[Senate Hearing 111-1160]
[From the U.S. Government Publishing Office]
S. Hrg. 111-1160
FOR-PROFIT SCHOOLS: THE STUDENT RECRUITMENT EXPERIENCE
=======================================================================
HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
ON
EXAMINING FOR-PROFIT SCHOOLS, FOCUSING ON THE STUDENT RECRUITMENT
EXPERIENCE, AND UNDERCOVER TESTING TO OBSERVE MARKETING PRACTICES
__________
AUGUST 4, 2010
__________
Printed for the use of the Committee on Health, Education, Labor, and
Pensions
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
TOM HARKIN, Iowa, Chairman
CHRISTOPHER J. DODD, Connecticut
BARBARA A. MIKULSKI, Maryland
JEFF BINGAMAN, New Mexico
PATTY MURRAY, Washington
JACK REED, Rhode Island
BERNARD SANDERS (I), Vermont
ROBERT P. CASEY, JR., Pennsylvania
KAY R. HAGAN, North Carolina
JEFF MERKLEY, Oregon
AL FRANKEN, Minnesota
MICHAEL F. BENNET, Colorado
CARTE P. GOODWIN, West Virginia
MICHAEL B. ENZI, Wyoming
JUDD GREGG, New Hampshire
LAMAR ALEXANDER, Tennessee
RICHARD BURR, North Carolina
JOHNNY ISAKSON, Georgia
JOHN McCAIN, Arizona
ORRIN G. HATCH, Utah
LISA MURKOWSKI, Alaska
TOM COBURN, M.D., Oklahoma
PAT ROBERTS, Kansas
Daniel E. Smith, Staff Director
Pamela Smith, Deputy Staff Director
Frank Macchiarola, Republican Staff Director and Chief Counsel
(ii)
C O N T E N T S
__________
STATEMENTS
WEDNESDAY, AUGUST 4, 2010
Page
Harkin, Hon. Tom, Chairman, Committee on Health, Education,
Labor, and Pensions, opening statement......................... 1
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming,
opening statement.............................................. 3
Prepared statement........................................... 6
Kutz, Gregory D., Managing Director, Forensic Audits and Special
Investigations, Government Accountability Office, Arlington, VA 10
Prepared statement........................................... 13
Franken, Hon. Al, a U.S. Senator from the State of Minnesota..... 38
Isakson, Hon. Johnny, a U.S. Senator from the State of Georgia... 40
Casey, Hon. Robert P., Jr., a U.S. Senator from the State of
Pennsylvania................................................... 42
Burr, Hon. Richard, a U.S. Senator from the State of North
Carolina....................................................... 44
Goodwin, Hon. Carte P., a U.S. Senator from the State of West
Virginia....................................................... 45
Mikulski, Hon. Barbara, a U.S. Senator from the State of Maryland 47
Bennet, Hon. Michael F., a U.S. Senator from the State of
Colorado....................................................... 50
Hawkins, David, Director of Public Policy and Research, National
Association for College Admission Counseling, Arlington, VA.... 52
Prepared statement........................................... 54
McComis, Michale S., Ed.D., Executive Director, Accrediting
Commission of Career Schools and Colleges, Arlington, VA....... 69
Prepared statement........................................... 71
Pruyn, Joshua, Former Admissions Representative, Alta College,
Inc., Denver, CO............................................... 81
Prepared statement........................................... 83
Alexander, Hon. Lamar, a U.S. Senator from the State of Tennessee 99
ADDITIONAL MATERIAL
Statements, articles, publications, letters, etc.:
Ingnorance by Degrees, article............................... 5
Senator Bennet............................................... 120
Response by Gregory D. Kutz to questions of:
Senator Enzi............................................. 121
Senator Hagan............................................ 125
Senator Alexander........................................ 126
Response by David Hawkins to questions of:
Senator Enzi............................................. 127
Senator Hagan............................................ 139
Senator Alexander........................................ 140
Response by Michale S. McComis, Ed.D. to questions of:
Senator Enzi............................................. 141
Senator Hagan............................................ 146
Senator Alexander........................................ 148
(iii)
FOR-PROFIT SCHOOLS: THE STUDENT RECRUITMENT EXPERIENCE
----------
WEDNESDAY, AUGUST 4, 2010
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The committee met, pursuant to notice, at 10:03 a.m., in
Room SD-106, Dirksen Senate Office Building, Hon. Tom Harkin,
chairman of the committee, presiding.
Present: Senator Harkin, Mikulski, Casey, Hagan, Merkley,
Franken, Bennet, Goodwin, Enzi, Alexander, Burr, and Isakson.
Opening Statement of Senator Harkin
The Chairman. The Senate Committee on Health, Education,
Labor, and Pensions will come to order.
This is the second in a series of hearings by this
committee focusing on the growing Federal investment in for-
profit colleges and universities. This industry has grown at an
extraordinary pace. Over the last 10 years, enrollment has
increased from 600,000 students to over 2 million students.
Federal financial aid to students at for-profit colleges
has ballooned from $4.6 billion a decade ago to more than $23
billion a year, today. The question is: What is driving the
explosive growth in this industry?
As you may know, I also chair the Appropriations
Subcommittee that funds the Pell grant program. And CBO has
given me some figures here that are quite startling. For
example, in 2006, our obligation on Pell grants was
$12,826,000,000. Last year, it was $26 billion, next year it
will go to $30 billion--$30.6 billion that our Appropriations
Committee will have to come up with just to fund the Pell grant
program.
And so, this explosive growth at a time where we have huge
deficits, and we're trying to get our budgets in order, causes
us real concern. The question we have to ask with this
explosive growth, and with CBO estimates that over the next 10
years we'll spend somewhere close to $300 billion to $350
billion just on Pell grants, we have to ask the question, Are
the students--and the U.S. taxpayers--getting a good value for
the billions of taxpayers dollars they are investing in these
for-profit schools?
In our first hearing, in June, this committee heard
testimony from witnesses about the pressures for for-profit
companies to relentlessly enroll more students in order to
increase profits and, in the case of publicly traded companies,
to meet the expectations of investors. The committee issued a
report showing that, in order to boost recruitment, many
publicly traded for-profit schools spend huge sums of title IV
dollars. Title IV dollars, which are taxpayer dollars. They
spend a huge amount on TV advertisements, billboards, phone
solicitations, and Web marketing, and as we shall see shortly,
an aggressive sales staff.
According to the Chairman's report, an analysis of the
eight publicly traded schools shows that, on average, they
spend 31 percent of revenues on recruiting and marketing.
Thirty-one percent.
This spending by for-profit schools sets them radically
apart from other colleges. By contrast, community colleges
typically spend just 1 or 2 percent on marketing; a tiny
fraction of the money spent by publicly traded for-profits.
However numbers only tell a part of the story. Much can be
revealed, too, by the experience that students, who are perhaps
the first in their family to go to college, have when they sit
down to talk to a recruiter or admissions officer. That is why
I asked the Government Accountability Office to investigate
this key encounter during the recruitment process at for-profit
institutions.
GAO's findings make it disturbingly clear that abuses in
for-profit recruiting are not limited to a few rogue recruiters
or even a few schools with lax oversight. To the contrary, the
evidence points to a problem that is systemic to the for-profit
industry: a recruitment process specifically designed to do
whatever it takes to drive up enrollment numbers, more often
than not to the disadvantage of students.
There is a cruel irony, here, that deserves special focus.
One ostensibly admirable aspect of for-profit colleges is that
they seek out and enroll large numbers of minority and low-
income students, offering them opportunities they might not
have. In choosing to enroll in a for-profit college, these
students typically go deeply into debt. They make other
sacrifices, all in search of a better life. They need
information that is clear, complete, and honest. Instead, too
often, they are victims of deceptive and/or abusive marketing
tactics.
In our first hearing, we learned that for-profit schools
are enrolling huge numbers of new students, but their total
current enrollment numbers show only a small increase, which
seems to point to an extremely high dropout rate. For example,
one publicly traded school had 84,555 students as of March 31
of this year. They enrolled 21,673 new students between April 1
and June 30, but ended June with 84,695 students, a gain of
only 140 students. What happened to the other 21,533? Did they
all graduate in 3 months? Or did they drop out?
Reports for the past year show that this school turns over
between 22 and 25 percent of their student population every 3
months. Every 3 months.
Why are such large numbers of students turning over, and
presumably dropping out? Are they leaving the schools with debt
and no degree? How can that be happening in such large numbers?
The testimony this morning from Mr. Gregory Kutz of the
Government Accountability Office will begin to answer these
questions.
Our second panel will allow us to hear directly from a
former recruiter for a large for-profit school. He will offer
us insight into the training and supervision systems that
foster the deceptive and misleading recruiting tactics that are
all too common at these schools. We will also hear from an
admissions counseling expert, who will contrast the recruiting
policies and practices at non-profit and public colleges with
those at for-profit schools. Finally, we will hear from the
executive director of a national accrediting organization to
help the committee better understand the national accreditation
process, and the steps that accrediting agencies take to ensure
that the for-profit schools they accredit are acting both
lawfully and in the best interests of their students.
I want to remind everyone that Congress has just committed
to making an increased investment in Pell grants, as I
mentioned earlier. We've boosted it up by $36 billion over the
next 10 years, which will bring us to a 10-year total of
somewhere between $300 billion and $350 billion in the next 10
years, just in the Pell grant program. If current enrollment
trends continue, a huge portion of those dollars will flow to
students attending for-profit schools. I encourage the
committee to keep this in mind as we hear testimony from
today's witnesses.
I think we need to keep two questions front and center: Are
these schools serving the best interests of their students? Are
our new investments--taxpayers' investments--in student
financial aid sufficiently safeguarded under current law? These
are the fundamental questions that this committee, and the
Appropriations Committee that I chair, really need answers to.
With that, I will turn to the committee's Ranking Member
and former chair, Senator Enzi, for his opening statement. And
then I will introduce our first panel.
Statement of Senator Enzi
Senator Enzi. Thank you, Mr. Chairman.
This morning, we are going to hear the details of
aggressive and inappropriate recruiting practices. Among other
things we will see examples of schools misrepresenting the
quality of education students receive, making unrealistic
promises of high-paying jobs, and in some instances encouraging
outright fraud. This behavior is unacceptable and should not be
defended. Use of pressure tactics, deceitful marketing, and
outright lies to mislead students has absolutely no place in
education, or for that matter, in any legitimate business. It's
truly appalling behavior, and the schools that engage in such
activities must be firmly dealt with.
However, I am just as concerned that descriptions of wrong
doings such as these will be used to unfairly characterize all
for-profit schools as bad actors, and that is simply not the
case. As Secretary Duncan has said, ``for-profit institutions
play a vital role in training young people and adults for
jobs.'' Unfortunately, this series of hearings has only shown
the negative, and seems intent on portraying all for-profits as
irresponsible and predatory.
My comments should not be interpreted as defending
unscrupulous behavior or condoning aggressive recruiting
practices. I am also not suggesting that this committee should
ignore wrongdoing in the for-profit sector. On the contrary, it
is crystal clear that some programs at for-profit schools are
misleading students and possibly defrauding taxpayers out of
millions of dollars in student aid funds.
However, in focusing only on for-profits, we are not being
objective, and we are ignoring the bigger picture of what is
happening across all of higher education. Public and nonprofit
schools are not immune from inappropriate behavior when it
comes to recruiting.
One of the most blatant places, of course, is in athletic
programs. A simple news search performed by my staff pulled up
nearly 20 individual examples of recruiting violations in
college athletic programs. For instance, one public university
has been cited for making hundreds of impermissible calls and
text messages to prospective student athletes, giving recruits
improper benefits and improperly distributing free tickets to
high school coaches and others. More recently, a college
basketball coach allegedly helped boosters raise money at a
high school tournament held in the university's gym; a direct
violation of NCAA Rules that prohibit such behavior attended by
prospective recruits. Situations like these are unacceptable
and are firmly dealt with when uncovered. However, unlike what
we are seeing here today, they are not used as evidence of
widespread corruption, or used to suggest that all college
athletic programs are engaged in unscrupulous behavior.
For-profit schools are a part of a much larger system of
higher education that includes for-profits, as well as
thousands of traditional institutions of higher education. Many
of the issues you raise, Chairman Harkin, particularly those
regarding student debt and default, are problems throughout the
higher education system, not only at for-profits. Also, the
rules that apply to Federal loans, apply to all students,
regardless of the type of institution they attend. We should be
scrutinizing all sectors of higher education and asking the
same questions you are now asking of for-profit institutions.
Again, I don't dispute the need to shine a light on the
for-profit sector. For-profits have grown at a tremendous rate
and are receiving an increasingly larger percentage of Federal
student aid funds. And, as the testimony today will illustrate,
there is clearly inappropriate behavior taking place in the
recruiting practices of some schools. However, if these
hearings are to be meaningful, the for-profit sector must not
be examined in a vacuum. It is part of a much broader community
of postsecondary schools that includes public, 4- and 2-year
schools, as well as private nonprofit schools. And, as
Secretary Duncan has explained,
``They are helping us meet an ever increasing demand
for skills that public institutions cannot always meet.
They are an essential part in achieving President
Obama's goal of being first in the world in college
completion by 2020.''
Therefore, I encourage you to reassess your approach to
these hearings and provide the committee with an examination of
for-profit schools in relation to all institutions of higher
education. Many, if not most, of the same rules and regulations
that we are discussing during these hearings apply to all
sectors of higher education. I believe that understanding how
each sector of higher education relates to the other is the
best way for us to ensure that students are protected and that
the taxpayers are getting the best return on their investment.
For that reason I will be asking the GAO to expand upon the
request you made for data on for-profit colleges to also
include a review of all institutions of higher education. I
hope that you will join me in that request.
I would also ask permission to have included in the record,
an article that was in the Wall Street Journal yesterday,
``Ignorance By Degrees in Higher Education.''
The Chairman. Without objection.
Senator Enzi. Thank you.
[The information referred to follows:]
[The Wall Street Journal, August 2, 2010]
Ignorance By Degrees
Colleges serve the people who work there more than the students who
desperately need to learn something.
(By Mark Bauerlein) \1\
Higher education may be heading for a reckoning. For a long time,
despite the occasional charge of liberal dogma on campus or of a
watered-down curriculum, people tended to think the best of the college
and university they attended. Perhaps they attributed their career
success or that of their friends to a diploma. Or they felt moved by a
particular professor or class. Or they received treatment at a
university hospital or otherwise profited from university-based
scientific research. Or they just loved March Madness.
---------------------------------------------------------------------------
\1\ Mr. Bauerlein, the author of ``The Dumbest Generation: How the
Digital Age Stupefies Young Americans and Jeopardizes Our Future,''
teaches at Emory University.
---------------------------------------------------------------------------
Recently, though, a new public skepticism has surfaced, with
galling facts to back it up. Over the past 30 years, the average cost
of college tuition and fees has risen 250% for private schools and
nearly 300% for public schools (in constant dollars). The salaries of
professors have also risen much faster than those of other occupations.
At Stanford, to take but one example, the salaries of full professors
have leapt 58% in constant dollars since the mid-1980s. College
presidents do even better. From 1992 to 2008, NYU's presidential salary
climbed to $1.27 million from $443,000. By 2008, a dozen presidents had
passed the million-dollar mark.
Meanwhile, tenured and tenure-track professors spend ever less time
with students. In 1975, 43% of college teachers were classified as
``contingent''--that is, they were temporary instructors and graduate
students; today that rate is 70%. Colleges boast of high faculty-to-
student ratios, but in practice most courses have a part-timer at the
podium.
Elite colleges justify the light teaching loads of their
professors--Yale requires only three courses a year, with a semester
off every third year--by claiming that the members of their faculty
spend their time producing important research. A glance at scholarly
journals or university-press catalogs might make one wonder how much of
this ``research'' is advancing knowledge and how much is part of a
guild's need to credentialize its members. In any case, time spent for
research is time taken away from students. The remoteness of professors
may help explain why about 30% of enrolling students drop out of
college only a few months after arriving.
At the same time, the administrator-to-student ratio is growing. In
fact, it has doubled since 1976. The administrative field has
diversified into exotic specialties such as Credential Specialist,
Coordinator of Learning Immersion Experiences and Dietetic Internship
Director.
In ``Higher Education?'' Andrew Hacker and Claudia Dreifus describe
such conditions in vivid detail. They offer statistics, anecdotes and
first-person accounts--concerning tuition, tenure and teaching loads,
among much else--to draw up a powerful, if rambling, indictment of
academic careerism. The authors are not shy about making biting
judgments along the way.
Of the 3,015 papers delivered at the 2007 meeting of the American
Sociological Association, the authors say, few ``needed to be
written.'' As for one of the most prestigious universities in the
world, ``the mediocrity of Harvard undergraduate teaching is an open
secret of the Ivy League.'' Much of the research for scholarly articles
and lectures is ``just compost to bulk up resumes.'' College presidents
succeed not by showing strong, imaginative leadership but ``by
extending their school's terrain.'' Indeed, ``hardly any of them have
done anything memorable, apart perhaps from firing a popular athletic
coach.'' For all the high-minded talk, Mr. Hacker and Ms. Dreifus
conclude, colleges and universities serve the people who work there
more than the parents and taxpayers who pay for ``higher education'' or
the students who so desperately need it.
Take the adjunct issue. Everyone knows that colleges increasingly
staff courses with part-time instructors who earn meager pay and no
benefits. But who wants to eliminate the practice? Administrators like
it because it saves money, professors because it saves them from
teaching labor-intensive courses. And adjuncts themselves would rather
continue at minimum wage than leave the profession altogether. In a
``coda,'' Mr. Hacker and Ms. Dreifus declare that ``it is immoral and
unseemly to have a person teaching exactly the same class as an
ensconced faculty member, but for one-sixth the pay.'' Perhaps so, but
without a united faction mobilized against it, such ``immorality''
won't stop anytime soon.
But some change may still be possible. A lot of criticism of
academia hasn't stuck in the past, Mr. Hacker and Ms. Dreifus imply,
because people have almost unthinkingly believed in the economic power
of the degree. Yes, you didn't learn a lot, and the professors blew you
off--the reasoning went--but if you got a diploma the job offers would
follow. But that logic may no longer be so compelling. With the economy
tightening and tales of graduates stuck in low-paying jobs with $50,000
in student loans, college doesn't look like an automatic bargain.
We need some hard cost accounting and comparisons, Mr. Hacker and
Ms. Dreifus argue, and so they end ``Higher Education?'' with capsule
summaries of, as they put it, ``Schools We Like''--that is, schools
that offer superior undergraduate educations at relatively low cost.
The list includes Ole Miss, Cooper Union, Berea College, Arizona State
and Western Oregon University. ``We think a low cost should be a major
determinant in any college decision,'' the authors wisely conclude, for
``a debt-free beginning is worth far more than a name-brand
imprimatur.''
[The prepared statement of Senator Enzi follows:]
Prepared Statement of Senator Enzi
The June 24, 2010 and August 4, 2010 hearings of the
Health, Education, Labor, and Pensions Committee focused almost
exclusively on title IV funding at for-profit institutions of
education. Many of the issues raised during these hearings
apply throughout higher education, not just at for-profits. The
following tables provide general statistical information
regarding tuition, default rates, title IV funding, spending on
instruction, and demographics for all sectors of higher
education.
As the table below illustrates, spending on instruction
ranges from 21 percent to 38 percent for all schools. Spending
on instruction at public and non-profit schools is only
marginally higher than it is at for-profit schools, 26 percent
at public 4-year schools versus 21 percent at for-profit 4-year
schools. The data also show public schools receive between 40
percent and 65 percent of their revenue from government
sources, while for-profits rely almost exclusively on tuition.
Despite this disparity, the data show for-profits spend roughly
the same percentage on instruction as public schools.
Sources of Revenue vs. Spending on Instruction by Sector
----------------------------------------------------------------------------------------------------------------
Percent of revenue
from State and
Percent of local Percent of
revenue from appropriations, expenditures on
tuition and and government instruction
fees grants and
contracts
----------------------------------------------------------------------------------------------------------------
Public 4-year............................................. 16.77 40.82 26
Public 2-year............................................. 16.21 64.09 38
Private Non-Profit 4-year................................. 25.96 12.25 33
Private Non-Profit 2-year................................. 51.28 14.71 34
For-Profit 4-year......................................... 89.52 4.69 21
For-Profit 2-year......................................... 84.53 8.60 31
----------------------------------------------------------------------------------------------------------------
Source: Digest of Education Statistics.
As shown below, the built-in government subsidies for
public 4-year institutions ensure that tuition and fees are
significantly lower than those for private non-profits or for-
profits. Additionally, the chart shows that the percentage
increase in tuition and fees over the past 10 years at for-
profits is similar to that for public 4-year institutions.
Average Higher Education Tuition and Fees
----------------------------------------------------------------------------------------------------------------
Yr/Yr 4-YR Yr/Yr 4-YR Yr/Yr
Award year 4-YR public percent private percent proprietary percent
----------------------------------------------------------------------------------------------------------------
2003-4.................................. $4,542 $15,149 $12,037
2004-5.................................. 4,936 9 16,046 6 13,063 9
2005-6.................................. 5,206 5 16,888 5 13,894 6
2006-7.................................. 5,496 6 17,943 6 14,261 3
2007-8.................................. 5,730 4 19,047 6 14,908 5
2008-9.................................. 6,070 6 20,112 6 15,521 4
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Yr/Yr 2-YR Yr/Yr 2-YR Yr/Yr
Award year 2-YR public percent private percent proprietary percent
----------------------------------------------------------------------------------------------------------------
2003-4.................................. $2,245 $9,091 $10,971
2004-5.................................. 2,412 7 8,182 -10 11,248 3
2005-6.................................. 2,514 4 8,553 5 11,778 5
2006-7.................................. 2,645 5 9,063 6 11,961 2
2007-8.................................. 2,749 4 9,396 4 12,357 3
2008-9.................................. 2,830 3 9,987 6 13,073 6
----------------------------------------------------------------------------------------------------------------
Source: Congressional Research Service.
As noted in the following chart, students in all sectors of
higher education rely heavily on Federal student financial
assistance under title IV of the Higher Education Act. However,
due to growth in the for-profit sector, and a high proportion
of low-income students, for-profit schools have seen a more
rapid increase in their receipt of title IV money than
traditional higher education, particularly Pell grant funds.
Furthermore, high unemployment is reportedly increasing higher
education applications and enrollment generally, and therefore,
contributes to the increase in Pell-eligible students attending
for-profit schools since 2007.
Total Pell Funding
--------------------------------------------------------------------------------------------------------------------------------------------------------
Pvt. non- For-
Public Pvt. non-profit profit For-profit total profit
Award year Public total Pell percent total Pell percent Pell percent
change change change
--------------------------------------------------------------------------------------------------------------------------------------------------------
1999-2000..................................................... $4,920,644,931 $1,341,992,126 $945,863,434
2000-1........................................................ 5,412,886,963 10 1,459,846,858 9 1,083,570,363 15
2001-2........................................................ 6,780,486,065 25 1,781,604,565 22 1,413,001,710 30
2002-3........................................................ 7,883,765,781 16 1,968,766,154 11 1,789,019,783 27
2003-4........................................................ 8,492,253,472 8 2,121,460,147 8 2,094,183,718 17
2004-5........................................................ 8,681,903,806 2 2,144,224,722 1 2,323,811,232 11
2005-6........................................................ 8,283,387,374 -5 2,049,911,431 -4 2,359,829,177 2
2006-7........................................................ 8,280,454,552 0 2,054,920,997 0 2,481,940,708 5
2007-8........................................................ 9,306,387,015 12 2,271,591,021 11 3,082,037,558 24
2008-9........................................................ 11,336,207,797 22 2,638,985,719 16 4,308,185,267 40
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Congressional Research Service.
As demonstrated below, individual Pell grant award amounts
are roughly the same as those received by students attending
traditional institutions of higher education.
Average Pell Grant Award
----------------------------------------------------------------------------------------------------------------
Public 2- Public 4- For-
Public 2-year- year Public 4-year- year For-profit profit
Award year avg. award percent avg. award percent avg. award percent
change change change
----------------------------------------------------------------------------------------------------------------
1999-2000...................... $1,775 $2,036 $1,859
2000-1......................... 1,883 6 2,195 8 1,946 5
2001-2......................... 2,125 13 2,478 13 2,197 13
2002-3......................... 2,246 6 2,625 6 2,361 7
2003-4......................... 2,272 1 2,662 1 2,389 1
2004-5......................... 2,277 0 2,671 0 2,390 0
2005-6......................... 2,243 -1 2,666 0 2,364 -1
2006-7......................... 2,267 1 2,696 1 2,380 1
2007-8......................... 2,422 7 2,874 7 2,536 7
2008-9......................... 2,705 12 3,253 13 2,866 13
----------------------------------------------------------------------------------------------------------------
Source: Congressional Research Service.
