell $4.51 ,or 6.8 percent, to $62.19.Apollo Group Inc., based in Phoenix, fell $3.50, or 5.7 percent, to $58 at 12:26 p.m. in New Yori< StockExchange composite trading. Grand Canyon, also based in Phoenix, declined 76 cents , or 3 percent, to$24 .20.The Education Department has proposed rules that might make it more difficult for for-profit collegesto recruit students and qualify for federal financial aid programs. In a speech yesterday, Shireman criticizedfor-profit educators for their growing use of federal student aid, the trade journal Inside Higher Ed reportedtoday on its Web site. Crain's Briefing"Allegedly , Mr. Shireman mentioned the for-profit education companies by name in reference to theincreasing amount of federal student aid being used by students to attend their schools ," said Jeffrey Silber,an analyst with BMO Capital Markets in New York, in a note to clients. "He then compared the relationshipbetween for-profit education companies and national accrediting agencies to the relationship between WallSt. firms and ratings agencies , citing an inherent conflict of i n t e r e s t . ~ ITT, Bridgepoint SharesITT Educational Services Inc., based in Carmel, Indiana, fell $6.05, or 5.5 percent, to $104.65. SanDiego-based Bridgepoint Education Inc., fell 61 cents , or 2.4 percent, to $25.04.Federal aid to for-profit colleges increased to $26.5 billion in 2009 from $4.6 billion in 2000, accordingto the department.The severity of the remarks was a departure for the Education Department official , who had been"congenial" to for-profit educators , Silber said in the note.Shireman's remarks weren't prepared as a speech, and the Education Department wasn't able toprovide a copy of them, said Justin Hamilton, a spokesman."For-profit colleges play a critically important role in helping to ensure so many American's haveaccess to education and training that can improve their job prospects and their lives," he said in an e-mail."We've had constructive discussions in recent months, and look forward to continued thoughtful dialoguewth the career education community."Shireman noted that higher-education accrediting agencies are constituted by, and financiallysupported by, their member colleges, according to Inside Higher Ed."Federal and state governments cannot rely on accreditors to assure that consumers and taxpayersare protected to full extent that they need to be," Shireman said, according to the report.Education Dept Criticism Pressures For-Profit Ed Shares (OJ)By Kerry Grace BennDow Jones Newswire, April30, 2010NEW YORK (Dow Jones}--For-profit education companies were under pressure Thursday after aU.S.Department of Education official did an about-face and bashed the companies and the accreditationprocess in a speech late Wednesday, allegedly comparing the sector with Wall Street firms whose actionsbrought about the financial turmoil of the last few years.In aspeech to state regulators who oversee for-profit colleges , Robert Shireman , the man behind theEducation Department's strategy, called out the colleges one by one for the increas ing amounts of federalstudent aid money they're getting , according to an article in industry publication Inside Higher Ed.BMO Capital Markets analyst Jeffrey Silber said in a note to clients he doesn't think the author ofInside Higher Ed's article was present to hear the speech, and that it's based on accounts from people who"presumably did attend."


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Silber said his thesis hasn't changed on the stocks--that there will likely be some constraints becauseof the regulation process, but he is cautiously optimistic the changes proposed earlier this year, like thegainful-employment proposition, will be diluted somewhat."However, the 'fear factor' has certainly risen this morning," he wrote.There were no prepared remarks for Shireman's speech, aDepartment of Education spokesman said,and Shireman wasn't immediately available for comment."For-profit colleges play a critically important role in helping to ensure so many Americans haveaccess to education and training that can improve their job prospects and their l i v e s the spokesman said."We've had constructive discussions in recent months and look forward to continued thoughtful dialog withthe career education community."Shares of Career Education Corp. (CECO) fell 10% to $30.07, while Corinthian Colleges Inc. (COCO)dropped 7.2% to $15.70. ITT Educational Services Inc. (ESI) declined 5.4% to $104.73, Apollo Group Inc.(APOL) slid 6% to $57.83 and Grand Canyon Education Inc. (LOPE) declined 2.4% to $24.37.Strayer Education Inc. (STRA), which beat analysts' expectations with its first-quarter earnings earlierThursday, pared some declines , falling 1.1% to $244.03.Signal Hill Group analyst Trace Urdan thinks Shireman's speech shows the Education Department is"taking avery hard line in promoting its gainful employment regulations.The most hotly debated measure to come out of the negotiated rulemak ing discussions was agovernment proposal to hold coll

Responsive Document - CREW: Department of Education: Regarding For-Profit Education: 8/16/2011 - OS...

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