Finally, data on student loan default rates, as detailed
below, show that students at for-profit schools may be more
likely to default on their loans.
Cohort Default Rates
----------------------------------------------------------------------------------------------------------------
2 Year [In 3 Year [In 4 Year [In
Sector percent] percent] percent]
----------------------------------------------------------------------------------------------------------------
For-Profit................................................... 8.6 16.7 23.3
Public....................................................... 4.7 7.2 9.5
Private non-profit........................................... 3.0 4.7 6.5
----------------------------------------------------------------------------------------------------------------
Source: Congressional Research Service.
A 2009 Government Accountability Office (GAO) report
examined this issue and stated that the high default rates at
for-profit schools can be linked to the demographic
characteristics of their students. ``Specifically, students who
come from low-income backgrounds and from families who lack
higher education are more likely to default on their loans, and
data show that students from proprietary schools are more
likely to come from low-income families and have parents who do
not hold a college degree.'' GAO-00-600. As the following
tables illustrate, for-profit students are poorer, older, and
more likely to be a first generation college student than
students attending traditional institutions of higher
education.
Family Income and Parental Education of Students
------------------------------------------------------------------------
Parents with
Annual median associate's degree
Sector family income or higher [In
percent]
------------------------------------------------------------------------
For-Profit...................... $24,300 37
Public.......................... 40,400 52
Private non-profit.............. 49,200 61
------------------------------------------------------------------------
Source: Congressional Research Service.
Age and Dependency of Students
------------------------------------------------------------------------
Financial
Students age independent
Sector 25 and older students [In
[In percent] percent]
------------------------------------------------------------------------
For-Profit.................................. 56 76
Public...................................... 35 50
Private non-profit.......................... 38 39
------------------------------------------------------------------------
Source: Congressional Research Service.
Student Ethnicity
------------------------------------------------------------------------
Private non-
For-Profit Public [In profit [In
[In percent] percent] percent]
------------------------------------------------------------------------
Am. Indian/AK Native.......... 1 1 1
Asian/Pacific Islander........ 4 7 6
Hispanic...................... 19 13 11
African-American.............. 26 13 12
White, non-Hispanic........... 50 66 70
------------------------------------------------------------------------
Source: Congressional Research Service.
The Chairman. Thank you.
Thank you, Senator Enzi.
Now, I'll introduce our first witness. Mr. Gregory Kutz is
the Managing Director of GAO's Forensic Audits and Special
Investigations Unit. The mission of the FSI is to provide the
Congress with high-quality forensic audits and investigations
of fraud, waste, and abuse, and evaluations of security
vulnerabilities and other requested investigative services.
In 1991, Mr. Kutz joined the Governmental Accountability
Office after 8 years at KPMG Peat Marwick. As a senior
executive at GAO, Mr. Kutz has testified at congressional
hearings over 80 times, primarily on matters related to fraud,
waste, and abuse and other special investigations. Mr. Kutz has
been responsible for reports issued by GAO, and testimony
relating to credit card and travel fraud and abuse, and
improper sales of sensitive military and dual-use technology,
tax fraud and abuse, wage theft, Hurricanes Katrina and Rita
fraud, transit benefit fraud, procurement fraud, pay problems
for military members, and seclusion and restraint of disabled
children in schools.
I read all of that to make a note of the fact that Mr. Kutz
has provided invaluable service along with the GAO to this
Congress and to the American people in making sure that our
taxpayers' dollars are well-spent, and that we have the
information we need to oversee the spending of those tax
dollars.
So, Mr. Kutz, welcome to the committee. I will start the
clock at 25 minutes. If you need a few more minutes than that,
we'll do it, because I know you have a lengthy testimony and
you have some video clips to show us. We have a vote at 10:40.
We'll try to get through your opening testimony and then we'll
take a break, and then we'll come back.
So, Mr. Kutz, your written statement at the GAO will be
made a part of the record in its entirety and again, welcome,
and please proceed.
STATEMENT OF GREGORY D. KUTZ, MANAGING DIRECTOR, FORENSIC
AUDITS AND SPECIAL INVESTIGATIONS, GOVERNMENT ACCOUNTABILITY
OFFICE
Mr. Kutz. Mr. Chairman and members of the committee, thank
you for the opportunity to discuss for-profit colleges. Today's
testimony will provide you with an inside look at the sales and
marketing practices of these colleges.
My testimony has two parts. First, I will discuss what we
did, and second, I will discuss the results of our undercover
testing.
First, our prospective students applied for admission to
for-profit colleges in six States, and here in Washington, DC.
We selected these colleges based on a number of factors,
including size, location, and the percentage of Federal funding
that was received.
Yes?
The Chairman. I apologize for interrupting, I forgot to ask
something I was supposed to.
Mr. Kutz, before you begin, I'd like you to make the
identity of the schools you visited public, together with the
identity of the schools we will be seeing in the video clips.
If you would like to provide a list of the schools, we would
appreciate that, and then each member can have that.
Mr. Kutz. Certainly, I'll list them off. In our testimony,
they're numbered as Nos. 1 through 15, and so I'll just go
through them. They're actually 12 unique colleges, we went to
three of them once.
Case No. 1 one is University of Phoenix in Arizona, case
No. 2 is Everest College in Arizona, No. 3 is Westech College
in California, No. 4 is Kaplan College in California, No. 5 is
Potomac College in Washington, DC, No. 6, No. 7 is Medvance
Institute in Florida, No. 8 is Kaplan College, again, this time
in Florida, No. 9 is College of Office Tech in Illinois, No. 10
is Argosy University in Illinois, No. 11 is the University of
Phoenix, again, this time in Pennsylvania, No. 12 is Anthem
Institute in Pennsylvania, No. 13 is Westwood College in Texas,
No. 14 is, again, Everest College, this time in Texas, and No.
15 is ATI Career Training in Texas.
The Chairman. Thank you, Mr. Kutz.
Mr. Kutz. What we did, was we used bogus identities and
documents and spoke to representatives at these 15 colleges
that I just mentioned, which is, again, 12 colleges, and 3 of
them were repeats. For the first scenario, our student had
income that was low enough to qualify for Federal grants and
subsidized loans. For our second scenario, our student had
higher income, and $250,000 in savings in what we described as
a recent inheritance.
We also enrolled our perspective students in two Web sites,
and four students were enrolled in these, and I will refer to
these throughout my testimony as marketing lead generators. We
did this to determine the type and frequency of marketing calls
that we would receive from these Web sites.
Now that I've set up what we did, let me move onto my
second point, the results of our undercover testing.
Specifically, we found that four colleges encouraged our
students to commit fraud.
What I'm going to do is walk you through our key findings,
and use the video clips to bring each of these points to life.
Although, as I mentioned, all 15 provided deceptive and
questionable information, as Senator Enzi mentioned, they were
not all bad, and some provided some good practices. So, I'm
going to start with that.
For example, several applicants were told that the transfer
of their credits depended upon the college that they were
transferring to. Several applicants were told to research
credible, independent evidence of expected salaries, and one
representative that you'll see told our applicant to be
cautious about taking out too much debt. These videos I'm going
to show now will show some good practices.
[Video]
Unfortunately, these good practices were harder to identify
than the bad ones. Let me start by speaking about my favorite
topic, as you mentioned in your opening of me, I speak about
fraud a lot.
Representatives from four schools encouraged our applicants
to falsify their Federal financial aid forms, or what you all
have heard before is the FAFSA form, FAFSA. Examples included,
telling our students not to report $250,000 in savings. One
representative told us that this $250,000 wasn't any of the
government's business. Another one told us to delete the
$250,000 from our Federal aid form.
Other students were told to add bogus dependents to their
Federal aid form. One representative held up three fingers, and
told us specifically to add three bogus dependents to our
Federal aid form. By falsifying our applications, our
fictitious students would have qualified for Federal grants and
subsidized loans that they were not entitled to. In other
words, although we had enough money to pay for this, they told
us to commit fraud, so that Federal taxpayers would pick up the
tab. The following videos show you two of these fraud cases.
[Video]
Representatives from 13 colleges gave our applicants
deceptive or questionable information about graduation rates,
guaranteed jobs, or they exaggerated future earnings. Examples
include one representative that said that people coming out of
their barber program--barber shop program--can earn $150,000 to
$250,000. According to the Bureau of Labor Statistics, 90
percent of the barbers in this area which, by the way, is here
in Washington, DC, make less than $19,000 a year.
Another representative did not offer a job guarantee but
said that 90 percent of the students get jobs. Here are some
videos that show these types of issues.
[Video]
As you know, Federal loan default rates at these for-profit
colleges are high. At eight of these colleges, at least 80
percent of the students have Federal loans. Examples of bad
advice we received include one individual telling us that they
had $85,000 of student loans that they probably would not
repay. Another representative told us that, unlike car loans,
nobody will come after you if you fail to pay your student
loans.
Also, you know, taxpayers pick up the tab for all of these
defaulted Federal loans, and students do face consequences when
they default on a loan. Here are some videos showing these
points.
[Video]
Let's move on to cost. Our analysis found that for-profit
colleges, for certificates and degrees, generally substantially
cost higher than public and private nonprofits. The primary
exception to this was for Bachelor's Programs, where private,
nonprofits are often more expensive.
Examples of deceptive information on cost include one
representative saying that their $15,000 computer drafting
program was a great value. The same certificate at a local
community college was $520. And another representative in Texas
said that their Bachelor's program cost $50,000 to $75,000 a
year, which is far less than traditional programs. That same
program at the University of Texas at Austin was $36,000.
Here are a few video clips.
[Video]
The two Web sites I mentioned we registered with appear to
be lead generators for numerous for-profit colleges. Two
fictitious individuals expressed interest in a culinary arts
certificate at Web sites A and B. We had two others express
interest in business degrees at these same Web sites. Within 5
minutes, our phone began to ring. The two individuals
interested in business degrees received about 180 calls, each,
in 1 month. The culinary arts students received far less
interest, with one only receiving a few calls, and the other
still receiving 72. In total, our four fictitious prospective
students received 436 calls in 1 month. All but six of these
calls were from for-profit colleges. The following video will
give you a perspective of what your voice mail would sound like
if you registered with one of these lead generators.
[Video]
As you can tell, our cover is blown, that was Amy Meyers,
actually.
So, we also identified a number of high-pressure sales and
marketing practices. Examples include, at six colleges
applicants were told that they could not speak to someone from
financial aid until they paid an application fee and signed
enrollment forms.
At one college, our applicant was scolded and ridiculed for
refusing to enroll before speaking to financial aid. And at
another college, our applicant was told to sign enrollment
forms, but was assured that it was not a legally binding
document. These colleges do not appear to have any enrollment
standards, and cost appears to be irrelevant because the
Federal Government is paying for the vast majority of this. So,
the aggressive marketing of anybody walking in the door should
not be a surprise here to anybody.
Here are two examples of these aggressive marketing
practices.
[Video]
In conclusion, it wasn't hard to find deceptive and
fraudulent marketing practices. These practices are not unique
to this industry. We've reported on fraudulent and deceptive
practices in several other industries, recently.
However, the big difference, here, is the vast majority of
money that is funding these activities is coming from American
taxpayers.
Mr. Chairman, you've been very generous with my time, and I
appreciate that, but I want to finish the story of that last
student. When you left off a minute ago, the sales
representative was pressuring them to enroll without speaking
to financial aid. They then said they were going to go get
someone from financial aid. As you'll see on this final video,
when they came back, they actually passed the person on to the
admissions director. Here is the unhappy ending to this story.
[Video]
Mr. Chairman, that ends my statement. I look forward to all
of your questions.
[The prepared statement of Mr. Kutz follows:]
Prepared Statement of Gregory D. Kutz
Highlights
why gao did this study
Enrollment in for-profit colleges has grown from about 365,000
students to almost 1.8 million in the last several years. These
colleges offer degrees and certifications in programs ranging from
business administration to cosmetology. In 2009, students at for-profit
colleges received more than $4 billion in Pell grants and more than $20
billion in Federal loans provided by the Department of Education
(Education). GAO was asked to (1) conduct undercover testing to
determine if for-profit colleges' representatives engaged in
fraudulent, deceptive, or otherwise questionable marketing practices,
and (2) compare the tuitions of the for-profit colleges tested with
those of other colleges in the same geographic region.
To conduct this investigation, GAO investigators posing as
prospective students applied for admissions at 15 for-profit colleges
in 6 States and Washington, DC. The colleges were selected based on
several factors, including those that the Department of Education
reported received 89 percent or more of their revenue from Federal
student aid. GAO also entered information on four fictitious
prospective students into education search Web sites to determine what
type of follow-up contact resulted from an inquiry. GAO compared
tuition for the 15 for-profit colleges tested with tuition for the same
programs at other colleges located in the same geographic areas.
Results of the undercover tests and tuition comparisons cannot be
projected to all for-profit colleges.
For-Profit Colleges--Undercover Testing Finds Colleges Encouraged Fraud
and Engaged in Deceptive and Questionable Marketing Practices
what gao found
Undercover tests at 15 for-profit colleges found that four colleges
encouraged fraudulent practices and that all 15 made deceptive or
otherwise questionable statements to GAO's undercover applicants. Four
undercover applicants were encouraged by college personnel to falsify
their financial aid forms to qualify for Federal aid--for example, one
admissions representative told an applicant to fraudulently remove
$250,000 in savings. Other college representatives exaggerated
undercover applicants' potential salary after graduation and failed to
provide clear information about the college's program duration, costs,
or graduation rate despite Federal regulations requiring them to do so.
For example, staff commonly told GAO's applicants they would attend
classes for 12 months a year, but stated the annual cost of attendance
for 9 months of classes, misleading applicants about the total cost of
tuition. Admissions staff used other deceptive practices, such as
pressuring applicants to sign a contract for enrollment before allowing
them to speak to a financial advisor about program cost and financing
options. However, in some instances, undercover applicants were
provided accurate and helpful information by college personnel, such as
not to borrow more money than necessary.
Fraudulent, Deceptive, and Otherwise Questionable Practices
------------------------------------------------------------------------
Degree/certificate, location Sales and marketing practice
------------------------------------------------------------------------
Certificate Program--California........... Undercover applicant was
encouraged by a college
representative to change
Federal aid forms to
falsely increase the number
of dependents in the
household in order to
qualify for grants.
Associate's Degree--Florida............... Undercover applicant was
falsely told that the
college was accredited by
the same organization that
accredits Harvard and the
University of Florida.
Certificate Program--Washington, DC....... Admissions representative
said that barbers can earn
up to $150,000 to $250,000
a year, an exceptional
figure for the industry.
The Bureau of Labor
Statistics reports that 90
percent of barbers make
less than $43,000 a year.
Certificate Program--Florida.............. Admission representative
told an undercover
applicant that student
loans were not like a car
payment and that no one
would ``come after'' the
applicant if she did not
pay back her loans.
------------------------------------------------------------------------
Source: GAO.
In addition, GAO's four fictitious prospective students received
numerous, repetitive calls from for-profit colleges attempting to
recruit the students when they registered with Web sites designed to
link for-profit colleges with prospective students. Once registered,
GAO's prospective students began receiving calls within 5 minutes. One
fictitious prospective student received more than 180 phone calls in a
month. Calls were received at all hours of the day, as late as 11 p.m.
To see video clips of undercover applications and to hear voice mail
messages from for-profit college recruiters, see http://www.gao.gov/
products/GAO-10-948T.
Programs at the for-profit colleges GAO tested cost substantially
more for associate's degrees and certificates than comparable degrees
and certificates at public colleges nearby. A student interested in a
massage therapy certificate costing $14,000 at a for-profit college was
told that the program was a good value. However the same certificate
from a local community college cost $520. Costs at private nonprofit
colleges were more comparable when similar degrees were offered.
______
Mr. Chairman and members of the committee, thank you for the
opportunity to discuss our investigation into fraudulent, deceptive, or
otherwise questionable sales and marketing practices in the for-profit
college industry.\1\ Across the Nation, about 2,000 for-profit colleges
eligible to receive Federal student aid offer certifications and
degrees in subjects such as business administration, medical billing,
psychology, and cosmetology. Enrollment in such colleges has grown far
faster than traditional higher-education institutions. The for-profit
colleges range from small, privately owned colleges to colleges owned
and operated by publicly traded corporations. Fourteen such
corporations, worth more than $26 billion as of July 2010,\2\ have a
total enrollment of 1.4 million students. With 443,000 students, one
for-profit college is one of the largest higher-education systems in
the country--enrolling only 20,000 students fewer than the State
University of New York.
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\1\ For-profit colleges are institutions of post-secondary
education that are privately-owned or owned by a publicly traded
company and whose net earnings can benefit a shareholder or individual.
In this report, we use the term ``college'' to refer to all of those
institutions of post-secondary education that are eligible for funds
under Title IV of the Higher Education Act of 1965, as amended. This
term thus includes public and private nonprofit institutions,
proprietary or for-profit institutions, and post-secondary vocational
institutions.
\2\ $26 billion is the aggregate market capitalization of the 14
publicly traded corporations on July 14, 2010. In addition, there is a
15th company that operates for-profit colleges; however, the parent
company is involved in other industries; therefore, we are unable to
separate its market capitalization for only the for-profit college line
of business, and its value is not included in this calculation.
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The Department of Education's Office of Federal Student Aid manages
and administers billions of dollars in student financial assistance
programs under Title IV of the Higher Education Act of 1965, as
amended. These programs include, among others, the William D. Ford
Federal Direct Loan Program (Direct Loans), the Federal Pell grant
program, and campus-based aid programs.\3\ Grants do not have to be
repaid by students, while loans must be repaid whether or not a student
completes a degree program. Students may be eligible for ``subsidized''
loans or ``unsubsidized'' loans. For unsubsidized loans, interest
begins to accrue on the loan as soon as the loan is taken out by the
student (i.e. while attending classes).
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\3\ The Federal Supplemental Educational Opportunity Grant (FSEOG),
Federal Work-Study (FWS), and Federal Perkins Loan programs are called
campus-based programs and are administered directly by the financial
aid office at each participating college. As of July 1, 2010 new
Federal student loans that are not part of the campus-based programs
will come directly from the Department of Education under the Direct
Loan program.
---------------------------------------------------------------------------
For subsidized loans, interest does not accrue while a student is
in college. Colleges received $105 billion in title IV funding for the
2008-9 school year--of which approximately 23 percent or $24 billion
went to for-profit colleges. Because of the billions of dollars in
Federal grants and loans utilized by students attending for-profit
colleges, you asked us to (1) conduct undercover testing to determine
if for-profit college representatives engaged in fraudulent, deceptive,
or otherwise questionable marketing practices, and (2) compare the cost
of attending for-profit colleges tested with the cost of attending
nonprofit colleges in the same geographic region.
To determine whether for-profit college representatives engaged in
fraudulent, deceptive, or otherwise questionable sales and marketing
practices, we investigated a nonrepresentative selection of 15 for-
profit colleges located in Arizona, California, Florida, Illinois,
Pennsylvania, Texas, and Washington, DC. We chose colleges based on
several factors in order to test for-profit colleges offering a variety
of educational services with varying corporate sizes and structures
located across the country. Factors included whether a college received
89 percent or more of total revenue from Federal student aid according
to Department of Education (Education) data or was located in a State
that was among the top 10 recipients of title IV funding. We also chose
a mix of privately held or publicly traded for-profit colleges. We
reviewed Federal Trade Commission (FTC) statutes and regulations
regarding unfair and deceptive marketing practices and Education
statutes and regulations regarding what information postsecondary
colleges are required to provide to students upon request and what
constitutes substantial misrepresentation of services. During our
undercover tests we attempted to identify whether colleges met these
regulatory requirements, but we were not able to test all regulatory
requirements in all tests.
Using fictitious identities, we posed as potential students to meet
with the colleges' admissions and financial aid representatives and
inquire about certificate programs, associate's degrees, and bachelor's
degrees.\4\ We inquired about one degree type and one major--such as
cosmetology, massage therapy, construction management, or elementary
education--at each college. We tested each college twice--once posing
as a prospective student with an income low enough to qualify for
Federal grants and subsidized student loans, and once as a prospective
student with higher income and assets to qualify the student only for
certain unsubsidized loans.\5\ Our undercover applicants were
ineligible for other types of Federal postsecondary education
assistance programs such as benefits available under the Post-9/11
Veterans Educational Assistance Act of 2008 (commonly referred to as
``the Post-9/11 G.I. Bill''). We used fabricated documentation, such as
tax returns, created with publicly available hardware, software and
materials, and the Free Application for Federal Student Aid (FAFSA)--
the form used by virtually all 2- and 4-year colleges, universities,
and career colleges for awarding Federal student aid--during our in-
person meetings. In addition, using additional bogus identities,
investigators posing as four prospective students filled out forms on
two Web sites that ask questions about students' academic interests,
match them to colleges with relevant programs, and provide the
students' information to colleges or the colleges' outsourced calling
center for follow-up about enrollment. Two students expressed interest
in a culinary arts degree, and two other students expressed interest in
a business administration degree. We filled out information on two Web
sites with these fictitious prospective students' contact information
and educational interests in order to document the type and frequency
of contact the fictitious prospective students would receive. We then
monitored the phone calls and voice mails received.
---------------------------------------------------------------------------
\4\ A certificate program allows a student to earn a college level
credential in a particular field without earning a degree.
\5\ Regardless of income and assets, all eligible students
attending a title IV college are eligible to receive unsubsidized
Federal loans. The maximum amount of the unsubsidized loan ranges from
$2,000 to $12,000 per year, depending on the student's grade level and
on whether the student is considered ``dependent'' or ``independent''
from his or her parents or guardians.
---------------------------------------------------------------------------
To compare the cost of attending for-profit colleges with that of
nonprofit colleges, we used Education information to select public and
private nonprofit colleges located in the same geographic areas as the
15 for-profit colleges we visited. We compared tuition rates for the
same type of degree or certificate between the for-profit and nonprofit
colleges. For the 15 for-profit colleges we visited, we used
information obtained from campus representatives to determine tuition
at these programs. For the nonprofit colleges, we obtained information
from their Web sites or, when not available publicly, from campus
representatives. Not all nonprofit colleges offered similar degrees,
specifically when comparing associate's degrees and certificate
programs. We cannot project the results of our undercover tests or cost
comparisons to other for-profit colleges.
We plan to refer cases of school officials encouraging fraud and
engaging in deceptive practices to Education's Office of Inspector
General, where appropriate. Our investigative work, conducted from May
2010 through July 2010, was performed in accordance with standards
prescribed by the Council of the Inspectors General on Integrity and
Efficiency.
background
In recent years, the scale and scope of for-profit colleges have
changed considerably. Traditionally focused on certificate and programs
ranging from cosmetology to medical assistance and business
administration, for-profit institutions have expanded their offerings
to include bachelor's, master's, and doctoral level programs. Both the
certificate and degree programs provide students with training for
careers in a variety of fields. Proponents of for-profit colleges argue
that they offer certain flexibilities that traditional universities
cannot, such as, online courses, flexible meeting times, and year-round
courses. Moreover, for-profit colleges often have open admissions
policies to accept any student who applies.
Currently, according to Education about 2,000 for-profit colleges
participate in title IV programs and in the 2008-9 school year, for-
profit colleges received approximately $24 billion in title IV funds.
Students can only receive title IV funds when they attend colleges
approved by Education to participate in the title IV program.
Title IV Program Eligibility Criteria
The Higher Education Act of 1965, as amended, provides that a
variety of institutions of higher education are eligible to participate
in title IV programs, including:
Public institutions--Institutions operated and funded by
State or local governments, which include State universities and
community colleges.
Private nonprofit institutions--Institutions owned and
operated by nonprofit organizations whose net earnings do not benefit
any shareholder or individual. These institutions are eligible for tax-
deductible contributions in accordance with the Internal Revenue code
(26 U.S.C. 501(c)(3)).
For-profit institutions--Institutions that are privately
owned or owned by a publicly traded company and whose net earnings can
benefit a shareholder or individual.
Colleges must meet certain requirements to receive title IV funds.
While full requirements differ depending on the type of college, most
colleges are required to: be authorized or licensed by the State in
which it is located to provide higher education; provide at least one
eligible program that provides an associate's degree or higher, or
provides training to students for employment in a recognized
occupation; and be accredited by an accrediting agency recognized by
the Secretary of Education. Moreover, for-profit colleges must enter a
``program participation agreement'' with Education that requires the
school to derive not less than 10 percent of revenues from sources
other than title IV funds and certain other Federal programs (known as
the ``90/10 Rule''). Student eligibility for grants and subsidized
student loans is based on student financial need. In addition, in order
for a student to be eligible for title IV funds, the college must
ensure that the student meets the following requirements, among others:
has a high school diploma, a General Education Development
certification, or passes an ability-to-benefit test approved by
Education, or completes a secondary school education in a home school
setting recognized as such under State law; is working toward a degree
or certificate in an eligible program; and is maintaining satisfactory
academic progress once in college.\6\
---------------------------------------------------------------------------
\6\ GAO previously investigated certain schools' use of ability-to-
benefit tests. For more information, see GAO, PROPRIETARY SCHOOLS:
Stronger Department of Education Oversight Needed to Help Ensure Only
Eligible Students Receive Federal Student Aid, GAO-09-600 (Washington,
DC: August 17, 2009).
---------------------------------------------------------------------------
Defaults on Student Loans
In August 2009, GAO reported that in the repayment period, students
who attended for-profit colleges were more likely to default on Federal
student loans than were students from other colleges.\7\ When students
do not make payments on their Federal loans and the loans are in
default, the Federal Government and taxpayers assume nearly all the
risk and are left with the costs. For example, in the Direct Loan
program, the Federal Government and taxpayers pick up 100 percent of
the unpaid principal on defaulted loans. In addition, students who
default are also at risk of facing a number of personal and financial
burdens. For example, defaulted loans will appear on the student's
credit record, which may make it more difficult to obtain an auto loan,
mortgage, or credit card. Students will also be ineligible for
assistance under most Federal loan programs and may not receive any
additional title IV Federal student aid until the loan is repaid in
full. Furthermore, Education can refer defaulted student loan debts to
the Department of Treasury to offset any Federal or State income tax
refunds due to the borrower to repay the defaulted loan. In addition,
Education may require employers who employ individuals who have
defaulted on a student loan to deduct 15 percent of the borrower's
disposable pay toward repayment of the debt. Garnishment may continue
until the entire balance of the outstanding loan is paid.
---------------------------------------------------------------------------
\7\ GAO-09-600.
---------------------------------------------------------------------------
College Disclosure Requirements
In order to be an educational institution that is eligible to
receive title IV funds, Education statutes and regulations require that
each institution make certain information readily available upon
request to enrolled and prospective students.\8\ Institutions may
satisfy their disclosure requirements by posting the information on
their Internet Web sites. Information to be provided includes: tuition,
fees, and other estimated costs; the institution's refund policy; the
requirements and procedures for withdrawing from the institution; a
summary of the requirements for the return of title IV grant or loan
assistance funds; the institution's accreditation information; and the
institution's completion or graduation rate. If a college substantially
misrepresents information to students, a fine of no more than $25,000
may be imposed for each violation or misrepresentation and their title
IV eligibility status may be suspended or terminated.\9\ In addition,
the FTC prohibits ``unfair methods of competition'' and ``unfair or
deceptive acts or practices'' that affect interstate commerce.
---------------------------------------------------------------------------
\8\ 20 U.S.C. Sec. 1092 and 34 CFR Sec. Sec. 668.41-.49.
\9\ 20 U.S.C. Sec. 1094 (c) (3) and 34 CFR Sec. Sec. 668.71-.75.
Additionally, Education has recently proposed new regulations that
would enhance its oversight of title IV eligible institutions,
including provisions related to misrepresentation and aggressive
recruiting practices. See 75 Fed. Reg. 34,806 (June 18, 2010).
---------------------------------------------------------------------------
for-profit colleges encouraged fraud and engaged in deceptive and
otherwise questionable sales and marketing practices
Our covert testing at 15 for-profit colleges found that four
colleges encouraged fraudulent practices, such as encouraging students
to submit false information about their financial status. In addition
all 15 colleges made some type of deceptive or otherwise questionable
statement to undercover applicants, such as misrepresenting the
applicant's likely salary after graduation and not providing clear
information about the college's graduation rate. Other times our
undercover applicants were provided accurate or helpful information by
campus admissions and financial aid representatives. Selected video
clips of our undercover tests can be seen at http://www.gao.gov/
products/GAO-10-948T.
Fraudulent Practices Encouraged by For-Profit Colleges
In order to qualify for financial aid, 4 of the 15 colleges we
visited encouraged our undercover applicants to falsify their FAFSA. A
financial aid officer at a privately owned college in Texas told our
undercover applicant not to report $250,000 in savings, stating that it
was not the government's business how much money the undercover
applicant had in a bank account. However, Education requires students
to report such assets, which along with income, are used to determine
how much and what type of financial aid for which a student is
eligible. The admissions representative at this same school encouraged
the undercover applicant to change the FAFSA to falsely add dependents
in order to qualify for grants. The admissions representative attempted
to ease the undercover applicant's concerns about committing fraud by
stating that information about the reported dependents, such as Social
Security numbers, was not required. An admissions representative at
another college told our undercover applicant that changing the FAFSA
to indicate that he supported three dependents instead of being a
single-person household might drop his income enough to qualify for a
Pell grant. In all four situations when college representatives
encouraged our undercover applicants to commit fraud, the applicants
indicated on their FAFSA, as well as to the for-profit college staff,
that they had just come into an inheritance worth approximately
$250,000. This inheritance was sufficient to pay for the entire cost of
the undercover applicant's tuition. However, in all four cases, campus
representatives encouraged the undercover applicants to take out loans
and assisted them in becoming eligible either for grants or subsidized
loans. It was unclear what incentive these colleges had to encourage
our undercover applicants to fraudulently fill out financial aid forms
given the applicants' ability to pay for college. The following table
provides more details on the four colleges involved in encouraging
fraudulent activity.
Table 1.--Fraudulent Actions Encouraged by For-Profit Colleges
----------------------------------------------------------------------------------------------------------------
Certification sought Fraudulent behavior
Location and course of study Type of college encouraged
----------------------------------------------------------------------------------------------------------------
CA................................... Certificate--Computer Less than 2-year, Undercover
Aided Drafting. privately owned. applicant was
encouraged by a
financial aid
representative to
change the FAFSA to
falsely increase the
number of dependents
in the household in
order to qualify for
Pell grants.
The undercover
applicant suggested to
the representative
that by the time the
college would be
required by Education
to verify any
information about the
applicant, the
applicant would have
already graduated from
the 7-month program.
The representative
acknowledged this was
true.
This
undercover applicant
indicated to the
financial aid
representative that he
had $250,000 in the
bank, and was
therefore capable of
paying the program's
$15,000 cost. The
fraud would have made
the applicant eligible
for grants and
subsidized loans.
FL................................... Associate's Degree-- 12-year, privately Admissions
Radiologic Technology. owned. representative
suggested to the
undercover applicant
that he not report
$250,000 in savings
reported on the FAFSA.
The representative
told the applicant to
come back once the
fraudulent financial
information changes
had been processed.
This change
would not have made
the applicant eligible
for grants because his
income would have been
too high, but it would
have made him eligible
for loans subsidized
by the government.
However, this
undercover applicant
indicated that he had
$250,000 in savings--
more than enough to
pay for the program's
$39,000 costs.
PA................................... Certificate--Web Page Less than 2-year, Financial aid
Design. privately owned. representative told
the undercover
applicant that he
should have answered
``zero'' when asked
about money he had in
savings--the applicant
had reported a
$250,000 inheritance.
The financial
aid representative
told the undercover
applicant that she
would ``correct'' his
FAFSA form by reducing
the reported assets to
zero. She later
confirmed by email and
voicemail that she had
made the change.
This change
would not have made
the applicant eligible
for grants, but it
would have made him
eligible for loans
subsidized by the
government. However,
this applicant
indicated that he had
about $250,000 in
savings--more than
enough to pay for the
program's $21,000
costs.
TX................................... Bachelor's Degree-- 4-year, privately owned Admissions
Construction representative
Management. encouraged applicant
to change the FAFSA to
falsely add dependents
in order to qualify
for Pell grants.
Admissions
representative assured
the undercover
applicant that he did
not have to identify
anything about the
dependents, such as
their Social Security
numbers, nor did he
have to prove to the
college with a tax
return that he had
previously claimed
them as dependents.
Financial aid
representative told
the undercover
applicant that he
should not report the
$250,000 in cash he
had in savings.
This applicant
indicated to the
financial aid
representative that he
had $250,000 in the
bank, and was
therefore capable of
paying the program's
$68,000 cost. The
fraud would have made
the undercover
applicant eligible for
more than $2,000 in
grants per year.
----------------------------------------------------------------------------------------------------------------
deceptive or questionable statements
Admissions or financial aid representatives at all 15 for-profit
colleges provided our undercover applicants with deceptive or otherwise
questionable statements. These deceptive and questionable statements
included information about the college's accreditation, graduation
rates and its student's prospective employment and salary
qualifications, duration and cost of the program, or financial aid.
Representatives at schools also employed hard-sell sales and marketing
techniques to encourage students to enroll.
Accreditation Information
Admissions representatives at four colleges either misidentified or
failed to identify their colleges' accrediting organizations. While all
the for-profit colleges we visited were accredited according to
information available from Education, Federal regulations state that
institutions may not provide students with false, erroneous, or
misleading statements concerning the particular type, specific source,
or the nature and extent of its accreditation. Examples include:
A representative at a college in Florida owned by a
publicly traded company told an undercover applicant that the college
was accredited by the same organization that accredits Harvard and the
University of Florida when in fact it was not. The representative told
the undercover applicant: ``It's the top accrediting agency--Harvard,
University of Florida--they all use that accrediting agency. . . . All
schools are the same; you never read the papers from the schools.''
A representative of a small beauty college in Washington,
DC told an undercover applicant that the college was accredited by ``an
agency affiliated with the government,'' but did not specifically name
the accrediting body. Federal and State Government agencies do not
accredit educational institutions.
A representative of a college in California owned by a
private corporation told an undercover applicant that this college was
the only one to receive its accrediting organization's ``School of
Excellence'' award. The accrediting organization's Web site listed 35
colleges as having received that award.
Graduation Rate, Employment and Expected Salaries
Representatives from 13 colleges gave our applicants deceptive or
otherwise questionable information about graduation rates, guaranteed
applicants jobs upon graduation, or exaggerated likely earnings.
Federal statutes and regulations require that colleges disclose the
graduation rate to applicants upon request, although this requirement
can be satisfied by posting the information on their Web site. Thirteen
colleges did not provide applicants with accurate or complete
information about graduation rates. Of these 13, 4 provided graduation
rate information in some form on their Web site, although it required a
considerable amount of searching to locate the information. Nine
schools did not provide graduation rates either during our in-person
visit or on their Web sites. For example, when asked for the graduation
rate, a representative at a college in Arizona owned by a publicly
traded company said that last year 90 students graduated, but did not
disclose the actual graduation rate. When our undercover applicant
asked about graduation rates at a college in Pennsylvania owned by a
publicly traded company, he was told that if all work was completed,
then the applicant should successfully complete the program--again the
representative failed to disclose the college's graduation rate when
asked. However, because graduation rate information was available at
both these colleges' Web sites, the colleges were in compliance with
Education regulations.
In addition, according to Federal regulations, a college may not
misrepresent the employability of its graduates, including the
college's ability to secure its graduates employment. However,
representatives at two colleges told our undercover applicants that
they were guaranteed or virtually guaranteed employment upon completion
of the program. At five colleges, our undercover applicants were given
potentially deceptive information about prospective salaries. Examples
of deceptive or otherwise questionable information told to our
undercover applicants included:
A college owned by a publicly traded company told our
applicant that, after completing an associate's degree in criminal
justice, he could try to go work for the Federal Bureau of
Investigation or the Central Intelligence Agency. While other careers
within those agencies may be possible, positions as a FBI Special Agent
or CIA Clandestine Officer, require a bachelor's degree at a minimum.
A small beauty college told our applicant that barbers can
earn $150,000 to $250,000 a year. While this may be true in exceptional
circumstances, the Bureau of Labor Statistics (BLS) reports that 90
percent of barbers make less than $43,000 a year.
A college owned by a publicly traded company told our
applicant that instead of obtaining a criminal justice associate's
degree, she should consider a medical assisting certificate and that
after only 9 months of college, she could earn up to $68,000 a year. A
salary this high would be extremely unusual; 90 percent of all people
working in this field make less than $40,000 a year, according to the
BLS.
Program Duration and Cost
Representatives from nine colleges gave our undercover applicants
deceptive or otherwise questionable information about the duration or
cost of their colleges' programs. According to Federal regulations, a
college may not substantially misrepresent the total cost of an
academic program. Representatives at these colleges used two different
methods to calculate program duration and cost of attendance. Colleges
described the duration of the program as if students would attend
classes for 12 months per year, but reported the annual cost of
attendance for only 9 months of classes per year. This disguises the
program's total cost. Examples include:
A representative at one college said it would take 3.5-4
years to obtain a bachelor's degree by taking classes year round, but
quoted the applicant an annual cost for attending classes for 9 months
of the year. She did not explain that attending classes for only 9
months out of the year would require an additional year to complete the
program. If the applicant did complete the degree in 4 years, the
annual cost would be higher than quoted to reflect the extra class time
required per year.
At another college, the representative quoted our
undercover applicant an annual cost of around $12,000 per year and said
it would take 2 years to graduate without breaks, but when asked about
the total cost, the representative told our undercover applicant it
would cost $30,000 to complete the program--equivalent to more than
2\1/2\ years of the previously quoted amount. If the undercover
applicant had not inquired about the total cost of the program, she
would have been led to believe that the total cost to obtain the
associate's degree would have been $24,000.
Financial Aid
Eleven colleges denied undercover applicants access to their
financial aid eligibility or provided questionable financial advice.
According to Federal statutes and regulations, colleges must make
information on financial assistance programs available to all current
and prospective students.
Six colleges in four States told our undercover applicants
that they could not speak with financial aid representatives or find
out what grants and loans they were eligible to receive until they
completed the college's enrollment forms agreeing to become a student
and paid a small application fee to enroll.
A representative at one college in Florida owned by a
publicly traded company advised our undercover applicant not to concern
himself with loan repayment because his future salary--he was assured--
would be sufficient to repay loans.
A representative at one college in Florida owned by a
private company told our undercover applicant that student loans were
not like car loans because ``no one will come after you if you don't
pay.'' In reality, students who cannot pay their loans face fees, may
damage their credit, have difficulty taking out future loans, and in
most cases, bankruptcy law prohibits a student borrower from
discharging a student loan.
A representative at a college owned by a publicly traded
corporation told our undercover applicant that she could take out the
maximum amount of Federal loans, even if she did not need all the
money. She told the applicant she could put the extra money in a high-
interest savings account. While subsidized loans do not accrue interest
while a student is in college, unsubsidized loans do accrue interest.
The representative did not disclose this distinction to the applicant
when explaining that she could put the money in a savings account.
Other Sales and Marketing Tactics
Six colleges engaged in other questionable sales and marketing
tactics such as employing hard-sell sales and marketing techniques and
requiring enrolled students to pay monthly installments to the college
during their education.
At one Florida college owned by a publicly traded company,
a representative told our undercover applicant she needed to answer 18
questions correctly on a 50 question test to be accepted to the
college. The test proctor sat with her in the room and coached her
during the test.
At two other colleges, our undercover applicants were
allowed 20 minutes to complete a 12-minute test or took the test twice
to get a higher score.
At the same Florida college, multiple representatives used
high pressure marketing techniques, becoming argumentative, and
scolding our undercover applicants for refusing to enroll before
speaking with financial aid.
A representative at this Florida college encouraged our
undercover applicant to sign an enrollment agreement while assuring her
that the contract was not legally binding.
A representative at another college in Florida owned by a
publicly traded company said that he personally had taken out over
$85,000 in loans to pay for his degree, but he told our undercover
applicant that he probably would not pay it back because he had a
``tomorrow's never promised'' philosophy.
Three colleges required undercover applicants to make $20-
$150 monthly payments once enrolled, despite the fact that students are
typically not required to repay loans until after the student finishes
or drops out of the program. These colleges gave different reasons for
why students were required to make these payments and were sometimes
unclear exactly what these payments were for. At one college, the
applicant would have been eligible for enough grants and loans to cover
the annual cost of tuition, but was told that she needed to make
progress payments toward the cost of the degree separate from the money
she would receive from loans and grants. A representative from this
college told the undercover applicant that the Federal Government's
``90/10 Rule'' required the applicant to make these payments. However,
the ``90/10 Rule'' does not place any requirements on students, only on
the college.
At two colleges, our undercover applicants were told that
if they recruited other students, they could earn rewards, such as an
MP3 player or a gift card to a local store.\10\
---------------------------------------------------------------------------
\10\ Depending on the value of the gift, such a transaction may be
allowed under current law. Federal statute requires that a college's
program participation agreement with Education include a provision that
the college will not provide any commission, bonus, or other incentive
payment based directly or indirectly on success in securing enrollments
or financial aid to any persons or entities engaged in any student
recruiting or admission activities. However, Education's regulations
have identified 12 types of payment and compensation plans that do not
violate this statutory prohibition, referred to as ``safe harbors''.
Under one of these exceptions, schools are allowed to provide ``token
gifts'' valued under $100 to a student provided the gift is not in the
form of money and no more than one gift is provided annually to an
individual. However, on June 18, 2010 the Department of Education
issued a notice of proposed rulemaking that would, among other things,
eliminate these 12 safe harbors and restore the full prohibition.
---------------------------------------------------------------------------
Accurate and Helpful Information Provided
In some instances our undercover applicants were provided accurate
or helpful information by campus admissions and financial aid
representatives. In line with Federal regulations, undercover
applicants at several colleges were provided accurate information about
the transferability of credits to other postsecondary institutions, for
example:
A representative at a college owned by a publicly traded
company in Pennsylvania told our applicant that with regard to the
transfer of credits, ``different schools treat it differently; you have
to roll the dice and hope it transfers.''
A representative at a privately owned for-profit college
in Washington, DC told our undercover applicant that the transfer of
credits depends on the college the applicant wanted to transfer to.
Some financial aid counselors cautioned undercover applicants not
to take out more loans than necessary or provided accurate information
about what the applicant was required to report on his FAFSA, for
example:
One financial aid counselor at a privately owned college
in Washington, DC told an applicant that because the money had to be
paid back, the applicant should be cautious about taking out more debt
than necessary.
A financial aid counselor at a college in Arizona owned by
a publicly traded company had the undercover applicant call the FAFSA
help line to have him ask whether he was required to report his
$250,000 inheritance. When the FAFSA help line representative told the
undercover applicant that it had to be reported, the college financial
aid representative did not encourage the applicant not to report the
money.
In addition, some admissions or career placement staff gave
undercover applicants reasonable information about prospective salaries
and potential for employment, for example:
Several undercover applicants were provided salary
information obtained from the BLS or were encouraged to research
salaries in their prospective fields using the BLS Web site.
A career services representative at a privately owned for-
profit college in Pennsylvania told an applicant that as an entry level
graphic designer, he could expect to earn $10-$15 per hour. According
to the BLS only 25 percent of graphic designers earn less than $15 per
hour in Pennsylvania.
Web Site Inquiries Result in Hundreds of Calls
Some Web sites that claim to match students with colleges are in
reality lead generators used by many for-profit colleges to market to
prospective students. Though such Web sites may be useful for students
searching for schools in some cases, our undercover tests involving
four fictitious prospective students led to a flood of calls--about
five a day. Four of our prospective students filled out forms on two
Web sites, which ask questions about students' interests, match them to
for-profit colleges with relevant programs, and provide the students'
information to the appropriate college or the college's outsourced
calling center for follow-up about enrollment. Two fictitious
prospective students expressed interest in a culinary arts certificate,
one on Web site A and one on Web site B. Two other prospective students
expressed interest in a bachelor's degree in business administration,
one on each Web site.
Within minutes of filling out forms, three prospective students
received numerous phone calls from colleges. One fictitious prospective
student received a phone call about enrollment within 5 minutes of
registering and another 5 phone calls within the hour. Another
prospective student received 2 phone calls separated only by seconds
within the first 5 minutes of registering and another 3 phone calls
within the hour. Within a month of using the Web sites, one student
interested in business management received 182 phone calls and another
student also interested in business management received 179 phone
calls. The two students interested in culinary arts programs received
fewer calls--one student received only a handful, while the other
received 72. In total, the four students received 436 phone calls in
the first 30 days after using the Web sites. Of these, only six calls--
all from the same college--came from a public college.\11\ The table
below provides information about the calls these students received
within the first 30 days of registering at the Web site.
---------------------------------------------------------------------------
\11\ Of the 436 calls, not all resulted in a voice message in which
a representative identified the school he or she was calling from. For
those callers who did not leave a message, GAO attempted to trace the
destination of the caller. In some cases GAO was not able to identify
who placed the call to the student.
Table 2.--Telephone Calls Received as a Result of Web site Inquiries
----------------------------------------------------------------------------------------------------------------
Number of
calls Total number
Student's Web site received Most calls of calls
Student location student Degree within 24 received in received in
used hours of one day* a month
registering
----------------------------------------------------------------------------------------------------------------
1............................ GA A Business 21 19 179
Administration.
2............................ CA B Business 24 18 182
Administration.
3............................ MD A Culinary Arts.. 5 8 72
4............................ NV B Culinary Arts.. 2 1 3
----------------------------------------------------------------------------------------------------------------
Source: GAO.
* This number is based on the number of calls received within the first month of registering but does not
include the first 24 hours.
tuition at for-profit colleges is sometimes higher than tuition at
nearby public and private nonprofit colleges
During the course of our undercover applications, some college
representatives told our applicants that their programs were a good
value. For example, a representative of a privately owned for-profit
college in California told our undercover applicant that the $14,495
cost of tuition for a computer-aided drafting certificate was ``really
low.'' A representative at a for-profit college in Florida owned by a
publicly traded company told our undercover applicant that the cost of
their associate's degree in criminal justice was definitely ``worth the
investment.'' However, based on information we obtained from for-profit
colleges we tested, and public and private nonprofit colleges in the
same geographic region, we found that most certificate or associate's
degree programs at the for-profit colleges we tested cost more than
similar degrees at public or private nonprofit colleges. We found that
bachelor's degrees obtained at the for-profit colleges we tested
frequently cost more than similar degrees at public colleges in the
area; however, bachelor's degrees obtained at private nonprofit
colleges nearby are often more expensive than at the for-profit
colleges.
We compared the cost of tuition at the 15 for-profit colleges we
visited, with public and private non-profit colleges located in the
same geographic area as the for-profit college. We found that tuition
in 14 out of 15 cases, regardless of degree, was more expensive at the
for-profit college than at the closest public colleges. For 6 of the 15
for-profit colleges tested, we could not find a private nonprofit
college located within 250 miles that offered a similar degree. For 1
of the 15, representatives from the private nonprofit college were
unwilling to disclose their tuition rates when we inquired. At eight of
the private nonprofit colleges for which we were able to obtain tuition
information on a comparable degree, four of the for-profit colleges
were more expensive than the private nonprofit college. In the other
four cases, the private nonprofit college was more expensive than the
for-profit college.
We found that tuition for certificates at for-profit colleges were
often significantly more expensive than at a nearby public college. For
example, our undercover applicant would have paid $13,945 for a
certificate in computer aided drafting program--a certification for a
7-month program obtained by those interested in computer-aided
drafting, architecture, and engineering--at the for-profit college we
visited. To obtain a certificate in computed-aided drafting at a nearby
public college would have cost a student $520. However, for two of the
five colleges we visited with certificate programs, we could not locate
a private nonprofit college within a 250 mile radius and another one of
them would not disclose its tuition rate to us. We were able to
determine that in Illinois, a student would spend $11,995 on a medical
assisting certificate at a for-profit college, $9,307 on the same
certificate at the closest private nonprofit college, and $3,990 at the
closest public college. We were also able to determine that in
Pennsylvania, a student would spend $21,250 on a certificate in Web
page design at a for-profit college, $4,750 on the same certificate at
the closest private nonprofit college, and $2,037 at the closest public
college.
We also found that for the five associate's degrees we were
interested in, tuition at a for-profit college was significantly more
than tuition at the closest public college. On average, for the five
colleges we visited, it cost between 6 and 13 times more to attend the
for-profit college to obtain an associate's degree than a public
college. For example, in Texas, our undercover applicant was interested
in an associate's degree in respiratory therapy which would have cost
$38,995 in tuition at the for-profit college and $2,952 at the closest
public college. For three of the associate's degrees we were interested
in, there was not a private nonprofit college located within 250 miles
of the for-profit we visited. We found that in Florida the associate's
degree in Criminal Justice that would have cost a student $4,448 at a
public college, would have cost the student $26,936 at a for-profit
college or $27,600 at a private nonprofit college--roughly the same
amount. In Texas, the associate's degree in Business Administration
would have cost a student $2,870 at a public college, $32,665 at the
for-profit college we visited, and $28,830 at the closest private
nonprofit college.
We found that with respect to the bachelor's degrees we were
interested in, four out of five times, the degree was more expensive to
obtain at the for-profit college than the public college. For example
in Washington, DC, the bachelor's degree in Management Information
Systems would have cost $53,400 at the for-profit college, and $51,544
at the closest public college. The same bachelor's degree would have
cost $144,720 at the closest private nonprofit college. For one
bachelor's degree, there was no private nonprofit college offering the
degree within a 250 mile radius. Three of the four private nonprofit
colleges were more expensive than their for-profit counterparts.
Table 3.--Program Total Tuition Rates
----------------------------------------------------------------------------------------------------------------
For-profit Public
Degree Location college college Private nonprofit
tuition tuition college tuition
----------------------------------------------------------------------------------------------------------------
Certificate--Computer-aided CA.................... $13,945 $520 College would not
drafting. disclose.
Certificate--Massage Therapy....... CA.................... $14,487 $520 No college within 250
miles.
Certificate--Cosmetology........... DC.................... $11,500 $9,375 No college within 250
miles.
Certificate--Medical Assistant..... IL.................... $11,995 $3,990 $9,307
Certificate--Web Page Design....... PA.................... $21,250 $2,037 $4,750
Associate's--Paralegal............. AZ.................... $30,048 $4,544 No college within 250
miles.
Associate's--Radiation Therapy..... FL.................... $38,690 $5,621 No college within 250
miles.
Associate's--Criminal Justice...... FL.................... $26,936 $4,448 $27,600
Associate's--Business TX.................... $32,665 $2,870 $28,830
Administration.
Associate's--Respiratory Therapist. TX.................... $38,995 $2,952 No college within 250
miles.
Bachelor's--Management Information DC.................... $53,400 $51,544 $144,720
Systems.
Bachelor's--Elementary Education... AZ.................... $46,200 $31,176 $28,160
Bachelor's--Psychology............. IL.................... $61,200 $36,536 $66,960
Bachelor's--Business Administration PA.................... $49,200 $49,292 $124,696
Bachelor's--Construction Management TX.................... $65,338 $25,288 No college within 250
miles.
----------------------------------------------------------------------------------------------------------------
Source: Information obtained from for-profit colleges admissions employees and nonprofit college Web sites or
employees.
Note: These costs do not include books or supplies, unless the college gave the undercover applicant a flat rate
to attend the for-profit college, which was inclusive of books, in which case we were not able to separate the
cost of books and supplies.
Mr. Chairman, this concludes my statement. I would be pleased to
answer any questions that you or other members of the committee may
have at this time.
______
Appendix I: Detailed Results of Undercover Tests
The following table provides details on each of the 15 for-profit
colleges visited by undercover applicants. We visited each school
twice, posing once as an applicant who was eligible to receive both
grants and loans (Scenario 1), and once as an applicant with a salary
and savings that would qualify the undercover applicant only for
unsubsidized loans (Scenario 2).
----------------------------------------------------------------------------------------------------------------
Students Students
receiving receiving Graduation Encouragement of fraud, and
College information and degree sought Pell grants Federal rate* [In engagement in deceptive, or
[In loans [In percent] otherwise questionable
percent] percent] behavior
----------------------------------------------------------------------------------------------------------------
1......................................... 27 39 15 Scenario 1
AZ--4-year, owned by publicly traded Admissions
company representative compares the
Bachelor's--Education college to the University of
Arizona and Arizona State
University.
Admissions
representative did not
disclose the graduation rate
after being directly asked.
He provided information on
how many students graduated.
This information was
available on the college's
Web site; however, it
required significant effort
to find the college's
graduation rate, and the
college did not provide
separate graduation rates
for its multiple campuses
nationwide.
Admissions
representative says that he
does not know the job
placement rate because a lot
of students moved out of the
area.
Admissions
representative encourages
undercover applicant to
continue on with a master's
degree after finishing with
the bachelor's. He stated
that some countries pay
teachers more than they do
doctors and lawyers.
Scenario 2
Admissions
representative said the
bachelor's degree would take
a maximum of 4 years to
complete, but she provided a
1-year cost estimate equal
to \1/5\ of the required
credit hours.
According to the
admissions representative
the undercover applicant was
qualified for $9,500 in
student loans, and the
representative indicated
that the applicant could
take out the full amount
even though the applicant
indicated that he had
$250,000 in savings.
Admissions
representative told the
undercover applicant that
the graduation rate is 20
percent. Education reports
that it is 15 percent.
2......................................... 57 83 Not Scenario 2
AZ--4-year, owned by publicly traded reported Upon request by
company applicant, the financial aid
Associate's Degree--Paralegal representative estimated
Federal aid eligibility
without the undercover
applicant's reported
$250,000 in savings to see
if applicant qualified for
more financial aid. The
representative informed the
applicant he was ineligible
for any grants.
Admissions
representative
misrepresented the length of
the program by telling the
undercover applicant that
the 96 credit hour program
would take 2 years to
complete. However, she only
provided the applicant a
first year cost estimate for
36 credit hours. At this
rate it would take more than
2.5 years to complete.
3......................................... 94 96 84 Scenario 1
CA--less than 2-year, privately owned College
Certificate--Computer Aided Drafting representative told the
undercover applicant that if
she failed to pass the
college's required
assessment test, she can
continue to take different
tests until she passes.
The college
representative did not tell
the graduation rate when
asked directly. The
representative replied, ``I
think, pretty much, if you
try and show up and, you do
the work, you're going to
graduate. You're going to
pass guaranteed.'' The
college's Web site also did
not provide the graduation
rate.
Undercover applicant
was required to take a 12-
minute admittance test but
was given over 20 minutes
because the test proctor was
not monitoring the student.
Scenario 2
Undercover applicant
was encouraged by a
financial aid representative
to change the FAFSA to
falsely increase the number
of dependents in the
household in order to
qualify for a Pell grant.
The financial aid
representative was aware of
the undercover applicant's
inheritance and, addressing
the applicant's expressed
interest in loans, confirmed
that he could take out the
maximum in student loans.
The career
representative told the
undercover applicant that
getting a job is a ``piece
of cake'' and then told the
applicant that she has
graduates making $120,000-
$130,000 a year. This is
likely the exception;
according to the BLS 90
percent of architectural and
civil drafters make less
than $70,000 per year. She
also stated that in the
current economic
environment, the applicant
could expect a job with a
likely starting salary of
$13-$14 per hour or $15 if
the applicant was lucky.
4......................................... 73 83 66 Scenario 1
CA--2-year, owned by publicly traded The financial aid
company representative would not
Certificate--Massage Therapy discuss the undercover
applicant's eligibility for
grants and loans and
required the applicant to
return on another day.
Scenario 2
While one school
representative indicated to
the undercover applicant
that he could earn up to $30
an hour as a massage
therapist, another
representative told the
applicant that the school's
massage instructors and
directors can earn $150-$200
an hour. While this may be
possible, according to the
BLS, 90 percent of all
massage therapists in
California make less than
$34 per hour.
5......................................... 34 66 71 Scenario 1
DC--4-year, privately owned Admissions
Bachelor's Degree--Business Information representative explains to
Systems the undercover applicant
that although community
college might be a less
expensive place to get a
degree, community colleges
make students spend money on
classes that they do not
need for their career.
However, this school also
requires students to take at
least 36 credit hours of non-
business general education
courses.
Admissions
representative did not
disclose the graduation rate
after being directly asked.
He told the undercover
applicant that it is a
``good'' graduation rate.
The college's Web site also
did not provide the
graduation rate.
Admissions
representative encouraged
the undercover applicant to
enroll by asking her to
envision graduation day. He
stated, ``Let me ask you
this, if you could walk
across the stage in a black
cap and gown. And walk with
the rest of the graduating
class and take a degree from
the president's hand, how
would that make you feel?''
Scenario 2
Admissions
representative said the
bachelor's degree would take
3.5 to 4 years to complete.
He gave the applicant the
cost per 12 hour semester,
the amount per credit, the
total number of credits
required for graduation, and
the number of credits for
the first year. When asked
if the figure he gave
multiplied by four would be
the cost of the program, the
representative said yes,
although the actual tuition
would have amounted to some
$12,000 more.
Admissions
representative required the
undercover applicant to
apply to the college before
he could talk to someone in
financial aid.
Admissions
representative told the
undercover applicant that
almost all of the graduates
get jobs.
Flyer provided to
undercover applicant stated
that the average income for
business management
professionals in 2004 was
$77,000-$118,000. When asked
more directly about likely
starting salaries, the
admissions representative
said that it was between
$40,000 and $50,000.
6......................................... 74 74 Not Scenario 1
DC--less than 2-year, Privately owned reported Admissions
Certificate--Cosmetology, Barber representative told the
undercover applicant that
the college was accredited
by ``an agency affiliated
with the government,'' but
did not specifically name
the accrediting body.
Admissions
representative suggested to
the undercover applicant
that all graduates get jobs.
Specifically he told the
applicant that if he had not
found a job by the time he
graduated from the school,
the owner of the school
would personally find the
applicant a job himself.
Scenario 2
Admissions
representative told our
undercover applicant that
barbers can earn $150,000 to
$250,000 a year, though that
would be extremely unusual.
The BLS reports that 90
percent of barbers make less
than $43,000 a year. In
Washington, DC, 90 percent
of barbers make less than
$17,000 per year. He said,
``The money you can make,
the potential is
astronomical.''
7......................................... 86 92 78 Scenario 1
FL--2-year, privately owned When asked by the
Associate's Degree--Radiologic Therapy undercover applicant for the
graduation rate for two
programs, the admissions
representative did not
answer directly. For example
the representative stated
that ``I've seen it's an 80
to 90 percent graduation
rate'' for one of the
programs but said for that
information, ``I would have
to talk to career
services.'' She also said 16
or 17 students graduated
from one of the programs,
but couldn't say how many
students had started the
program. The college's Web
site also did not provide
the graduation rate.
Admissions
representative told our
prospective undercover
applicant that student loans
were not like car loans
because student loans could
be deferred in cases of
economic hardship, saying
``It's not like a car note
where if you don't pay
they're going to come after
you. If you're in hardship
and you're unable to find a
job, you can defer it.'' The
representative did not
explain the circumstances
under which students might
qualify for deferment.
Borrowers who do not qualify
for deferment or forbearance
and who cannot pay their
loans face fees, may damage
their credit or have
difficulty taking out future
loans. Moreover, in most
cases, bankruptcy law
prohibits a student borrower
from discharging a student
loan.
Scenario 2
Admissions
representative suggested to
the undercover applicant
that he not report $250,000
in savings reported on the
FAFSA. The representative
told the applicant to come
back once the fraudulent
financial information
changes had been processed.
This change would
not have made the undercover
applicant eligible for
grants because his income
would have been too high,
but it would have made him
eligible for loans
subsidized by the
government.
8......................................... Not Not Not Scenario 1
FL--2-year, owned by publicly traded reported reported reported Admissions
company representative falsely
Associate's Degree--Criminal Justice stated that the college was
accredited by the same
agency that accredits
Harvard and the University
of Florida.
A test proctor sat
in the test taking room with
the undercover applicant and
coached her during the test.
The undercover
applicant was not allowed to
speak to a financial aid
representative until she
enrolled in the college.
Applicant had to
sign agreement saying she
would pay $50 per month
toward her education while
enrolled in college.
On paying back
loans, the representative
said, ``You gotta look at it
. . . I owe $85,000 to the
University of Florida. Will
I pay it back? Probably not
. . . I look at life as
tomorrow's never promised .
. . Education is an
investment, you're going to
get paid back tenfold, no
matter what.''
Admissions
representative suggested
undercover applicant switch
from criminal justice to the
medical assistant
certificate, where she could
make up to $68,000 per year.
While this may be possible,
BLS reports 90 percent of
medical assistants make less
than $40,000 per year.
Scenario 2
When the applicant
asked about financial aid,
the two representatives
would not answer but debated
with him about his
commitment level for the
next 30 minutes.
The representative
said that student loans
would absolutely cover all
costs in this 2-year
program. The representative
did not specify that Federal
student loans by themselves
would not cover the entire
cost of the program. While
there are private loan
programs available, they are
normally based on an
applicant passing a credit
check, and typically carry
higher interest rates than
Federal student loans.
The representative
said paying back loans
should not be a concern
because once he had his new
job, repayment would not be
an issue.
The representatives
used hard-sell marketing
techniques; they became
argumentative, called
applicant afraid, and
scolded applicant for not
wanting to take out loans.
9......................................... 83 80 70 Scenario 2
IL--2-year, privately owned Admissions
Certificate--Medical Assistant representative initially
provided misleading
information to the
undercover applicant about
the transferability of the
credit. First she told the
applicant that the credits
will transfer. Later, she
correctly told the applicant
that it depends on the
college and what classes
have been taken.
10........................................ Not Not Not Scenario 1
IL--4-year, owned by publicly traded reported reported reported Admissions
company representative said the
Bachelor's Degree--Psychology bachelor's degree would take
3.5-4 years to complete, but
only provided an annual cost
estimate for \1/5\ of the
program.
Scenario 2
Admissions
representative did not
provide the graduation rate
when directly asked. Instead
she indicated that not
everyone graduates.
11........................................ 47 58 9 Scenario 1
PA--4-year, owned by publicly traded Admissions
company representative told the
Bachelor's Degree--Business undercover applicant that
Administration............................ she could take out the
maximum amount of Federal
loans, even if she did not
need all the money. She told
the applicant she could put
the extra money in a high-
interest savings account.
While subsidized loans do
not accrue interest while a
student is in college,
unsubsidized loans do accrue
interest. The representative
did not disclose this
distinction to the applicant
when explaining that she
could put the money in a
savings account.
Scenario 2
Admissions
representative told the
undercover applicant that
the college is regionally
accredited but does not
state the name of the
accrediting agency. The
college's Web site did
provide specific information
about the college's
accreditation, however.
Admissions
representative said
financial aid may be able to
use what they call
``professional judgment'' to
determine that the
undercover applicant does
not need to report over
$250,000 in savings on the
FAFSA.
Admissions
representative did not
disclose the graduation rate
after being directly asked.
He instead explained that
all students that do the
work graduate. This
information was available on
the college's Web site;
however, it required
significant effort to find
the college's graduation
rate, and the college did
not provide separate
graduation rates for its
multiple campuses
nationwide.
12........................................ 52 69 56 Scenario 1
PA--less than 2-year, privately owned Admissions
Certificate--Web Page Design representative told the
undercover applicant that
she has never seen a student
decline to attend after
speaking with financial aid.
The admissions
representative would not
allow the applicant to speak
with financial aid until she
enrolled in the college.
If the undercover
applicant was able to get a
friend to enroll in the
college she could get an MP3
player and a rolling
backpack. As noted in the
testimony, although this is
not illegal, it is a
marketing tactic.
Scenario 2
Financial aid
representative told the
undercover applicant that he
should have answered
``zero'' when asked about
money he had in savings--
the applicant had reported a
$250,000 inheritance.
The financial aid
representative told the
undercover applicant that
she would change his FAFSA
form by reducing the
reported assets to zero. She
later confirmed by e-mail
and voice mail that she had
made the change.
This change would
not have made the undercover
applicant eligible for
grants, but it would have
made him eligible for loans
subsidized by the
government.
13........................................ 81 99 54 Scenario 1
TX--4-year, privately owned Admissions
Bachelor's Degree--Construction representative said the
Management; Visual Communications program would cost between
$50,000 and $75,000 instead
of providing a specific
number. It was not until the
admissions representative
later brought the student to
financial aid that specific
costs of attendance were
provided.
Scenario 2
Admissions
representative did not
disclose the graduation rate
after being directly asked.
The college's Web site also
did not provide the
graduation rate.
Admissions
representative encouraged
undercover applicant to
change the FAFSA to falsely
add dependents in order to
qualify for grants.
This undercover
applicant indicated to the
financial aid representative
that he had $250,000 in the
bank, and was therefore
capable of paying the
program's $68,000 cost. The
fraud would have made the
applicant eligible for
$2,000 in grants per year.
14........................................ 89 92 34 Scenario 1
TX--2-year, owned by publicly traded Admissions
company representative said the
Associate's Degree--Business program takes 18 to 24
Administration months to complete, but
provided a cost estimate
that suggests the program
takes more than 2.5 years to
complete.
The college's Web
site did not provide the
graduation rate.
Scenario 2
Undercover applicant
would be required to make a
monthly payment to the
college towards student
loans while enrolled.
Admissions
representative guaranteed
the undercover applicant
that getting a degree would
increase his salary.
15........................................ 100 100 70 Scenario 1
TX--2-year, privately owned The undercover
Associate's Degree--Respiratory Therapy applicant was not allowed to
speak to a financial aid
representative until he
enrolled in the college.
Scenario 2
Admissions
representative
misrepresented the length of
time it would take to
complete the degree. He said
the degree would take 2
years to complete but
provided a cost worksheet
that spanned 3 years.
The undercover
applicant was told he was
not allowed to speak to a
financial aid representative
until he enrolled in the
college. After refusing to
sign an enrollment agreement
the applicant was allowed to
speak to someone in
financial aid.
Admissions
representative told
undercover applicant that
monthly loan repayment would
be lower than it actually
would be.
----------------------------------------------------------------------------------------------------------------
Source: GAO undercover visits and Department of Education.
* This information was obtained from the Department of Education National Center for Education Statistics.
The Chairman. Mr. Kutz, thank you for your testimony, but
moreover, thank you for your diligence in following through on
our requests for information.
Is that a vote?
A 15-minute roll-call vote has just started. Rather than
interrupt our line of questioning--and I intend to have 10-
minute rounds of questions for this panel, let's recess for 10
minutes or so, we'll go over and vote and come back, Mr. Kutz.
We have two votes? I only got one vote. The committee will
stand in recess for 15 minutes. And that should give us time to
vote. If there are two votes than we'll probably be back here
in about 20 minutes.
So, we'll take at least a 15-minute break, Mr. Kutz, and
we'll be back at that time.
Thank you.
[Recessed.]
[Reconvened.]
The Chairman. The committee will resume its sitting. I will
go ahead with my first round of questioning in anticipation of
other Senators coming here after this second vote. I apologize,
but that's just the way of the Senate.
So, Mr. Kutz, again, thank you very much for your testimony
and thank you and all of the GAO for all of the great work that
you do in keeping us advised and informed.
But, Mr. Kutz, picking up on the deceptive recruiting
practices, I hear a lot of talk that, ``Well, these are just a
few rogue people.'' Or, perhaps a school just has lax recruiter
oversight, that the vast majority of the for-profit schools
would never engage in fraudulent, deceptive, or overly
aggressive marketing to students. Based on, not just this
investigation, but on your experience, would you say the
misleading and deceptive practices--overly aggressive marketing
are the exception, or are these more widespread throughout all
of the for-profit schools?
Mr. Kutz. Well, as I mentioned in my opening statement, all
15 provided fraudulent, deceptive, or otherwise questionable
practices. So, there were none that we would say were
completely clean.
There were some good practices, as I mentioned, sprinkled
into these, and that's not surprising--there are good people
trying to do the right thing. This was not a statistical
sample, but it's important to point out, too, that we did not
have any specific leads that led us to those 15 locations. We
didn't know what we were going to find. So, it wasn't a
statistical sample, but we had no specific leads of fraud. So,
certainly it gives you an indication that this is much more
widespread than a few bad actors.
The Chairman. Mr. Kutz, I think, the first two clips were
good practices. Did you identify those schools, or could you
identify those schools? Were they on this list?
Mr. Kutz. Yes, they were. Absolutely.
Yes, the first three, the good practices were the College
of Office Technology in Illinois, Argosy University and Potomac
College, here, in Washington, DC.
The Chairman. I see.
Mr. Kutz. So, there were three clips in the good practices.
The Chairman. I see.
Mr. Kutz, in your opinion, what is the likelihood that a
typical student considering a for-profit school could actually
get an accurate understanding of the cost of the program and of
the total cost?
Mr. Kutz. Well, as you saw in the videos, it's highly
unlikely. Not only did you have problems getting to speak to a
financial aid representative, we kept saying, ``We want to know
how much it is,'' and they kept saying, ``No, no, no.'' So,
there were a lot of things. Plus, there were other things they
did to kind of disguise the cost; whether telling you the
program was 12 months or, 9 months and giving you 12 months of
cost--or, the opposite, 9 months of cost for a 12-month
program, meaning it really cost more. So, it was very difficult
to sift through the cost in most cases.
There were some, again, that were good practices, but most
of them it was very difficult to determine the cost. I think
you're talking, too, about oftentimes your low-income people.
So, I think that's some of the people that are being targeted,
here.
The Chairman. Mr. Kutz, these schools are required in
certain circumstances to provide prospective students with
actual graduation rates for the college and programs. Your
written testimony discusses the difficulty you had in obtaining
these graduation rates. Could you go into more detail about
that, and do you believe the average student is given an
accurate understanding of the graduation rates at these for-
profit schools?
Mr. Kutz. Nine of the fifteen neither provided us
graduation rates orally, or had them on their Web sites.
Others, we got conflicting information at the same school. One
school the person said, ``We've only been around a few months,
we don't really have one,'' the other person said it was 70
percent--at the same school. So, it was very difficult to sift
fact from fiction, here.
The Chairman. Why do you believe that so many schools that
we saw depicted would not even let you speak with a financial
aid representative before paying a fee and signing an
enrollment contract?
Mr. Kutz. I believe it's part of the training they receive.
It's a marketing pitch, and they were very consistent in some
of these places. I mentioned the six--they would not let us
speak to financial aid until we signed a document and paid them
money as an admissions fee, or an application fee, I guess, is
what it was probably called.
So, they were consistently trained. And we tried--and some
of those videos went on for 40 minutes, where we kept trying to
speak to financial aid. So, you saw 2-minute clips, but our
students got very frustrated. You know, it was a test for us,
but real people would get very frustrated. We simply wanted to
know what the cost was, and we had a hard time getting to
financial aid. So it was--I think it was a marketing script.
The Chairman. So, I've only got 30 seconds left, here. Your
visit lasted for several hours. Would you say that the
practices in those videos haven't been fully able to capture
all that was in the presentation?
Mr. Kutz. No, and there were other good practices, but
there were many other bad practices. We just gave you 12
minutes of clips here--we probably had 90 to 100 hours of video
from our undercover visits. Some of them took 2 or 3 hours. So,
there's dead time in there, too, but there's also other
things--there were other fraud cases we didn't show you, there
were other cases of people inflating the cost--or, understating
the cost or providing some other deceptive information. So,
there's a lot more than what you saw.
The Chairman. Thank you, Mr. Kutz. My 5 minutes is up. I
said we were going to have 10-minute rounds, but because we had
this break to vote, I'm just going to do 5-minute rounds. We
can do a second round, if people so desire.
Senator Enzi.
Senator Enzi. Thank you, Mr. Chairman.
Actually, I used to use a ``secret shopper'' kind of
concept in the retail business, and it's valuable to find out
what people are really doing. And I suspect that is just what's
been done with your secret shopper and probably is making a
difference in colleges out there, already. I think they'll
probably clean up their act a little bit.
One of those scenarios did kind of remind me of when my
oldest daughter was applying to college, and it was at a
private, nonprofit college. And we had filled out the FAFSA
form, and they were looking it over--we made all of our kids
save money to go to college, to work and save money--and this
person said, ``You know, you really ought to take some of that
money and buy a car and re-do your form, because that won't
count.'' I didn't appreciate that kind of instruction to my
kids after making them save their money.
Which of the situations in your investigation that were
revealed in your investigation will you refer to the Department
of Education's Inspector General or the Department of Justice
for further review? Are you going to take some action with
this?
Mr. Kutz. Absolutely. We will refer, formally, to the
investigative side of the Department of Education Inspector
General the four fraud cases and, in fact, they came over to
our office yesterday and met with us. So, they already are
aware of the four, and so those four will go to the
investigative side.
All 15 of these cases will be shared with the Department of
Education, if they want to have further information from an
oversight standpoint, we will share it with them, too.
Senator Enzi. Did you run into any difficulties with the
hidden camera? I assume it was a hidden camera?
Mr. Kutz. Yes, some were in hats, and some were in
portfolios, and you did notice, sometimes, that we had a
headshot above the nose or whatever the case may be, so
sometimes--and we also went in with two. Every time we went in
we had two people, there was a friend, and there was the
prospective student. So, sometimes the camera would look at
your prospective friend and you would lose the picture a little
bit, but we typically had hats or other devices.
Senator Enzi. I think they did a pretty good job with their
photography.
Now, in your written testimony, you criticized several
schools for not allowing access to financial aid advice, and
suggested that the Federal law requires the schools to provide
that advice. And I do think that they were trying to keep
people from getting information that they really deserve and
need to know. Did the schools run into a problem with getting
jammed up on people wanting specific financial advice without
knowing whether a student had enrolled? And I'm not talking
about just these colleges, I'm talking about any colleges. Do
you run into that problem, where the school worries about not
having enough financial aid people to provide specific
information, unless they have some kind of an indication that
they're going to enroll? Not necessarily signing on the dotted
line for whatever the total amount is.
Mr. Kutz. Well, as we talked in the opening statement,
there were certain colleges that let us speak to financial aid
representatives without signing a document and without
enrolling. So, some gave us access. The other ones were very,
as I mentioned, were very disciplined--they just kept saying,
``No, no, no. You have to sign.'' So, it was a mixture. Some
were more willing to share that financial information before we
actually signed a document than others were. So, I don't know
why that is, Senator, I mean, but it was a mixed bag.
Senator Enzi. Yes. Did they have a filled-out FAFSA form,
already?
Mr. Kutz. That's interesting. We did go in with a filled-
out FAFSA, and they were actually surprised we walked in with
one filled out. They said, ``We usually help the students fill
it out,'' which is a little bit scary to me, given some of the
advice that we received.
But, yes, we went in with filled-out FAFSAs in all cases.
Senator Enzi. You didn't take a look at any of the public
or the private nonprofits when you did this, did you?
Mr. Kutz. No, we didn't.
Senator Enzi. Just these 15?
Mr. Kutz. Just these 15 colleges.
Senator Enzi. So, we wouldn't know if this practice of not
allowing the financial advisor is common in other schools?
Mr. Kutz. Can't speak to that.
Senator Enzi. I'll go ahead and give up the rest of my
time.
The Chairman. Twenty seconds.
Senator Enzi. I know, tremendous amount of time.
Thank you, Mr. Chairman.
The Chairman. Senator Franken.
Statement of Senator Franken
Senator Franken. Thank you, Mr. Chairman. Thank you for
this hearing. I think there is a reason to be doing this on
for-profit colleges, and I have tremendous respect for the
Ranking Member, but with so much of the defaults being in for-
profit, and such a low graduation rate, and so much profit
being made, and so much government money being spent for these
for-profit schools with such bad results, on the bad actors--
and I want to emphasize bad actors from good actors--this is
low-hanging fruit. This feels like low-hanging fruit. Of
course, you're going to have some athletic recruiting problems,
we know those exist. But that's not what this hearing is about.
This is about Pell grants going to schools that are recruiting
people and, in an unethical manner, that are lying to people--
this is of a very different order. And I think we should
recognize this.
I'm very disturbed by the videos. I just want to ask you,
just to make sure, Andrew Breitbart didn't edit these, did he?
Mr. Kutz. No.
[Laughter.]
Senator Franken. You testified that all 15 schools
investigated by the GAO made deceptive or otherwise
questionable statements to undercover applicants. Now, most of
the deceptive practices that your investigation exposed are
already illegal. How are these schools getting away with this?
What enforcement mechanisms are missing that allow this conduct
to take place so readily and openly?
Mr. Kutz. Well, you have the Department of Education who
has certain remedies with organizations that don't follow their
regulations, you've got the IG who we'll be giving the fraud
cases to, and then you have, of course, industry typically
talks about self-policing. Some combination of those, here,
clearly has failed, Senator, and I think that there are certain
things that need to be done. I mean, hopefully, like you said,
that these colleges will take a look at this video, or one of
you said, and straighten up after this, and actually talk to
their people about--it's a combination of two things--it's the
fraud, but it's also, how do these people feel? You know, I
asked my people, ``How do you feel sitting in these things? ''
It's uncomfortable, it's embarrassing. A lot of these--one of
these schools----
Senator Franken. Well, this is clearly their M.O., though,
so they may not want to give this up. This is how they hook--
hoodwink people into signing on, and then rip them off. So, I'm
not sure that feeling bad about it--I mean, I understand that
the people who felt bad were your people.
I want to get into this good actors versus bad actors. For
example, at this school called Walden University in Minnesota,
it has an impressively low 2-year cohort loan default rate of
1.7 percent, and I've been told by their President that part of
the reason for this is that they work hard to ensure that
students they admit are good fits for their programs. Based on
your research, I mean, you had all 15 be deceptive.
Mr. Kutz. Correct.
Senator Franken. How widespread do you think these
deceptive and overly aggressive practices are at for-profit
colleges? What other information do you think we need to
determine how truly widespread this is?
Mr. Kutz. Well, we did this, Senator, in June and July,
primarily, so this is fresh information and my team did a good
job of getting a lot done in a short period of time. It's not a
statistical sample, but as you said, we were 15 for 15. So,
there's indications that this would be a broader issue.
One of the other things, too, is the Department of
Education could do this kind of thing, and they maybe do some
of this, but there has to be continuous testing of this and
oversight for this.
But you're right, giving this up and having sales impacted
is something that is a consideration for these companies.
Senator Franken. I just wanted to, as we do these hearings,
make sure that we, No. 1, find a way to separate the good
actors from the bad actors, and find some metrics to do that by
and then act against the bad actors.
Because, I'll tell you something, and I've said this before
in this committee. My wife's father died when she was 18 months
old, leaving her mom widowed with five kids, four girls. All of
the girls went to college, including my wife. They all managed
to go to college based on scholarships and Pell grants. There's
no bigger defender of Pell grants than me, because of that.
But, I can't conscience this. And we're studying these for-
profit institutions for a reason. There's a reason to be having
these hearings and confining them to for-profit institutions,
because the numbers are so outlandish. And if we are truly
talking about saving money and cutting the deficit, we ought to
be going after the low-hanging fruit. And that's what this
appears to be.
And I don't quite get this idea of, ``Well, we also have to
be studying nonprofits and publics.'' Fifteen out of fifteen
are giving you deceptive information. I think we've located a
place where there are a tremendous high percentage of bad
actors. And we've got to get after them.
Thank you.
The Chairman. Senator Isakson.
Statement of Senator Isakson
Senator Isakson. Thank you very much, Mr. Chairman.
In your GAO highlights, it says that the 15 were selected,
(A) Because the Department of Education reported that they
received 89 percent or more of their revenue from Federal
funds, Federal student aid, is that right?
Mr. Kutz. That is one of the factors we considered, yes.
Senator Isakson. When you put the fictitious people on the
Web sites, you gauged the number of solicitations that came
back from those people being posted as a part of your
determination?
Mr. Kutz. No. Those Web sites were completely independent
of the 15. Absolutely independent.
Senator Isakson. They weren't--oh.
Mr. Kutz. Although, some of the referrals from the Web site
went to some of the 15. So, some of those 15 are linked to
those Web sites.
Senator Isakson. The point is, you had some suspicion, or
some area of interest in these 15 to begin with.
Mr. Kutz. Not really. I mean, they got a lot of Federal
dollars, that was certainly one of the things. But we tried
to--we did this in June and July, we did this in a very short
period of time, so some of those geographic grouping, where we
tried to get several in one location. But we had no specific
evidence of fraud or any abuse at any location. There's a lot
of noise about the industry, but we didn't pick any location,
in particular, because of any specific allegations on that
location.
Senator Isakson. Did each one of the schools have a PPA
agreement with the Department of Education?
Mr. Kutz. I don't know that. I don't know.
Senator Isakson. Well, following up on Senator Franken's
statement and I may be wrong, and I welcome anybody to correct
me that knows differently, but title IV funds are not available
to you unless you enter into a Program Participation Agreement
with the Department of Education.
Mr. Kutz. This was all undercover, so presumably then they
would have had that, but we did not look at any of those
documents, except in our undercover.
Senator Isakson. Well, I'm suggesting that you go check
this out, because if they did, I believe--from what I've read
in the Department of Education materials and other things I've
been looking for--that there are substantial violations in the
Participation Agreements in title IV based on what you've shown
here.
Mr. Kutz. And I think the Department of Education agrees.
We did meet with the Department of Education earlier this week,
also, so they will have evidence from all 15.
Senator Isakson. Would their route of enforcement of a PPA
agreement be through DOJ?
Mr. Kutz. I don't know if it would be criminal, it might be
more civil.
Senator Isakson. Who, then, would they turn it over to, to
pursue the institution? Internal people within the Department
of Education?
Mr. Kutz. For the civil. For the criminal, the
investigative side of the Inspector General's who we're working
with on these cases. And they would work for DOJ if they
actually decided to take a case to a U.S. Attorney.
Senator Isakson. So the IG is who you're working with?
Mr. Kutz. On the fraud cases. On the rest of it, it would
be more of the management oversight side.
Senator Isakson. So DOE would do the contractual violation
part?
Mr. Kutz. Yes, correct.
Senator Isakson. OK. Well, the reason for going along that
line, we went through a lot of this on incentive compensation
for recruiting students and all kinds of things. In fact, 1992
was when the Higher Education Act was amended to address the
commission incentive. There's a period of time where they were
paying bonuses to people for bringing students in. That's a
violation now. There are only certain safe harbors where your
compensation can be tied in any way to recruiting. I don't
think there's any safe harbor from fraud. I don't think there's
any safe harbor from this type thing.
The most effective thing the government can do is, if they
have a bona fide case of a violation of a PPA agreement under
Section 668.14 of the Act, then they ought to immediately
pursue whatever legal remedy it is, or at least pursue those
individuals cease and desist or remove their ability to receive
the money.
Mr. Kutz. As I said, we'll certainly make our information
available to the Department of Education on the management side
and on the investigative side.
Senator Isakson. My point for raising that is the chips
will fall where they may, but I don't want to leave a hearing
with a generic application against all for-profits because of
15 of them when we got 15 that violated an agreement they have
with us, that we ought to be pursuing. The best way to get
people to pay attention to the law is to enforce it, whether
it's a regulation, a contractual agreement, or statutory law.
I'd like to know what DOE is going to do to pursue any of
these violations of PPA agreements with the institutions in
mind because I think that would be important for us to know.
Because if we leave here with just an indictment of an
industry without actually going after people we've discovered,
that certainly have information that the very least is
questionable, or at the very most is probably against the law,
then we ought to see to it that's enforced.
Mr. Kutz. Can I make one more point?
Senator Isakson. I didn't ask too many questions.
Mr. Kutz. Well, no, and it's along these lines. I think the
accountability here should be with the schools and not
necessarily the individuals. But I think what's going to happen
is the individuals will be held out as rogue employees, and
will be potentially dealt with individually. But I think that's
probably unfair here because I expect anybody we would have
walked into perhaps that was trained a certain way in marketing
was going to follow the same script.
So, I think what we're going to see, and we've seen it
before in other undercovers we've done for investigations that
the organizations say that was a rogue employee. But I expect
in some of these cases, that was absolutely not true.
Senator Isakson. Well, if I may, Mr. Chairman, just
following on that response, I think your intuition is probably
correct, but my point is that the concern over what's happened
in these instances, needs to be corrected, not just stated and
end up being an indictment. But then nothing's done about it. I
know we have people that are doing bad things, but I know we
have a lot of people doing it right. And they're going to be
under a cloud unless we begin to separate the wheat from the
chaff.
And I think the only way to do that is through enforcement
of the program participation agreement. Then everybody will
know it really means something. And then I think you'll
automatically have compliance because of the ramifications of
noncompliance.
Thank you, Mr. Chairman.
The Chairman. Thank you. I see that my friend from Georgia
was talking about the Nunn Commission. Senator Nunn from
Georgia headed an investigation of for-profit colleges that led
to the ban on incentive compensation in the 1992 Higher
Education Act reauthorization.
The second panel, Mr. Hawkins, will talk about that and
point out how the safe harbors that were implemented in 2002
basically negated what was done in 1992. So, the second panel
will get into this.
Next is Senator Casey.
Statement of Senator Casey
Senator Casey. Thank you, Mr. Chairman. And sir, thank you
for your testimony. It was enlightening to see both the video
as well as to have read the report. I have to say in the
interest of full disclosure, I was the auditor general in
Pennsylvania for two terms. So I know what it's like to issue
reports like this, and then to be criticized for the----
Mr. Kutz. We're not very popular, are we, Senator?
Senator Casey. I have a high degree of skepticism when a
report like this gets attacked. So I'll put that on the table.
But I was struck by the scope of what you found. I was
looking through--just looking by way of summary of pages 9
through 13. And when you break it down into the categories of
deceptive or questionable statements, whether it's
accreditation information, whether it's graduation rate,
employment, questions, program duration, cost, financial aid. I
mean, you have 15 colleges, 13 colleges involved, 9, 11, 6. And
you really have no predicate, necessarily to--so you're looking
at this fresh. And still, we see all kind of problems.
To say it's inexcusable doesn't begin to describe the
outrage of this. And you've done the American people a real
service by pointing out these problems, and by making sure that
we're focused on two groups of people, and maybe only these
two, students and taxpayers in my judgment.
I know that sometimes when you issue reports like this, the
result is a series of recommendations or suggestions. So I want
to ask you about that. But I think that what a lot of people
are waiting for in the wake of a report like this is
accountability at a couple of levels.
Certainly at the individual level, these individuals who
engage in these practices have to be held accountable. For
some, that might mean firing them. And I think the institutions
have to act very quickly, if they haven't already, to deal with
that individually.
And they have to work that out in terms of our employment
laws and statutes, but there also has to be institutional
industry accountability. That needs to happen real fast if
taxpayers and students in the families that they come from or
going to have confidence that the results of your report are in
fact being taken seriously and implemented. So that's
commentary. And I know you're not here to evaluate comments
like that.
But I wanted to ask you in light of the results that you
found, and the outrage that we all feel about what was on the
video, do you have any recommendations in terms of what the
Federal Government should do, or--and I should say and the
industry--in terms of strategies, tools, policies, statutory
change, the whole range of possible actions that could flow
from a report like this? Do you have any suggestions about how
either the industry can right the ship, so to speak, and
whether or not the Federal Government can take specific actions
to prevent these kind of practices from taking place again?
Mr. Kutz. Certainly. I think oversight like this,
consistent oversight is going to be necessary to do this. And
one of the benefits of consistent oversight like this with a
lot of press coverage and whatever you're going to get is
public awareness. And so, hopefully, we're go to--and that's a
prevention tool. So if the public becomes more and more aware
of what's going on, I think that some of the people targeted by
this could believe some of the stuff that you actually saw in
there and heard about, they're accredited by Harvard, just the
same places Harvard University, these for-profit colleges has
the same--I mean that's ridiculous, but someone might actually
believe something like that.
So prevention is the most important thing here. And ways
the government can do that, monitoring by the Department of
Education. And then we've talked about consequences here with
respect for the bad actors. If you don't make examples of the
bad actors, which also can have a preventive effect, as you
know, then you have a system where people think there are no
consequences. And you're going to see these practices continue.
So if there's no consequences, we're going to be back here a
year from now with the same discussion.
Senator Casey. Do you have any sense as to whether or not
the Department of Education has the resources to do the kind of
oversight that's needed here? Or do you have any sense of that?
Mr. Kutz. I don't--I can't speak to that specifically.
Senator Casey. I wanted to ask you as well, and this is
more broad ranging, based upon your experience, but based upon
your experience in doing reports like this in the past, what's
the most successful post-report strategy that you've seen,
where you see either the Federal Government taking action to
correct these problems, or prevent them from happening? Or
follow-up that's done, that's particularly helpful?
What do we have to try to avoid in the aftermath of a
report like this? A hearing like this is part of the
accountability. But what do we have to avoid, what do we have
to be concerned about 6 months, a year from now, in terms of
what didn't happen by way of follow up?
Mr. Kutz. Well in some cases, the reactions automatically
are that we need more legislation.
Senator Casey. Right.
Mr. Kutz. I don't know if that's true here or not. Perhaps
on some of these issues, there's things that could be tightened
up, but it sure appears to me that these regulations in place
address most of what you saw on the video. So then it seems to
me that they're not being effectively overseen and enforced.
And so, unless you believe that there's holes in the
regulations, and if there are, then that's your responsibility
to consider legislation. If it's not, then you need to put the
pressure on the Department of Education because this is Federal
taxpayer money. I mean most of this is Federal taxpayer
dollars. So Congress and the administration have a
responsibility to make sure those dollars are being spent as
efficiently, effectively as possible, and that they're not
predatory lending practices and other things with low-income
individuals in our country.
Senator Casey. Thanks very much.
The Chairman. Thank you, Senator Casey.
Senator Burr.
Statement of Senator Burr
Senator Burr. Thank you, Mr. Chairman. Mr. Kutz, thank you
very much for what I think is a very thorough investigation on
your part of bad practices, fraud, whatever we want to call it.
It's No. 1, unacceptable.
No. 2, it should be pursued in the most aggressive way as
Senator Isakson said. And let me just ask you, without some
enforcement, will this go away?
Mr. Kutz. No, I mean, you're talking about money, profits.
And, you look at sales, and I ask my people what does this
seem--the people that sat in the chairs, because those are the
ones that really saw this face to face. And it was kind of like
an experience of buying an automobile in some cases. So I mean,
yes, it's going to stay the same until someone does something.
Senator Burr. I'd ask you in that investigation, did you
ever follow up to see if there was some type of cash incentive
that was provided by the institution to the individual that was
actually processing the application for admission?
Mr. Kutz. That's a great question. We didn't see it, but we
saw certain things like the boards you might see up in the
sales organization would close sales and things like that. So
clearly, these were salespeople. There certainly appeared to be
sales targets in some cases. Whether they're being compensated
based on that or not, it sure felt that way, but there's no way
for us to know.
Senator Burr. Clearly, Mr. Chairman, that's an area I'd
love for the Department of Education to look at within the
contractual agreements we have with institutions. That might be
an area that we look at eliminating any concerns about
incentives playing a role in one's willingness to break the
law.
As troubling as this sounds, I've got to say, I'm more
concerned with the graduation rates in this country than I am
with whether it happened in for-profit or not-for-profit. I
think we need to stay focused on how many kids get across the
goal line.
In North Carolina, we have 58, 4-year institutions by my
count. Of those 4-year institutions, 9 institutions had a
greater than 50 percent graduation rate after 4 years. Twenty-
two had a greater than 50 percent graduation rate after 6
years. Twenty-four had a greater than 50 percent graduation
rate after 8 years.
In 2-year institutions, we have 120. Twenty-six of those
institutions had a graduation rate of over 50 percent in the
third year. Of those 26 institutions, 20 institutions were for-
profit. Of the 94 that didn't meet the 50 percent threshold
after 3 years, 88 were public institutions and 6 were for-
profit.
So I share this with my colleagues to let them know the
label of for-profit or the label for nonprofit has no specific
impact on graduation rates. And I think ultimately, that's
something that we have to stay focused on from a policy
standpoint.
And I would conclude, Mr. Chairman, with just this
observation, we're talking about the Federal Government's
partnership in this particular case with institutions and flow
through from institutions to students. When I look at a full-
time student for 8 years still receiving financial aid, and a
graduation rate at 8 years or under 50 percent, I have to ask
myself where does the Federal obligation to aid with graduation
stop? I'm not talking about students that are on part-time
schedules. I'm not talking about students that have to drop out
because of family matters and come back. I'm talking about the
student that is a full-time student throughout that whole
process because they haven't figured out what their major's
going to be. They like school.
And I think we have to ask policy question at some point up
here. If that crowds out somebody that wants to enter as a
freshman, and doesn't provide them equal opportunity at those
Federal resources, then we've got to rethink where our
priorities are.
I certainly don't have the answer. And I'm not here to do
it. But I am here to say to my colleagues, it's a question that
needs to be asked. More importantly, we need to focus more on
graduation rates than how a school is constructed. But we need
to hold for-profit and not-for-profit to the standards of the
contractual agreements they have for the Federal partnership
that Senator Isakson talked about. And I hope the Chairman will
very seriously ask you, Mr. Kutz, if we haven't already, to
take a similar review of the not-for-profit institutions that
we have to find out if the problem is as great at those
institutions as you found in the for-profit institutions.
Again, I thank you. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Burr.
Senator Goodwin.
Statement of Senator Goodwin
Senator Goodwin. Thank you, Mr. Chairman. I'd like to
follow up on Senator Franken's questions to you earlier about
the scope of the investigation, and specifically, the number of
schools that were included as the chairman described there, you
certainly have a significant amount of experience handling
investigations, just like this.
So my question would be, given the scope of this industry
nationwide, what sort of conclusions can you draw from the fact
that for 15 schools engaged in what looks like pretty egregious
conduct, four may have, in fact, committed fraud. What sort of
conclusions can you draw from the fact that four schools in
this industry committed conduct like that? And what sort of
principles can the committee extrapolate from those findings?
Mr. Kutz. Well, 4 out of 15 for fraud is very disturbing.
Senator Goodwin. Sure.
Mr. Kutz. Because you're talking about people stealing from
the Pell grant program, and Subsidized Student Loan Program.
That takes money out of taxpayers' pockets certainly. So that
is alarming. And that's something of all the enforcement things
we've talked about here, that needs to be dealt with in the
most strict manner by the Education IG and the Education
Department, because those practices cannot be accepted under
any circumstances--fraud in any program, getting that out of
the program. Whatever anti-fraud tools you have to prevent
these practices--if someone's taking the $250,000 off a form,
what's the Department of Education doing on those FAFSA forms
to validate people's assets? That's an important issue. I know
that the IG has recommended in the past, as I understand,
checking against IRS records independently to look for people
under reporting income, because that's what we're talking about
here, people falsifying the FAFSA forms to get Pell grants and
subsidized student loans. And there are anti-fraud tools the
Department of Education could use to prevent that.
Senator Goodwin. That's related to my next question. Did
your investigation in your opinion reveal gaps in the
regulatory and oversight scheme for these schools, or simply a
need for increased monitoring and enforcement of existing
regulations?
Mr. Kutz. Probably both. I mean, it was a strict
undercover. So we didn't evaluate the Department of Education.
But given what we saw, it's certainly a period a little bit
like the wild, wild West out there if you will. So that would
indicate that there is not a lot of regulatory infrastructure
in place overseeing or enforcing perhaps both in this
particular case.
Senator Goodwin. You also mentioned earlier it was your
intuition, and reasonable at that, that these folks we
witnessed on the videos may have been trained in certain sales
tactics and marketing approaches. And as the Senator from North
Carolina referred to in his questioning, there may in fact have
been incentives to reach certain sales goals. Did your
investigation reveal any evidence of such incentives or
marketing training or the converse, a lack of training as to
how to respond to questions from prospective students in a
manner that complied with Federal law?
Mr. Kutz. There could have been lack of training, but it
was really more training in a script and some of the actual
practices we saw, like not letting someone speak to financial
aid until they signed enrollment papers and paid an admission
or application fee, they were--again, they were very, very
persistent. We tried every which way. Those videos you saw were
2 minutes, but we tried for 40 minutes to get into financial
aid in one case. They just wouldn't let us in there.
Maybe you didn't see the last video when they ripped up the
application.
Senator Goodwin. Sure, yes.
Mr. Kutz. So that was the end result. I think they were
very well-trained. But perhaps another one, that was six of
them, that just refused to let us go to financial aid without
signing a document enrolling you into the school.
But there are other ones that I think may have just been
lack of training or other types of things as you mentioned.
Senator Goodwin. All right. Thank you, sir. Thank you, Mr.
Chairman.
The Chairman. Thank you, Senator Goodwin.
Senator Mikulski.
Statement of Senator Mikulski
Senator Mikulski. Thank you very much, Mr. Chairman. I want
to salute you and the Ranking Member Senator Enzi for having
this series of hearings on proprietary colleges.
I would like to ask unanimous consent that a statement be
placed in the record. Mr. Chairman, I took the lead 18 months
ago to get higher education re-authorized when Senator Kennedy
was so sick. We worked closely with you to work very closely
with Senator Enzi, and also with my good friend from Tennessee.
You know, we thought what we were creating was an
opportunity ladder for people of all ages and all stages to
pursue higher education. And we worked very hard.
Now we see that what has been created in some instances is
not a ladder of opportunity, but a black hole of debt and
disappointment and heartbreak.
I do think we need to reform, but I think we need to parse
out the good, the bad, and the ugly. And we look forward to
working with you. There's a lot of accumulated knowledge here
that we could benefit from.
My concern is with the Pell grants, we could be on the cusp
of what I call the Pell grant bubble. All these schools have
sprung up in the last couple of years or added to their
enrollment. And part of their largesse is coming from the Pell
grant program. It's a rip off of the student. And it's a rip
off of the taxpayer. And I think it's despicable.
Well, let me get to my questions Mr. Kutz. These people who
are--these so-called admission representatives, do you regard
them as bounty hunters? And were they paid bonuses, a variety
of fees? Did they have quotas that they had to meet, et cetera?
And were they paid bonuses? In other words, did they function
like bounty hunters?
Mr. Kutz. They functioned as sales people is the way I
would describe it. And whether they were--it was an undercover,
Senator. So we don't know for sure what was happening behind
the scenes. But they certainly appeared to be well-trained in
hard close tactics in aggressive marketing tactics. And you may
have missed the video, but you actually saw what it was like to
sit in the chair----
Senator Mikulski. Yes, sir, I just read the script.
Mr. Kutz. So yes, it was aggressive marketing and
salespeople. They were called admissions officers.
Senator Mikulski. But you don't know if they had quotas, et
cetera?
Mr. Kutz. We don't know that, no.
Senator Mikulski. OK. Well, I'm going to call them bounty
hunters. Were these bounty hunters employees of the college or
the school? Or were they kind of like a telemarketing firm
that's trained in, kind of eat your kill tactics?
Mr. Kutz. The ones that we did the face to face with, which
was the 15 colleges, they appeared to be employees. We also
registered on two Web sites. And those appeared to me more
telemarketers who were feeding the for-profit colleges.
Senator Mikulski. So again, it's not a one-size-fits-all
bounty hunter issue?
Mr. Kutz. No, some were employees and some were what I call
lead generators.
Senator Mikulski. So we could prohibit telemarketing? Now
let me ask you this question. After these students were
recruited with often duplicitous promises, the false
certification, et cetera, when they went to these schools, did
they get what they paid for? In other words, if they signed up
for everything from radiation therapy to a business degree,
were the programs accredited for work in those fields?
Mr. Kutz. We never actually went to class. We stopped the
undercover. We just did these tests in June and July. We didn't
go all the way through. We ended our undercover at the
applications process. So we don't know what we would have
actually gotten if we attended class.
Senator Mikulski. So you don't know if after the
duplicitous luring in of these students, where they thought
they were getting a degree in say massage therapy or radiation
therapy, which are licensed programs by the State, whether
those students received appropriate training? They also have to
be an accredited institution.
Mr. Kutz. We didn't go far enough to do that.
Senator Mikulski. You didn't do that?
Mr. Kutz. No.
Senator Mikulski. But that's another realm that we should
look into. If they lied to you to get you in, do they lie to
you when you're there?
Third, what would you recommend as the metrics, because you
are GAO guys--what would you recommend as the metrics to be
able to parse out the good, bad, and ugly in terms of this type
of recruitment?
Mr. Kutz. Well, from the standpoint of what we saw,
certainly fraud, deceptive marketing. I'm not sure what metrics
you can have there. Some of the metrics they use, of course,
are graduation rates, student loan default rates. Completion
rate, I understand, is a different term that's used. So those
are the metrics that are used.
And these schools we went to, the graduation rates varied
from single digits to 80 percent. So it was kind of all over
the board. And the default rates are very, very high in this
industry.
But on the fraud, hopefully the metric is none. You know,
hopefully, you don't have your employees telling people to lie
about Pell grants, but that's in fact what we found. So to me,
the metric there is zero is the right metric.
Senator Mikulski. Well, schools operate on a broad range. I
have an online university called Walden, and the default rate
is less than 3 percent. That's better than the University of
Maryland. And also, I have another school, where the default
rate is 48 percent. That's outrageous.
But I just want to then turn to the Chair, picking up with
some of the issues raised by Senator Isakson. If in fact what
you alleged is that these bounty hunters told students to lie,
that means there's an intent to defraud the Federal Government.
And I think my question, Mr. Chairman, is should we get this
information for Federal prosecution? You're a good lawyer. I
mean, if people are not only engaging in predatory practices,
but also intending to defraud the Federal Government, I think
they need to be prosecuted.
Mr. Kutz. Senator, we've done that. We've met yesterday, in
fact, with the investigative side of the Department of
Education Inspector General. And so, those cases are all being
referred to law enforcement. And whether they can make cases
and take to a U.S. Attorney and get something done, I don't
know that, but they are certainly going to consider them.
Senator Mikulski. Well, I would like to know that. When
I've got a school that's got a 3 percent default rate, you
talked about a culinary school, there's only one culinary
school in Baltimore. They were called back 72 times. It meant
that they were cooking up something else other than steamed
crabs. And I'm pretty steamy about what's going on here and
even crabby about it.
[Laughter.]
Mr. Kutz. I can't comment on that.
Senator Mikulski. So this old song is ready to go. Thank
you, Mr. Chairman.
Mr. Kutz. I'm glad you're not crabby at me, though, at
least. Thank you.
Senator Mikulski. Mr. Chairman, just a personal point--Kutz
is my mother's family name. Are you all from Pennsylvania?
Mr. Kutz. No, actually from Wisconsin, but Kutztown, it's
the same----
Senator Mikulski. Yes, we never made it past Baltimore.
Mr. Kutz. Never made it up there, OK.
Senator Mikulski. No, we got to this Polish sausage and
opened a grocery store and there we are.
[Laughter.]
But anyway, thank you for all your good work. I appreciate
it.
Mr. Kutz. Thank you, Senator.
The Chairman. All right, cousins.
Senator Bennet.
Statement of Senator Bennet
Senator Bennet. Thanks, Mr. Chairman. I may have lost track
of what this hearing's about.
[Laughter.]
But I'm glad to be here. Mr. Kutz, thank you for your
testimony, which revealed an array of problems, problems that,
by the way, should be of concern and I think are of concern to
the taxpayers and to prospective students and to the private
universities themselves, at least the ones that are not engaged
in the practices like the ones you saw. They're very
disturbing.
And my first question was, what is your sense about how
much the problem is coming from a lack of enforcement of
current rules versus a need for additional regulation? How is
your experience with this investigation led you to think about
that question?
Because there are a lot of things we saw that are clearly--
in all respect--in theory regulated already, but there may be
an enforcement problem. I wonder if you could talk about that a
little bit?
Mr. Kutz. Right, well, fraud is fraud. And so we can talk
about that.
Senator Bennet. Right.
Mr. Kutz. But some of the other regulations, I just wrote
down some just so I have them, but there are certain
requirements related to disclosures with tuition, fees, other
costs, accreditation, completion and graduation rates. We found
issues with all of those.
So in those instances, the regulations are there. And it's
a matter of whether they're being enforced.
Senator Bennet. Do you think that--and whose job is it to
do that enforcement?
Mr. Kutz. The Department of Education.
Senator Bennet. Do you think they're resourced adequately
to do that? I know you talked----
Mr. Kutz. I can't speak to the resourcing.
Senator Bennet. OK.
Mr. Kutz. I mean, we met with them. They're certainly aware
of these. And we're hopeful that they will use these to help
improve their enforcement and oversight.
Senator Bennet. Did you get an impression, having seen the
regulations that already exist, that were clearly being
violated, an impression about further work we should do, either
statutory or regulatory to try to deal with practices that are
not yet governed by these regulations?
Mr. Kutz. We can consider that. We did this in 3 months.
And actually, if you watch the videos, they were all from June
and early July. We scrambled to really work hard. My team did a
great job logistically to pull this off with these undercovers
across the country in a period of just weeks.
Senator, we could certainly consider that and get back to
the committee on any things we see as holes in the regulations,
if they came up. And we may not, but if we see anything, we
would certainly share that with you.
Senator Bennet. One of the challenges, I think, that we are
going to face, and that the DOE is going to face is that it's
so difficult to monitor every individual transaction that
occurs. And that probably is not a sensible way to approach
this, at least from my point of view.
And so the question is, how do we have a set of enforcement
mechanisms that really will work?
Mr. Kutz. I think on certain things, like let's say Pell
grants, for example, you've got the FASFA form. There are
things you could do systemically there perhaps, such as looking
at other independent databases of people who falsified those
forms.
If you could have access to IRS database, for example, you
could run a match of IRS against Pell grant recipients, you
would likely find people who were understanding their assets.
Senator Bennet. Well, that was the video where they said
you don't need to put this on your FAFSA form because that's
what the income tax form is for?
Mr. Kutz. That's what they said, yes.
Senator Bennet. Yes.
I wonder--just a last question, Mr. Chairman, how often
during the investigation you found that prospective students
were not able to speak with the tuition counselor until they
paid an application fee? I mean, how common is that? That was
one of the more disturbing things that we saw this morning.
Mr. Kutz. They absolutely refused to let us speak to
financial aid without signing enrollment and providing an
application fee, 6 out of 15 times.
Senator Bennet. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Bennet. Senator Kutz, or
Mr. Kutz, thank you very, very much.
Mr. Kutz. Thank you for the promotion.
[Laughter.]
Maybe a demotion around here. But again, thank you and all
at GAO for your outstanding work. And we'll be interacting with
you as we go ahead with our further investigations. Thank you
very much.
Mr. Kutz. Thank you so much.
The Chairman. We'd like to now move to our second panel.
And our second panel is: first, David Hawkins, director of
Public Policy and Research at the National Association for
College Admission Counseling, a nonprofit membership
organization founded in 1937 by 19 midwestern colleges to
create a code of ethics for college admission counseling. Mr.
Hawkins has been at this organization since 2000. And also
recently, he served in the Department of Education's negotiated
rule making panel as a representative of college admission
officials.
After Mr. Hawkins, we'll hear from Michale McComis, who is
the executive director and chief executive officer of the
Accrediting Commission of Career Schools and Colleges. Dr.
McComis joined ACCSC in 1994 and currently oversees the
accreditation process for over 800 schools that enroll more
than 250,000 students. He's also an adjunct faculty member at
the University of Virginia, teaching graduate courses in
education policy.
Finally, we have Joshua Pruyn, who worked as an admissions
representative at Westwood College in Denver from November 2007
through May 2008. Mr. Pruyn now works in development for a
Colorado-based substance abuse treatment provider. He graduated
from Alfred University in 2005.
Again, I welcome our second panel. All of your prepared
statements will be made a part of the record in their entirety.
I ask if you could basically sum up in 5 minutes or so. If it
goes over a little bit, fine, but not too much, I hope. And
again, your statements will be made a part of the record.
And we'll start, as I said, again, with Mr. Hawkins,
director of Public Policy and Research for the National
Association for College Admission Counseling. Mr. Hawkins,
welcome and please proceed.
STATEMENT OF DAVID HAWKINS, DIRECTOR OF PUBLIC POLICY AND
RESEARCH, NATIONAL ASSOCIATION FOR COLLEGE ADMISSION
COUNSELING, ARLINGTON, VA
Mr. Hawkins. Thank you very much, Mr. Chairman, members of
the committee. Thank you for holding this hearing. And thank
you for inviting me to be a part of the testimony here today.
The National Association for College Admission Counseling,
as you said, is a nonprofit association of high school
counselors and college admission officers from across the
United States and around the world. We have a code of ethics
that we call our Statement of Principles of Good Practice that
govern admission practice for our member colleges and
universities, as well as high schools. We have some binding
principles that are enforceable within our membership. And we
also have best practice principles that guide ethical practice
for admission.
In founding our association, the colleges that developed
the idea of standards for ethical practice realized that it was
not in their best interests to engage in a race to the bottom
in terms of unethical admission practice.
Likewise, perhaps more importantly, it was not in the
students interest because students suffer from the same kinds
of information asymmetry, frankly, that we see in other
situations. The subprime mortgage industry comes to mind
immediately, where you have the situation in the admission and
financial aid process, where there is an incredible amount of
ground to cover if you're a prospective student. If its your
college, you know the information backward and forward. So
there's an asymmetry there that leaves students particularly
vulnerable to being misled in the process.
Our founding colleges realized that. And they set forth in
an effort to strive for higher standards for admission
practice.
Our involvement in the issue before the committee really
stems back to the 2002 creation of what we are calling the safe
harbors to the incentive compensation ban that is in the Higher
Education Act. And as some of you alluded to earlier, that
incentive compensation ban was enacted in 1992 after the Nunn
Commission hearings, which found substantial problems in
recruiting and admission, similar to the ones we've seen today.
I would also point out, and have pointed out in our written
testimony, that the Department of Education also covered this
ground in the 1970s. There doesn't appear to have been any
statutory result to Congress' and the department's
investigation into recruitment practices in the 1970s, but I
did include some information in our written testimony,
indicating that it has been a problem that far back.
Our concern about the safe harbors that were enacted in
2002 is that they have effectively gutted the incentive
compensation ban that was passed by Congress in 1992. Our
concern specifically is that it's created a roadmap for
institutions to circumvent the law as it was designed
originally by Congress.
We pointed out in 2002 to the department, as we have
pointed out in our written testimony today, that what would
result from the safe harbors was fairly widespread potential
for fraud and abuse, and actual fraud and abuse. And
unfortunately, I think we've seen this borne out.
The basic features that--of the practices that the
incentive compensation ban was enacted to eradicate on the
college side, you see aggressive boiler room style sales
tactics. You see obfuscation of financial aid information and
costs. You see misinformation about academic programs
accreditation and transfer of credits. You see false statements
or misrepresentations about employment prospects and earnings
potential. And in just about every case, what lies behind a lot
of this is the fact that admission officers and recruiters are
compensated almost exclusively if not exclusively, based on
whether a student enrolls.
So they do not get paid or they may risk substantial pay
reduction or even firing if students--if they do not actually
process students through the door.
What results is a cascading series of problems for
students, of course. They're pressured into making decisions
without accurate information or being offered an opportunity to
consider their options to comparison shop.
They're ushered through the enrollment process with no
information about the amount of debt that they may incur.
They're roped into programs that may be ill-suited for their
needs. And they're left with a large, large mountain of debt,
which is very difficult to pay off, particularly if you do not
improve your employment prospects.
Of course, these are bad enough for the students. And I
think that we have to consider that we are really concerned
about the students here in this discussion, but they are
equally concerning for the taxpayers, because when the students
default on their loans, the taxpayers end up picking up the
tab. So I think it's in our fiscal health interest to make sure
that this problem is cleared up.
I think in closing, really, I think contrary to what we've
heard from the industry, these practices seem to be standard at
this point. These are not isolated incidents. These do not
appear to be isolated incidents of bad actors or rogue
officers. This appears to be a fairly standard practice, which
again, has been pretty--the blueprint for which has been laid
out through the safe harbors.
We acknowledge certainly that nonprofit colleges have
occasionally run afoul of the incentive compensation ban, just
as they sometimes run afoul of our own standards in our
association. And for that reason, we sincerely appreciate the
discussion that you, Mr. Chairman, have started here with this
hearing. We certainly appreciate the Department of Education's
effort to tighten up the regulations and eliminate the safe
harbors. We will look forward to being a part of this
discussion moving forward. Thank you.
[The prepared statement of Mr. Hawkins follows:]
Prepared Statement of David Hawkins
summary
The Importance of Ethical Admission Practice as a Student and Taxpayer
Protection
This testimony offers the perspective of the National Association
for College Admission Counseling (NACAC), a non-profit association of
college admission professionals that maintains a code of ethics for
admission practice in the United States, on recruitment practices in
relation to title IV Federal student aid programs. NACAC's ethical code
mirrors Federal law in that it prohibits the payment of commissions to
admission officers based on the number of students recruited or
enrolled. This testimony discusses how ``commissioned sales'' as an
admission model leads to harmful consequences for students and
taxpayers due to information asymmetries in the admission and financial
aid processes, particularly as they involve Federal financial aid.
The Current Regulatory Challenge
Congress' 1992 enactment of the ban on incentive compensation for
admission and financial aid officers as a program integrity measure
helped curb fraud and abuse in student aid programs. However, the
creation of 12 regulatory loopholes (dubbed ``safe harbors'') to the
ban by the previous Administration in 2001-2 substantially weakened the
law. Our objections to the ``safe harbors'' noted that widespread
abuses would result from the creation of such loopholes. Indeed, the
effect of the ``safe harbors'' has been to render statute nearly
meaningless. We offer evidence of widespread disregard for the letter
and spirit of the law banning incentive compensation, as institutions--
particularly those concentrated in the for-profit sector--appear to
have made commissioned sales in admission standard business practice,
with potentially disastrous results for students and taxpayers. Such
evidence includes investigative reporting from news outlets across the
Nation, State and Federal regulatory actions, and lawsuits highlighting
the extent to which the ban on incentive compensation has been diluted.
Recurring Nature of Problems With Incentive Compensation and the Effort
to Correct for the Absence of Regulatory Oversight
Finally, this testimony provides a brief reference to previous
congressional efforts to reign in abusive recruiting practices.
Congress was presented with evidence in the 1970s that commissioned
recruiting practices posed a threat to the integrity of Federal aid
programs. The Nunn Commission in the early 1990s offered evidence of
the same abuses, resulting in the enactment of the ban on incentive
compensation in the 1992 Higher Education Act reauthorization. In 2010,
after nearly a decade of a weakened regulatory effort, Congress is
faced with yet another abundance of evidence that abusive recruiting
practices pose a threat to title IV program integrity. The Department
of Education has issued draft regulations that would restore the
regulatory purpose that Congress intended in 1992, and eliminate the
safe harbors in favor of tougher regulation to ensure that students and
taxpayers are protected from harmful recruiting practices.
______
about nacac
NACAC is a non-profit association of nearly 12,000 high school
counselors and college admission officers across the United States. The
association represents more than 1,600 high schools and 1,100 not-for-
profit public and private colleges and universities. Founded in 1937,
NACAC's core mission is to provide a code of ethics for the college
admission counseling profession. NACAC's Statement of Principles of
Good Practice constitutes the guiding principles for professional
college admission practice in the United States.
ethical admission practice
NACAC's Statement of Principles of Good Practice states that
members ``will not offer or accept any reward or remuneration from a
college, university, agency, or organization for placement or
recruitment of students. Members will be compensated in the form of a
fixed salary, rather than commissions or bonuses based on the number of
students recruited.''
Association members stress that NACAC's core principles are
intended to serve the student interest in the transition from secondary
to postsecondary education. Members will readily acknowledge that the
number of students enrolled in a given academic year is a matter of
great importance to all institutions of higher education. However,
reducing the basis for compensation to the number of students enrolled
in any circumstance introduces an incentive for recruiters to ignore
the student interest in the transition to postsecondary education, and
invites complications similar to those that preceded the enactment of
the ban on incentive compensation in the 1992 Higher Education Act
reauthorization.
Our historic concern with the treatment of admission officers as
professionals, rather than salespersons, is rooted in the interest of
students in transition to postsecondary education. Because the
transition to higher education is an unsystematic, often opaque process
that individuals possessing varying levels of ``college knowledge''
must navigate, the information asymmetry between the employees in
charge of recruiting and prospective students is immense. In an
unregulated environment, the potential for misrepresentation and
outright fraud is a clear and present threat, which can result in harm
to students and, in the case of Federal aid and loans, to the taxpayer.
Indeed, the recognition of this asymmetrical environment and its
potentially detrimental effects on students was the founding purpose
for NACAC in 1937.
Examples of such information asymmetry include:
Lack of access to information about higher education is a
well-documented challenge among under-served populations. The lack of
information about college makes low-income students particularly
susceptible to misrepresentation of information about a college or
course of study. Aggressive recruiters whose livelihoods depend on
meeting a weekly quota will have little incentive to accurately
represent the goodness of fit between a potential student's interests
or qualifications and the institution's program.
Lack of information about financial aid is a second well-
documented challenge among under-served populations. Commissioned sales
creates an incentive to obfuscate the source and nature of the
financial means by which prospective students will pay for their
education. The complexity of the modern financial aid system is
indisputable, and unscrupulous institutions and recruiters use this
complexity to their advantage. Indeed, NACAC has long argued for
greater clarity in the presentation of financial aid packages at
institutions of all types. In an environment where commissioned sales
is accepted practice, the potential for manipulation and deception of
financial aid information is far greater.
Potential students trust colleges as gateways to
certifications, licensing, and professional education. Understanding
the level of education that is required to work in a professional field
is a complicated task. A major challenge for secondary school
educators, in fact, is to guide students to the appropriate
institutional fit for pursuing careers. Much of the guidance school
counselors offer to students about where to apply and or enroll in
postsecondary education is based on students' career preferences and
academic skills. Such guidance can mean the difference between
successful and unsuccessful completion of a postsecondary certificate
or degree. Non-traditional or under-served populations, who may be
years removed from the structure of high school and/or whose high
schools may not be equipped for college counseling, are often at the
mercy of recruiters or admission offices for guidance. Most students
trust that colleges will steer them in the right directions. Few seem
to be prepared for high pressure sales tactics, and few--as evidenced
by testimony from the previous hearing--seem aware that a college can
be a for-profit company, or that there may be cause to question what
recruiters and advertisements are telling them. Whereas consumers may
be prepared for a high-pressure sales pitch at a car dealership, home
improvement store, or other commercial setting, few are aware that a
college recruiter might employ the same tactics. Taking advantage of
this trust enables recruiters to exploit a potential student's lack of
awareness of the terms of the interaction.
Students trust postsecondary educational institutions and their
admission officers because counseling--as opposed to sales or
marketing--has historically been a prominent part of ethical admission
practice at American colleges and universities. NACAC's commitment to
the counseling component of higher education admission is contained in
the association's ``Statement on the Counseling Dimension of the
Admission Process at the College/University Level.'' (See Attachment 1)
According to the statement:
Increased recruitment efforts, the introduction of marketing
concepts and the trend toward enrollment management have led to
the perception, real or imagined, that recruitment and
marketing techniques are taking the place of counseling. It has
been suggested that while encouraging the optimum fit between
student and institution was once considered important, what
counts most today is using any means possible to attract
students to meet enrollment and economic targets.
NACAC stands firm in its position that counseling has been
and continues to be an essential, if not the most essential,
ingredient in the college admission process. The development of
human resources and the assurance that each student will be
helped to realize his/her educational potential can only
strengthen and perpetuate the strong democracy we so proudly
enjoy--the democracy that, in turn, encourages and supports our
diverse educational system.
NACAC considers the commitment to professional admission practice
as an ethical imperative that serves student interests. The additional
commitment to upholding the law constitutes an obligation to protect
students and the taxpayers who underwrite the aid system that offers
access to the full diversity of postsecondary institutions and provides
an opportunity for a diverse range of institutions to operate.
The ban on incentive compensation is a ``front-end'' protection for
Federal student aid programs is among the last-remaining Federal
protections against waste, fraud and abuse. Without such a restriction,
unscrupulous institutions may:
Use aggressive and misleading recruiting tactics to
bolster enrollment numbers;
Manipulate the academic program, such as awarding
inappropriately high or passing grades to students who have not
successfully completed coursework;
Manipulate output measures, such as the student loan
default rate, to mask serious integrity risks that result from the
inappropriate recruitment of students.\1\
---------------------------------------------------------------------------
\1\ See Final Audit Report ED-OIG A02H0007, U.S. Department of
Education, Office of Inspector General, May 19, 2008; See also
``Lawsuit Accuses U. of Phoenix of Protecting Its Default Rate at
Students' Expense,'' Chronicle of Higher Education, January 14, 2009.
---------------------------------------------------------------------------
Even in the absence of outright manipulation, the risks incurred by
institutions that use overly aggressive marketing tactics to enroll
students who are unable or unlikely to benefit from an educational
program are unacceptable for proper stewardship of taxpayer funds.
failure of regulatory purpose
The Higher Education Act statutory ban on incentive compensation
states:
[An] institution will not provide any commission, bonus, or
other incentive payment based directly or indirectly on success
in ensuring enrollments or financial aid to any persons or
entities engaged in any student recruiting or admission
activities or in making decisions regarding the award of
student financial assistance, except that this paragraph shall
not apply to the recruitment of foreign students residing in
foreign countries who are not eligible to receive Federal
student assistance. (20 U.S.C. Sec. 1094(a)(20)).
This statute is worded similarly to NACAC's guidance on the same
matter: ``Members will be compensated in the form of a fixed salary,
rather than commissions or bonuses based on the number of students
recruited.'' In NACAC's judgment, the wording in each instance is
sufficiently clear to dictate forms of practice allowable under both
the law and the accepted standards of the college admission profession.
In 2001-2, the Department ostensibly developed the current
regulatory ``safe harbors'' to clarify Federal policy toward
enforcement of the incentive compensation statute. In our opinion, as
expressed in our comments at the time, most ``safe harbors'' were
neither necessary nor appropriate given the clarity of statute. NACAC
also expressed concern that the regulatory safe harbors were enacted
despite clear statements of concern from procedural and substantive
standpoints. In the first instance, the Web-based Commission on
Education, which issued a report in 2000, noted that the Department of
Education stated that ``this [incentive compensation] provision could
only be changed through new legislation.'' \2\ However, the Department
subsequently embarked on a regulatory change in 2001. In the second
instance, the regulations were passed over the objections of the two
major associations representing admission officers (NACAC and the
American Association of Collegiate Registrars and Admission Officers,
or AACRAO), as well as members of the negotiated rulemaking committee.
---------------------------------------------------------------------------
\2\ ``The Power of the Internet for Learning: Final Report of the
Web-based Education Commission,'' December 2000.
---------------------------------------------------------------------------
Shortly after the regulations were finalized, the U.S. Department
of Education's Office of Inspector General noted:
We nonconcurred with one provision to change the incentive
compensation regulations. This provision would allow
institutions to pay third parties based on success in securing
enrollment, without limitation on the incentive nature of those
payments. We do not believe that the existing statutory ban on
incentive compensation allows any incentive payments to
entities involved in recruiting based on their success in
enrolling students. (Semiannual Report to Congress No. 45, U.S.
Department of Education, Office of Inspector General, p. 9)
NACAC sought more information about why the Inspector General's
``non-concurrence'' was overridden by the Administration via the
Freedom of Information Act (FOIA). NACAC's request for information
about the statutory grounds for implementing the safe harbors over the
objection of the Inspector General was denied, as were subsequent
appeals.
Despite their ostensible purpose, the safe harbors have failed to
(1) provide additional clarity, and (2) satisfy statutory intent of
preventing the use of incentive compensation for admission and
financial aid staff. We believe that the regulations, combined with
what appeared to be a de-emphasis of oversight within the
Department,\3\ created an environment in which enforcement was
effectively gutted.
---------------------------------------------------------------------------
\3\ An October 30, 2002 memo to the Chief Operating Officer of the
Federal Student Aid from Deputy Secretary William D. Hansen directing
that violations of the incentive compensation ban are punishable by
fines, rather than return of title IV funds, stated, ``I have concluded
that the preferable approach is to view a violation of the incentive
compensation prohibition as not resulting in monetary loss to the
Department. . . . Improper recruiting does not render a recruited
student ineligible to receive student aid funds for attendance at the
institution on whose behalf recruiting is conducted.'' This approach
fails to take into account the monetary loss to the Department incurred
by student loan defaults which are likely to occur whether there is
``documented misrepresentation,'' as the memo suggests, or simple
obfuscation of the terms of enrollment or repayment of financial
obligations.
---------------------------------------------------------------------------
practical effects of regulatory loopholes and de-emphasis of regulation
In the 8 years since the enactment of the regulatory safe harbors,
there is evidence of widespread disregard for the incentive
compensation statute. Documentation of this phenomenon is included in
this written testimony as Attachment 2. This documentation provides
what we believe is a critical mass of evidence to suggest that the
practice of compensating admission officers via commission has become
standard practice at many institutions of higher education,
particularly in the publicly traded for-profit sector. Our concern for
compliance with this long-held ethical principle and Federal law
extends to colleges of all types. Indeed, NACAC's Statement of
Principles of Good Practice binds our postsecondary members (all of
whom are not-for-profit public and private institutions) to this
principle in addition to their legal obligation. However, evidence that
incentive compensation is more the rule than the exception in the
publicly traded for-profit sector is plentiful. Prominent examples
include:
``Telemarketing--that's how enrollment at Lehigh Valley
College often begins. Recruiters must make 125 calls and schedule five
appointments a day, and enroll 10 applicants a month. Top performers
get vacations to the Bahamas. Those who fail to sign up enough
applicants are asked to resign.'' (Allentown Morning Call, April 24,
2005) Among the Morning Call's investigative findings were ``aggressive
and sometimes misleading sales tactics are at the center of LVC's
recruiting. School officials give prospective students inaccurate or
incomplete information.''
``Admission counselors [at Career Education Corporation's
Brooks College] . . . were expected to enroll three high school
graduates a week, regardless of their ability to complete the
coursework. And if they didn't meet those quotas, they were out of a
job. [Admission counselors] all say the pressure produced some very
aggressive sales tactics.'' (60 Minutes, January 30, 2005)
``Many former students say admissions representatives told
them whatever they thought the applicants needed to hear to get them to
sign on the dotted line. The students claim admissions reps said it was
a prestigious school that they would be lucky to gain admission to,
when it actually accepts anyone eligible for a student loan. The
graduates say they were misled about the terms of their loans; many
have since realized that by the time they finish making payments,
they'll have paid more than $100,000 for just 15 months of school. . .
. Two former admissions representatives who worked at [California
Culinary Academy] confirm that students were misled. . . . The two
women describe a high-pressure sales environment where the reps focused
solely on meeting enrollment numbers, not on finding students who would
benefit from the program.'' (San Francisco Weekly, June 6, 2007)
``[A] serious finding regarding the school's substantial
breach of its fiduciary duty; specifically that the University of
Phoenix (UOP) systematically engages in actions designed to mislead the
Department of Education and to evade detection of its improper
incentive compensation system for those involved in its recruiting
activities.'' (U.S. Department of Education Program Review Report,
February 5, 2004, PRCN 200340922254) In the report, the Department
unearthed a recruiting strategy, operating in plain view, designed to
deceive the Department of Education. The Department's report found that
the admission compensation structure at Phoenix was exclusively based
on success in enrolling students, that methods for enforcing quotas on
admission officers included a high-pressure ``red room'' strategy, and
that the mantra for recruiters was to get ``asses in classes.''
Taken together, the pattern of non-compliance with statute appears
to take place in a systematic fashion, in nearly complete disregard to
the statute and the principles it embodies.
the recurring nature of congressional oversight on incentive
compensation
The detrimental effect of unethical recruiting is a recurring theme
in the history of the Federal financial aid programs. For purposes of
this committee hearing, we believe it is important to note that
Congress seems compelled to revisit program integrity issues--
particularly recruitment practices--on a regular basis.
We presently have under consideration--and expect to forward
to Congress soon--proposed statutory language which, if
enacted, would (among other points) strengthen the Office's
ability to review the performance of institutions relative to
student aid programs. The proposed language would also provide
for establishment of appropriate guidelines for institutional
financial responsibility and the maintenance of student
records, compliance with ethical standards for advertisement
and recruitment of students, provision for fair and equitable
tuition refund policies, and public disclosure of institutional
performance statistics. (emphasis added)--Excerpted from the
Statement by the Honorable T. H. Bell, U.S. Commissioner of
Education before the Permanent Subcommittee on Investigations
of the Senate Committee on Government Operations, November 20,
1975.
Recognition of the information asymmetry between colleges and
students was also central to the recommendations of the Nunn
Commission, whose 1991 report led to the enactment of additional laws
and regulations to protect against waste, fraud and abuse in the
Federal student aid system.
One of the most widely abused areas of those observed during
the Subcommittee's investigation lies in admissions and
recruitment practices. Among these practices three stand out in
terms of the adverse effects they generate: false and/or
misleading advertising; unethical and/or illegal recruitment
efforts; and, falsification of information use to satisfy GSLP
ability-to-benefit requirements.--Excerpted from ``Abuses in
Federal Student Aid Programs,'' Permanent Subcommittee on
Investigations, Senate Committee on Government Affairs, May 17,
1991.
conclusion
Despite the ostensible goal of ``clarifying'' statute, the
regulatory safe harbors promulgated in 2002 appear to have effectively
gutted the incentive compensation ban contained in the Higher Education
Act. As history has shown, there is a clear case for regulating against
``commissioned sales'' in admission. The Department of Education's
recent Notice of Proposed Rule Making (NPRM) would eliminate the safe
harbors and restore the Federal Government's protection against this
persistently troublesome practice. The two major associations that
represent college admission officers in the United States, NACAC and
the American Association of Collegiate Registrars and Admission
Officers (AACRAO), are supportive of the Department's regulatory
language on incentive compensation.
NACAC considers the commitment to professional admission practice
as an ethical imperative that serves student interests. We consider the
additional commitment to upholding Federal law a logical extension of
the ethical imperative, as well as necessary obligation to protect
taxpayers who underwrite the aid system that offers access to the full
diversity of postsecondary institutions.
We appreciate the committee's attention to this matter, and will
offer further information as needed.
______
Attachment 1.--Statement on the Counseling Dimension of the Admission
Process at the College/University Level
The National Association for College Admission Counseling (NACAC)
has long been an advocate of the counseling dimension of the college
admission process. The Association was founded in 1937 to establish a
code of ethics that would guide colleges and universities in their
relationships with students and secondary school counselors and,
concomitantly, to promote the interests of students over those of
institutions.
As the door to higher education opened wider and greater numbers of
students were encouraged to seek admission, there developed a need to
help students understand the differences among the variety of
institutions and the array of educational programs available to them.
It also became necessary to determine the quality of students'
secondary school preparation and to direct them to programs of study
that would enable them to continue to grow both personally and
academically.
Because of the increased diversity of the American system of
postsecondary education, the need continues today for helpful guidance
to assist students in making decisions to best meet their individual
needs among the full range of postsecondary choices. In addition, the
cost of higher education today and the heightened concern regarding
families' ability to pay for it place a high demand on the need for
accurate, timely financial aid and planning information. Such guidance
and counseling must come from both the secondary school counselor and
college admission counselor.
While the traditional college-going population remained stable in
recent years and the predictions of dramatically declining numbers
remained largely unrealized, we are now beginning to experience real
demographic shifts in the population that may have a significant
influence on college and university enrollment in the coming years.
Increased recruitment efforts, the introduction of marketing concepts
and the trend toward enrollment management have led to the perception,
real or imagined, that recruitment and marketing techniques are taking
the place of counseling. It has been suggested that while encouraging
the optimum fit between student and institution was once considered
important, what counts most today is using any means possible to
attract students to meet enrollment and economic targets.
NACAC stands firm in its position that counseling has been and
continues to be an essential, if not the most essential, ingredient in
the college admission process. The development of human resources and
the assurance that each student will be helped to realize his/her
educational potential can only strengthen and perpetuate the strong
democracy we so proudly enjoy--the democracy that, in turn, encourages
and supports our diverse educational system.
NACAC believes that precollege guidance and counseling is a
developmental process that begins early in the educational experience
and continues through secondary school and on into college. College
admission counselors stand with school counselors at the juncture
between secondary and postsecondary education and together they play a
pivotal role in helping to ease students' transition from one level to
the next. We also believe in the dignity and worth of every human being
and in the right to develop their full potential. Counseling individual
students about postsecondary plans and during the school to college
transition is a fundamental aspect of the admission process of
institutions of higher learning.
the college admission counseling initiative
The foundation for counseling students for college admission is the
emphasis on meeting students' needs.
This perspective assumes the availability of individual and group
counseling aimed at helping students understand their personal
aptitudes, abilities, interests, and values in relation to the
offerings of a particular college or university. Appropriate counseling
interventions can occur during college day/night programs, college
fairs, interview sessions, campus tours, and student/parent information
sessions on campus.
Institutions that promote a counseling perspective provide
assurance that the admission staff includes trained professionals with
appropriate counseling and related skills, and there is a willingness
to assume responsibility for all institutional personnel who may become
involved in the process of counseling students for admission (e.g.,
alumni, coaches, faculty, and students on campus). Further, effective
linkages with secondary schools, community agencies, other campus
student services offices, and the college faculty are developed and
lead to open communication, understanding, and cooperation. Such
programs are also characterized by the following:
A clearly defined institutional mission, including written
goals and objectives of the admission program, and an evaluation
component that seeks to understand what is being done and that serves
as a basis for major institutional decisions.
Availability of clear, accurate information about the
institution, including admission requirements, educational programs,
costs and financial assistance that will enable students to reach sound
decisions.
Emphasis on equity and accessibility and a commitment to
the needs of underrepresented students. This assumes the presence of
positive attitudes that promote student development regardless of race,
sex, or disability and support the inclusion of role models among the
staff and faculty who reflect these characteristics.
Delivery of services according to ethical practices
developed by NACAC and other similar education groups.
Referral of students to other institutions when it is
determined that students' needs can be better met elsewhere.
Emphasis on student retention, including the existence of
adequate academic and other support services to insure the success of
admitted students.
A supportive administration and campus environment that
promotes student growth and development.
NACAC encourages all collegiate institutions to review their
admission programs from this perspective. The entire process is
predicated on the ability of professionals to relate to and respond to
student needs. This is done in collaboration with other counselors and
educators who share these beliefs and place the highest value on
student development and the realization of student potential.
Attachment 2.--Evidence of Incentive Compensation Ban Violations
Recent evidence suggests widespread disregard for the Federal ban
on incentive compensation by institutions participating in Federal
student aid programs, putting students and taxpayers at risk. In a time
of tight budgets, safeguarding the integrity of student aid funds
should be the top priority for Congress and the Administration to
ensure the most efficient and effective use of taxpayer funds for
student aid.
government accountability office reports
Higher Education: Information on Incentive Compensation
Violations Substantiated by the U.S. Department of Education. GAO-10-
370R, February 23, 2010.
Proprietary Schools: Stronger Department of Education
Oversight Needed to Help Ensure Only Eligible Students Receive Federal
Student Aid. GAO-09-600, October 14, 2009.
federal investigations
On January 17, 2008, an Assistant U.S. Attorney in the
Civil Division of the U.S. Attorney's Office for the Eastern District
of Pennsylvania contacted Kaplan Higher Education Division's CHI-
Broomall campus and made inquiries about the Surgical Technology
program, including the program's eligibility for title IV Federal
financial aid, the program's student loan defaults, licensing and
accreditation. The inquiry is presently proceeding on an ``informal,
voluntary basis.'' (Kaplan Inc., SEC Form 10-K, Filed 2008)
The Technical Career Institute has been found to have
improperly paid $440,487 to FFEL lenders to reduce the institutions
cohort default rate in order to continue to participate in the FFEL and
Direct Loan programs. To avoid listing students as defaulting on their
loans, TCI returned all student funds to FFEL lenders then proceeded to
collect debt directly from students with stricter terms than those
under FFEL loans. (United States Department of Education, Office of
Inspector General, Final Audit Report, Technical Career Institutes,
Inc.'s Administration of the Federal Pell grant and Federal Family
Education Loan Programs, May 19, 2008)
The University of Phoenix paid $9.8 million to settle an
investigation by the Department of Education into recruiting practices
that violate the ban on ``commissioned sales'' of admissions. The
Department found that Phoenix ``bases [recruiters'] salaries solely on
the number of students they enroll.'' According to testimony in a later
lawsuit by the former CFO, UOP had held back this report because of the
fear of negative news coverage. (U.S. Department of Education, Program
Review Report, PRCN 200340922254, 2004, Inside Higher Ed, January 17,
2008)
The Securities and Exchange Commission has launched an
informal inquiry into stock-option granting practices at Corinthian
Colleges, Inc., the company announced. (Yahoo! Finance News, August 18,
2006)
Apollo Group, Inc., was notified in June 2006 that the
Securities and Exchange Commission was conducting an informal
investigation relating to the company's stock option grants. (APOL Form
NT 10-Q, Filed July 10, 2006, p. 2)
The U.S. Department of Education New York Regional Office
(NYRO) has determined that Interboro, through its parent company to
EVCI Career Colleges Holding Corporation, must reimburse the DOE as a
result of the program review pointing to failure to correctly follow
the procedures of the Ability to Benefit admission exams (ABT)
regarding some 79 graduates and liability for TAP grants received by
these students. Also, NYRO has indicated it is referring the program
review to the responsible division in DOE for possible administrative
action against Interboro including suspension, fines or termination.
Interboro closed on December 21, 2007, due to comply with the New York
Board of Regents regulations regarding ABT. (Press Release from EVCI
Career Colleges, December 17, 2007)
Federal officials raided the National School of Technology
in Miami and two campuses of Florida Career College in October 2007.
Although the Department of Education would not comment on the substance
of the investigation, media reports noted that 90 percent of National
School of Technology's students are paying for their education with
some sort of loan. The school's student loan default rates reached
almost 49 percent in 1989 but stands at 12.7 percent in 2005, according
to the Federal Government. (The Sun-Sentinel, October 17, 2007)
Corinthian Colleges ordered to repay $776,241 to the
Department of Education for violations of student aid procedures at
Bryman College (CA). (Chronicle of Higher Education, May 16, 2005)
The U.S. Department of Education's OIG found that seven
institutions, working with the Apollo Group's Institute for
Professional Development, violated the Higher Education Act ban on
``commissioned sales'' of admissions from 1999-2001, resulting in the
OIG's recommendation that more than $70 million in Federal funds be
returned. (OIG Semiannual reports to Congress, 2002-3)
The National Consumer Law Center found that in 2003, the
Department of Education's Office of Inspector General (OIG) made public
seven audits documenting serious fraud and abuse in school
administration of Federal student aid programs. In decisions that
required the return of more than $18 million in Federal student aid,
the Department found widespread evidence of the following: (1) Schools
closing without warning; (2) Routine fabrication of financial aid
documents; (3) Falsification of ability-to-benefit tests; (4) Failure
to comply with the 90/10 rule; (5) Overstating program length; (6)
Disbursement of funds to ineligible students.
state investigations
Career Education Corporation (CEC) was forced to pay
$200,000 to the State of Pennsylvania after the Attorney General
reached an Assurance of Voluntary Compliance with the Lehigh Valley
College (LVC) operated by a subsidiary of CEC, Allentown Business
School after a State-led investigation. The investigation finds LVC
guilty of violating the Consumer Protection Law by failing to provide
explanation and individual attention as promised to students regarding
financial aid repayment guidelines and interest rates, using quotas for
enrollment as well as incentive-based compensation for admission
counselors and steering students towards one lender. The suit also
finds that the students were misled in regards to post-graduation
employment, compensation and transferability of credits to other
institutions. (Assurance of Voluntary Compliance settlement, Court of
Common Pleas for Lehigh County, PA, February 20, 2008)
The Florida Attorney General's Office has settled with
Florida Metropolitan University, a for-profit school that was accused
of misrepresenting transfer value of credits to former students. Under
the $99,900 agreement, FMU (which changed its name on November 5, 2007
to Everest University) says it will maintain a ``transfer center'' and
work out transfer agreements with other colleges and universities. Even
though no wrong doing was admitted, the settlement touched on the
students' main complaint that they were not clearly told by school
officials that credits earned may not be accepted at other schools.
There are still over 100 pending lawsuits by former FMU students. (St.
Petersburg Times, November 5, 2007)
Texas Attorney General filed suit under the Texas
Deceptive Trade Practices Act against Kaplan Higher Education Corp.
which operates Career Centers of Texas alleging that the
``electricians'' program being offered by this school misled students.
Allegedly, the school was claiming in market and recruitment material
that the students could obtain a full license to conduct a range of
resident and commercial electrical work with a 900 hour course for a
fee of $10,000.00. Texas claims, however, that this program is not at
all in line with the actual regulations to get an electricians license
which requires testing under the Texas Electrical Safety and Licensing
Act and a specified number of hours of on-the-job training with a
licensed electrician rather than coursework at a college. The court
asks to halt the misleading promotion, refund tuition paid by the
students who were misled and request civil penalties of $20,000.00 per
violation of the law. (Attorney General of Texas press release, October
16, 2006)
The New York State Education Department ordered Taylor
Business Institute, a commercial 2-year business college, to close as
of January 2007. The school was highly criticized for its poor
curriculum, absence of leadership, high staff turnover, and high
attrition rate of 80 percent. The Department also mentioned that more
than 90 percent of students at Taylor had never received a high school
degree. (New York Times, September 28, 2006)
The Florida Attorney General's Office widened its
investigation of Florida Metropolitan University in June 2006, seeking
school records involving job-placement rates, grading, instructor
qualifications, financial aid and course prices. The AG Office had
announced in November 2005 that it was investigating FMU, owned by
Corinthian Colleges, over the company's ``advertising and marketing
practices.'' At that time, the Florida AG subpoenaed documents from the
last 5 years related to advertisements, training of FMU admissions
officers, complaints, compensation and identity of admission
representatives, and other documents. (Tampa Bay Business Journal,
November 22, 2005; Wall Street Journal Online, June 22, 2006)
In June 2006, California legislators considered a bill
that would require for-profit institutions to report graduation and
job-placement rates to the State. This bill was introduced after
activists argued that weak reporting rules give for-profit colleges an
open door for false advertising practices. The reporting bill, however,
was amended so that it will merely establish a working group on the
issue. This legislation follows an earlier law, the Private
Postsecondary and Educational Reform Act, that required non-Western
Association of Schools and Colleges accredited institutions to report
program data to the California Bureau for Private Postsecondary and
Vocational Education. A law passed in 2003, however, weakened that act
by exempting regionally accredited institutions. (Inside Higher
Education, June 22, 2006)
In New York, investigations into for-profit college
activities led to a moratorium on the establishment of new programs by
for-profit colleges while policymakers examined ways in which rules
protect against fraud and abuse. The New York State Board of Regents
has approved new regulations on for-profit institutions, including a
transition period before new for-profit colleges are authorized to
award degrees and a requirement that institutions enact stronger and
more transparent admissions policies. (Inside Higher Education, May 24,
2006)
Kentucky's Attorney General has asked a court to strip
Decker College, a for-profit institution, of its charter, thus
prohibiting it from doing business in Kentucky. Investigations by
Kentucky officials revealed widespread fraud and abuse, forcing the
institution to close temporarily. The investigation and court
procedures in this case are ongoing. (Louisville Courier-Journal,
November 5, 2005)
The New Jersey Department of Labor and Workforce
Development issued a letter to the Sanford Brown Institute-Iselin,
owned by Career Education Corporation, expressing concerns regarding
allegations against SBI-Iselin raised in the January 2005 CBS News 60
Minutes report on for-profit colleges. DLWD requested that the school
provide justification for continued operation of the school in light of
the allegations raised in the report. SBI-Iselin submitted a written
explanation in July 2005, and school administration met with DLWD
officials in September 2005. At this meeting, SBI-Iselin received
confirmation that it could continue with the submission of its license
application, a process which had been delayed by DLWD. (CECO SEC Form
10-Q, Filed November 2, 2005, p. 20)
In January 2003, the New York State Comptroller's Office
began an audit of DeVry New York's compliance with the New York State
Tuition Assistance Program grant (``TAP'') requirements for the 3-year
period ending June 2002. Fieldwork was completed in June 2003 and a
preliminary report was issued in July 2003. The Company responded to
the preliminary report, disagreeing with some of the findings in the
report. Subsequently, the Company received an amended report and
responded again. In the first quarter of fiscal 2005, the Company
received the final report and determination of disallowance that
resulted in financial liability to the Company. The final liability was
in an amount for which the Company had previously accrued. The Company
has remitted the required claim of disallowance and the matter is now
closed. (DeVry, Inc., SEC Form 10-Q, Filed May 11, 2005, p. 35)
The Washington State Higher Education Coordinating Board
required the Business Career Training Institute (BCTI) to repay $63,000
in State need grants for low-income students after the school admitted
falsifying enrollment tests to admit unqualified students. (Portland
Oregonian, March 15, 2005)
The Oregon Department of Education placed the Business
Career Training Institute (BCTI) on probation after it found that the
school was ``unfair and deceptive'' in how it recruited, admitted, and
enrolled students. (Portland Oregonian, February 5, 2005) The State
found that recruiters were paid on the basis of the number of students
enrolled, which is a violation of the Higher Education Act. (OAR-581-
045-0061, ``Private Career School Agents,'' February 2005, Oregon
Department of Education) BCTI subsequently suspended classes with no
warning to students or State administrators. (Portland Oregonian, March
15, 2005) The Accrediting Council for Continuing Education and Training
revoked the Business Career Training Institute's accreditation on March
15, 2005. In April 2005, the Council barred two BCTI presidents, Tom
Jonez and Morrie Pigott, from ever again operating a school accredited
by that council. BCTI had closed just days before, on March 11, 2005,
after years of allegations of non-compliance with Federal education and
auditing regulations and several student lawsuits.
The California attorney general's office examining
allegations of fraud against a number of for-profit institutions,
including ITT and Corinthian. (Chronicle of Higher Education, October
1, 2004)
media reports
In a Good Housekeeping report, former students share
stories of ``stressful'' loan debt, feeling ``defeated,'' and program
``realit[ies] [that] didn't match the promises'' at Sanford-Brown in
White Plains, NY (owned by Career Education Corp.); Brown Mackie
College in Merrillville, IN; and American Intercontinental University
in Los Angeles (owned by Education Management Corp.); respectively. A
former president of Sanford-Brown College's Hazelwood, MO campus
discussed ``unqualified'' faculty and meetings about money, never
academics. (Good Housekeeping, June 2010)
According to Securities and Exchange Commission filings by
Education Management Corporation, attorneys general in Illinois and
Oregon are investigating the for-profit college's Art Institute schools
for their relationships between the schools and the providers of loans
to students at those schools. In addition, a lawsuit against EMC's
Argosy University in Texas filed by former students who claim the
college misrepresented the importance of its accreditation, the
availability of loan repayment options, and the quantity and quality of
career options. (The Milwaukee Wisconsin Journal Sentinel, May 5, 2010)
According to a regulatory filing from Corinthian Colleges,
Inc., the U.S. Department of Education found that the company's Everest
College Phoenix division misrepresented costs and aid eligibility,
which the Department called ``intentional evasion of the 90/10
requirements,'' as noted in the SEC filing. (Corinthian Colleges, Inc.
SEC Form 10-Q, Filed March 31, 2010, p. 22; Associated Press, May 4,
2010)
Bloomberg News Service reported that Drake College of
Business recruits at homeless shelters and 5 percent of students at its
Newark, NJ campus is homeless. In 2008, the college began offering a
biweekly stipend of $350 to students who attended at least 80 percent
of classes and maintained a C average. A case manager at a Newark
rescue mission, from which 20 clients over 2 years enrolled at Drake,
told Bloomberg, ``It's basically known in the community: If you're
homeless, and you need some money, go to Drake.'' The Accrediting
Council for Independent Colleges & Schools reportedly opened an
investigation of Drake's recruitment tactics, which could lead to the
revoking of its accreditation making it ineligible for title IV aid.
According to the report, Cleveland's Chancellor University and
University of Phoenix also recruit at homeless shelters; this practice
helps Phoenix recruiters meet their enrollment quota of five students
per month. (Bloomberg News Service, April 30, 2010)
The St. Petersburg Times revealed that for-profit
companies are working to keep taxpayer dollars flowing to their
revenues by opposing proposed regulations by the U.S. Department of
Education that would tie student debt to future income. The Career
College Association, the for-profit education group, has donated over
$150,000 to congressional candidates and parties in just this 2010
election cycle; only Harvard and Stanford have donated more. Arthur
Keiser, owner Keiser Career Colleges and Keiser University, has donated
more than $66,000 to congressional candidates since 2009, making him
one of the top 12 donors nationwide. (St. Petersburg Times, April 11,
2010)
In a complaint filed in Maricopa County Court, a former
Grand Canyon University enrollment counselor seeks punitive damages for
being fired for refusal to ``call and threaten'' a prospective student
regarding a $100 non-existent application fee, to shred records of
calls to members of the Do Not Call registry daily, and to use sales
scripts copyrighted by the University of Phoenix. (Courthouse News
Service, April 9, 2010)
Ohio State Representative Clayton Luckie (D-Dayton) called
for an investigation of Miami-Jacobs Career College saying he will hold
hearings on the college's practices and propose legislation requiring
companies notify students of accreditation during the admission
process. Miami-Jacobs has been accused of not meeting accreditation
standards and was sued by its students in 2008 for claiming
accreditation that did not exist. (Dayton Daily News, April 9, 2010)
A report from Smart Money pointed out that Education
Connection, with its enticing television commercials, sells names and
contact information of potential students to a select group of for-
profit education companies and non-profit postsecondary education
institutions. The article reveals that schools then call students
directly or hire a third party referral business with a call center and
that this recruiting process is much like ``dialing-for-dollars'' with
companies making hundreds or thousands of calls per day. (Smart Money,
April 7, 2010)
In a report from the Sun Sentinel, a consumer alert urges
prospective students to do research before enrolling in for-profit
education. The report notes that costs for associate degrees can exceed
$30,000 leaving students with loan debt and possibly a diploma that
future employers and potential transfer institutions of higher
education do not recognize. (Sun Sentinal, March 29, 2010)
The New York Times featured a front-page article about a
beneficiary of this economic recession: for-profit higher education
companies. The article revealed that some companies require students to
borrow for tuition that can exceed $30,000 per year. Also noted is that
upon program completion, many students have acquired unmanageable debt
and little training for gainful employment. (The New York Times, March
13, 2010)
After ITT Educational Services, Inc. purchased Daniel
Webster College in June 2010 for $20.8 million, Bloomberg News Service
revealed how the company obtained accreditation it would not have
earned itself. ``Now [for-profit higher education companies are] taking
a new tack in their quest to expand. By exploiting loopholes in
government regulation and an accreditation system that wasn't designed
to evaluate for-profit takeovers, they're acquiring struggling
nonprofit and religious colleges--and their coveted accreditation.
Typically, the goal is to transform the schools into online behemoths
at taxpayer expense.'' (Bloomberg News Service, March 4, 2010)
The Denver Post discussed the consequences of high tuition
costs at for-profit colleges. Twenty-three percent of students
attending Colorado for-profit institutions defaulted on their Federal
student loans in the first 3 years of repayment; that compares to a 15
percent default rate at Colorado 4-year public colleges. In addition to
burdening taxpayers, defaulting on Federal student loans causes ruined
credit ratings for students. (The Denver Post, January 24, 2010)
The University of Phoenix has campuses in 29 of the 30
most populated States; one State blocking Phoenix's bid for a campus is
New York. A State review team of University of Phoenix's general
education courses found that ``First-year algebra `is not a college-
level mathematics course' and `does not demand as high a level of
critical thinking as the high school curriculum' in New York. . . .
Courses in human nutrition and in environmental issues and ethics
lacked basic science, and instructors were unqualified.'' (Bloomberg
News Service, January 19, 2010)
The Denver Post notes that for-profit higher education is
a business ``in which the Federal Government guarantees up to 90
percent of revenue, sales are recession-proof and profit margins
regularly run in the double digits.'' A professor of education who
studies for-profit education companies observes that it is easy to
generate revenue in this sector: ``You have a limited set of courses, a
standardized curriculum and a teaching staff of working professionals.
Then you recruit like hell. . . . The more enrollments, the more money
you make.'' (The Denver Post, January 18, 2010)
The Denver Post reports that along with growth in for-
profit education comes an increase in complaints and lawsuits over
recruiting practices, levels of debt, and employability. Colorado has
received 164 student complaints about for-profit schools in the last 3
years and it has revoked authorizations of two for-profit schools and
one for-profit vocational school since September 2009. According to
loan data from the U.S. Department of Education, last year Colorado
students received $1.6 billion in Federal loans and Pell grants, of
which $690 million went to for-profit companies. (The Denver Post,
January 17, 2010)
In an article about the recruitment of military personnel
by for-profit colleges, Bloomberg News Service revealed that for-profit
online colleges ``are lured by a Defense Department pledge of free
schooling up to $4,500 a year for active members of the armed services.
. . . Taxpayers picked up $474 million for college tuition for 400,000
active-duty personnel in the year that ended Sept. 30, 2008, more than
triple the spending a decade earlier, Defense Department statistics
show.'' One Camp Lejeune director said some schools prey on Marines,
calling and emailing them day and night. An executive at a search firm
specializing in the placement of military personnel notes that Fortune
500 firms are reluctant to hire service members with degrees from
online for-profit companies. (Bloomberg News Service, December 15,
2009)
Apollo Group paid $78.5 million, of which $67.5 million
will go to the Federal Government and $11 million will go to
plaintiffs, in a whistleblower lawsuit filed by two former employees
who said the University of Phoenix paid recruiters based on the number
of students they enrolled. (Bloomberg News Service, December 14, 2009)
A report from The Wall Street Journal reveals students
using Federal student loans to cover costs of for-profit education have
a 21 percent default rate in the first 3 years of repayment; about
three times the rate of 4-year public and non-profit postsecondary
education institutions. (The Wall Street Journal, December 14, 2009)
An Associated Press analysis of for-profit colleges
reveals that an increasing proportion of Federal student aid dollars
are going to the sector. In 2008, the top five institutions receiving
the most Pell grants were all for-profit companies. (USA Today,
November 30, 2009)
American Public Media's Marketplace reported on admission
practices experienced by current and former students and former
recruiters at the University of Phoenix, exposing abuses in the
enrollment process. Three students interviewed experienced hard-sell
tactics that included being hounded by for-profit college recruiters.
Former recruiters cited deception in the process, including lying about
space availability to create urgency and demand, winning a prospective
student's trust through lengthy personal phone calls, and claiming
regional accreditation. (American Public Media's Marketplace, November
4, 2009)
In a report about featuring statements from current and
former University of Phoenix students, American Public Media's
Marketplace notes that recruiters are paid based on the number of
students they enroll, which can create a deceptive and high-pressure
admission process. Students cite receiving loans without their
knowledge and attending courses that provide no valuable training.
(American Public Media's Marketplace, November 3, 2009)
After the U.S. Department of Education's regulatory
investigators cited the University of Phoenix with enrollment abuses in
2004, the Apollo Group paid nearly $10 million to resolve the
allegations. However, some of Phoenix's recruiters still use high-
pressure and deceptive tactics, according to current and former
students and former recruiters interviewed by ProPublica and American
Public Media's Marketplace. Recruiters disclosed they were required to
display what they felt to be high-pressure sales tactics and misleading
techniques. Students shared they were deceived about the
transferability of credits and types of financial aid such as receiving
loans after being promised grants and scholarships. (ProPublica,
November 3, 2009)
Thirteen students brought a suit against Corinthian
Colleges Inc. alleging Corinthian, Rhodes, and Everest Colleges in
Dallas, Fort Worth, and Arlington, TX did not deliver on promises made
during the recruitment process and are focused only on revenue.
Students say advertising claims about job placement rates and the
transferability of credits to other colleges were false. (NBC Dallas-
Fort Worth, August, 28, 2009)
In Atlanta, a lawsuit alleges American InterContinental
University enrolled students who were unable to read and lacked a high
school diploma and that it fraudulently attained accreditation. In
addition, the college also rewarded recruiters with bonuses based
solely on the numbers of students they enrolled. (The Atlanta Journal-
Constitution, August 24, 2009)
A wrongful termination lawsuit against the University of
Phoenix revealed evidence of the continuing use of recruiting practices
in violation of the incentive compensation prohibition. Although the
university claims to use an intricate system for evaluating recruiters
taking into account enrollment numbers, but not solely using these
numbers as a measure of performance, several documents surfaced
suggesting that enrollment numbers were the key factor in determining
job performance. A recruiter received credit for an enrolled student
only if that student attended at least three classes or 3 weeks. In
addition, failure to meet certain quotas set for a month would result
in decreases in salary and possibly termination. (New America
Foundation, February 19, 2009)
In an article dated July 14, 2007, The Kansas City Star
pointed to many struggles University of Phoenix is having regarding
increasing its profits. Among the quotes, Trace Urdan, a senior analyst
with the investment bank Signal Hill, says that the parent company,
Apollo, is sending a message that they are ``chasing after growth for
growth's sake'' in order to increase their stock value. (The Kansas
City Star, July 14, 2007)
In interviews with both former admission officers and
students, San Francisco Weekly pointed out the deceptive practices of
the California Culinary Academy (CCA) since Career Education
Corporation took ownership of the school in 1999. These anonymous
former admission officers tell the paper that they would tell the
applicants anything they needed to hear to sign on the dotted line and
admits anyone eligible for a student loan and a pulse. The students
said that they were misled with high placement rates and unattainable
salaries in the application material and conversations with admission
officers. (San Francisco Weekly, June 6, 2007)
In early February 2007, the New York Times ran a story
chronicling the latest troubles for the University of Phoenix.
According to the article, current and former students of the university
both online and on campuses in Arizona, California, Colorado, Florida,
Michigan, Texas, and Washington have complained of recruiting abuses,
unqualified professors, and low academic standards. The university's
stock fell greatly at the end of 2006 amidst resignations of top
officials at Apollo Group. The article mentions a 16 percent graduation
rate among all Phoenix students, and 4 percent rate among online
students. About 95 percent of Phoenix instructors are part-time. (New
York Times, February 11, 2007).
Lehigh Valley College, owned by Career Education
Corporation, is reported to have practiced illegal recruiting,
enrollment, and grade reporting in Pennsylvania. Five complaints were
submitted to the Pennsylvania Department of Education, which did not
act on the complaints as they were ``out of its purview.'' (Allentown
Morning Call, April 25, 2005)
60 Minutes' report resulted in a hearing of the House
Education & Workforce Committee on March 1, 2005, during which evidence
of continued improprieties were provided by a former admission officer
at one of Career Education Corporation's campuses.
In Oregon, former employees of American InterContinental
University Online (owned by Career Education Corporation) described the
institutions ``admission'' tactics as little more than ``high pressure
sales,'' as recruiters were dogged by supervisors with constantly
escalating enrollment targets, misleading sales scripts, and the belief
that managers wanted enrollees regardless of their ability to pay
tuition. (Portland Oregonian, February 20, 2005)
CBS News reported that recruiters for Career Education
Corporation's (CEC) Brooks College employed high pressure sales
tactics, and were expected to meet quotas of enrolled students. At
other CEC campuses, reporters revealed that recruiters admitted clearly
unqualified students, presumably to meet sales quotas. (60 Minutes,
January 30, 2005)
lawsuits
In a Federal lawsuit against Education Management Corp., a
former employee of South University Online cites he observed violations
of title IV Federal statute and regulations: paying salaries based on
the number of students recruiters signed up for courses; submitting
fake proctor forms for ability to benefit tests; allowing students to
take ability to benefit tests repeatedly until they passed; and
offering free trips, iPods, and gift cards to representatives who
enroll the highest number of students. (The United States District
Court Western Pennsylvania. Brian T. Buchanan vs. Education Management
Corp., Filed July 2007; Pittsburgh Tribune-Review, May 7, 2010)
In a lawsuit against ITT Educational Services, Inc., a
plaintiff who was hired as director of ITT's Lathrop, CA campus cites
he observed violations of State and Federal laws and regulations to
benefit from Federal subsidized financial aid: staff changing failing
scores to passing scores on placement tests, staff inflating and
altering attendance records and grades, inaccurate job placement
figures, and recruiters being compensated based on the number of
students they convinced to enroll. In addition, he observed staff alter
and destroy files required to be maintained by State and Federal law.
(The United States District Court Southern District of Indiana. Jason
Halasa vs. ITT Educational Services, Inc. Filed April 15, 2010)
A class action suit was filed against Apollo Group Inc.
and The University of Phoenix alleging that they artificially deflated
their cohort default rates in order to remain eligible for title IV
funds. By returning students' Federal loan money to lenders once they
had withdrawn from classes during the first term, UOP avoided listing
these students as defaulting on their loans. UOP then proceeded to
collect the debt directly from the students under more rigid terms,
devoid of a 6-month grace period and low interest rates, than those
agreed upon between the student and the original lender resulting in
debt being passed on to collection agencies and adversely affecting
students' credit. (The U.S. District Court Eastern District of
Arkansas. Shawn Martin, Angela Russ and Nitisha Ingram vs. Apollo
Group, Inc. and University of Phoenix. Filed December 9, 2008)
Three former academic officers at Kaplan University have
filed a wide-ranging lawsuit alleging the for-profit institution of
defrauding the U.S. Government of more than $4 billion. The lawsuit
alleges that Kaplan enrolled unqualified students, inflated their
grades so they could stay enrolled and falsified documents for
accreditation purposes. They also accuse the company of paying its own
employees to enroll in classes so they meet the requirement of 10
percent of revenue coming from sources other than Federal loans and
grants. In addition, the complaint also accuses Kaplan of providing
incentives to its college recruiters based on the number of students
they enroll, in violation of Federal regulations. (The Chronicle of
Higher Education, March 13, 2008)
The Apollo Group was forced to pay an estimated $277.5
million to shareholders who sued for securities fraud alleging that the
company officials withheld a harshly critical U.S. Department of
Education report in February 2004 that accused the company of violating
a Federal prohibition against paying recruiters based on the number of
students they enrolled. Former CFO Kenda Gonzalez, also a defendant in
the case, admitted in testimony that they did hold the report back out
of fear of negative news coverage. (Inside Higher Ed, January 17, 2008)
A class action suit was filed against Career Education
Corporation alleging that their California Culinary Academy
misrepresented that its admissions were selective, its program elite
and its degree prestigious. Also, alleging CCA was erroneously saying
that upon graduation well-paying jobs would be waiting and students'
education loans would be readily repayable. The plaintiffs allege that
none of this information was true when they were informed of it or even
when they went to look for jobs. They also seek to prove that CEC, or
CCA, accepted undisclosed benefits from lenders to place students in
loans that exceed market rates. (Chronicle of Higher Education, October
1, 2007)
In December 2005, former students commenced a putative
class action against DeVry University and DeVry Inc. (``Defendants'')
in Los Angeles Superior Court, alleging that the defendants failed to
comply with disclosure requirements under California Education Code
relating to the transferability of academic units earned. This case was
settled in 2007. (DeVry, Inc., SEC Form 10-K, Filed August 24, 2007,
p. 36)
Chubb Institute, a chain of career schools owned by High
Tech Institute, has lost its accreditation in Chicago by the
Accrediting Council for Continuing Education and Training (ACCET) and
is being sued by former students in New Jersey and Pennsylvania
alleging they misrepresented job placement figures. A branch of Chubb
is also closing in Virginia due to financial problems due to alleged
mismanagement and an unresponsive administration. The ACCET claims the
Chicago school did not have ``required prerequisite courses'' and
instructors adjusted test scores by deleting questions that were not
covered so that most students in the class had an ``A''. (The
Washington Post, August 13, 2007)
Corinthian Colleges, a large vocational school chain based
in California, has agreed to pay $6.5 million to settle a lawsuit
alleging they engaged in unlawful business practices by exaggerating
their record of placing students in well-paying jobs and forcing their
recruiters to meet a pre-set quota of new enrollments. (LA Times,
August 1, 2007)
Oakland City University, a nonprofit college in Indiana,
agreed to pay $5.3 million to settle a complaint by a whistle blower
that maintained the institution offered improper incentives to student
recruiters. The former admissions director at Oakland City claimed that
he and others were paid in commissions and bonuses based on their
ability to enroll students. (Chronicle of Higher Education, July 31,
2007)
An insurance company for the Business Computer Training
Institute, which closed in July amidst allegations of Federal student-
loan fraud and other improper practices, has agreed to pay $9 million
to former students in a class action lawsuit. The students had accused
the institute of fraud, breach of contract, and of breaking Washington
State's consumer-protection laws. The settlement could benefit as many
as 28,000 students, and negotiations were underway for a second
settlement in the amount of $55 million. (Chronicle of Higher
Education, May 14, 2007)
On September 6, 2006, the Ninth U.S. Circuit Court of
Appeals reinstated a lawsuit against the University of Phoenix that
alleges the institution obtained Federal funds under false pretenses by
paying recruiters on the basis of how many students they enrolled. The
case, brought against the University of Phoenix by two former
recruiters, was dismissed by a U.S. District Court in California in
2004. (Chronicle of Higher Education and Inside Higher Education,
September 6, 2006) In May 2007, The U.S. Supreme Court declined a
request from University of Phoenix to intervene in this lawsuit,
letting the lawsuit proceed despite the institution's objections.
(Chronicle of Higher Education, May 4, 2007)
On August 25, 2005, a class action was filed against
Career Education Corporation (CEC) through its subsidiaries by eight
former students allege that defendants made fraudulent
misrepresentations and violated the Missouri Merchandising Practices
Act by misrepresenting or failing to disclose, among other things,
details regarding instructors' experience or preparedness, estimates
for starting salaries of graduates and curriculum, that credits earned
were transferable at Sanford-Brown College (subsidiary of CEC). The
plaintiffs also allege that admissions representatives had sales quotas
for enrolling new students, directly in opposition to the Higher
Education Act. The plaintiffs, through the complaint, accuse the
defendants of failing to provide the promised instruction, training and
placement services. This matter has been settled as of May 2007.
(Career Education Corporation, SEC Form 10-Q, Filed May 3, 2007)
On March 21, 2005, a class action complaint was filed in
the Superior Court for the State of California against Brooks College,
a school owned by Career Education Corporation. The complaint alleges
that the college violated California Business and Professions Code and
Consumer Legal Remedies Act by allegedly misleading potential students
regarding the admission criteria, transferability of credits and
retention and placement statistics as well as engaging in false and
misleading advertising. (Career Education Corporation, SEC Form 10-K,
Filed May 3, 2007)
Former students of the Sanford-Brown Institute in
Landover, MD issued a complaint in March 2006 alleging that SBI broke
the Maryland consumer fraud act by ``misrepresenting or failing to
disclose,'' among other things, details regarding instructors'
experience or preparedness, availability of clinical externship
assignments, and estimates for the dates upon which the plaintiffs
would receive their certificates. The complaint also states the
institution failed to provide promised instruction, training,
externships and placement services. (Career Education Corporation, SEC
Filing 10-Q Form, November 7, 2006, p. 76)
A class action lawsuit has been filed by Kahn Gauthier
Swick, LLC in the U.S. District Court for the District of Arizona on
behalf of shareholders who acquired Apollo Group stock and securities
between November 28, 2001 and October 18, 2006. The suit charges
violations of Federal securities laws, including backdating of stock
options.
The University of Phoenix has been sued by the Equal
Employment Opportunity Commission for employment discrimination. The
EEOC charged the University of Phoenix preferred hiring admission
counselors who belonged to the Church of Jesus Christ of Latter-day
Saints over those who did not. The suit was filed on behalf of four
current or former non-Mormon University of Phoenix enrollment officers.
It alleges that after these four men complained internally, the
University of Phoenix transferred all of them and terminated one of
them. The suit was filed as a class action. (Inside Higher Ed,
September 29, 2006)
The Seattle Times reported in early August 2006 that Crown
College of Tacoma would pay over $87,000 to settle claims by six
students who alleged the school misled them about whether their credits
would transfer to other colleges or universities. The settlement
involved the third such lawsuit against the school. In January 2006,
Crown College was ordered to pay almost $77,000 in a case that involved
a student who said the college had told her she could transfer her
credits to Gonzaga University. (Seattle Times, August 5, 2006)
On July 21, 2006, a class-action securities fraud
complaint was filed in Federal District Court in the Southern District
of New York against EVCI Career Colleges Holding Corporation, parent of
Interboro Institute. The complaint alleged that the company had cheated
in determining whether students were eligible for Federal and State
financial aid and had fired employees for failing to meet enrollment
quotas. The complaint indicated that unethical practices at the
corporation went even further than those outlined in a 2005 NY State
Education Department investigation. (New York Times, July 24, 2006)
A group of students have filed suit against the ECPI
College of Technology in Greenville, SC, alleging that the school is a
``fraud and a sham,'' and alleging that training at the school is
``severely deficient.'' (Greenville News, August 11, 2005)
A wrongful termination suit by a former professor and
``educator of the year'' at American InterContinental University (AICU)
against Career Education Corporation in Los Angeles indicates that
fraudulent enrollment practices enabled that institution to receive
Federal student aid funds. According to the lawsuit, AICU enrolled
clearly unqualified students, enrolled ``imaginary'' students, falsely
advertised job placement rates, and falsified reports to sustain
enrollments. (New York Times, May 15, 2005)
In January 2002, a graduate of one of DeVry University's
Los Angeles-area campuses filed a class-action complaint on behalf of
all students enrolled in the post-baccalaureate degree program in
Information Technology. The suit alleges that the program offered by
DeVry did not conform to the program as it was presented in the
advertising and other marketing materials. In March 2003, the complaint
was dismissed by the court with limited right to amend and re-file. The
complaint was subsequently amended and re-filed. During the first
quarter of the Company's fiscal year 2004, a new complaint was filed by
another plaintiff with the same general allegations and by the same
plaintiff's attorneys. Discovery continues but there is no determinable
date at which this matter may be brought to conclusion. (DeVry, Inc.,
SEC Form 10-Q, Filed May 11, 2005, p. 25)
In November 2000, three graduates of one of DeVry
University's Chicago-area campuses filed a class-action complaint that
alleges DeVry graduates do not have appropriate skills for
employability in the computer information systems field. The complaint
was subsequently dismissed by the court, but was amended and re-filed,
this time including a then-current student from a second Chicago-area
campus. Discovery continues but there is no determinable date at which
this matter may be brought to conclusion. The Company has accrued $0.5
million representing the estimated minimum amount to resolve the two
class-action claims. (DeVry, Inc., SEC Form 10-Q, Filed May 11, 2005,
p. 25)
Institutions owned by Corinthian Colleges and Career
Education Corporation face lawsuits across the country from current and
former students. Lawsuits present allegations of ``systemic deceptive
trade practices,'' including: (1) Falsification of grades to maintain
enrollment; (2) Misleading information about transferability of credit;
(3) Illegal recruiting and compensation practices (Chronicle of Higher
Education, October 1, 2004; Miami Herald, March 11, 2005; Tacoma News-
Tribune, April 12, 2005)
Shareholders of ITT and Career Education Corporation are
attempting to file class action suits against the companies for
allegedly using misleading financial information to artificially
inflate the value of their stock. (Chronicle of Higher Education,
October 1, 2004)
other
Career Education Corporation's American InterContinental
University was recently placed on a 1-year probation by its accrediting
agency, the Southern Association of Colleges and Schools. If AIU's
accreditation is withdrawn, students attending would no longer be able
to receive Federal financial aid. The latest action has prompted
shareholders to again question the commitment to regulatory compliance
on the part of the company's governing board. (Wall Street Journal,
December 12, 2005)
For-profit college activities in Canada have recently
prompted the Canadian legislature to consider legislation tightening
rules for private career colleges. Complaints have been submitted by
students from across Canada against institutions such as CDI College,
owned by Corinthian Colleges. (Canadian Press (via Canada.com),
November 5, 2005)
The Chairman. Thank you, Mr. Hawkins. Now Dr. McComis. Dr.
McComis, welcome. Please proceed.
STATEMENT OF MICHALE S. McCOMIS, Ed.D., EXECUTIVE DIRECTOR,
ACCREDITING COMMISSION OF CAREER SCHOOLS AND COLLEGES,
ARLINGTON, VA
Mr. McComis. Mr. Chairman, members of the committee, thank
you for the opportunity to testify. My name is Michale McComis,
and I'm the executive director of the Accrediting Commission of
Career Schools and Colleges or ACCSC.
Let me state at the outset unequivocally, that any student
recruiting or advertising practice that unduly induces students
to enroll in an institution is anathema to the mission of the
organization that I represent and tarnishes the entire higher
education community.
ACCSC works diligently to enforce its standards in the
areas being addressed by this hearing, and looks forward to
exploring with this committee and Congress how oversight of the
student recruitment experience might be strengthened.
The role of accreditation is important as a means to ensure
that only the highest level of integrity is injected into the
student recruitment and admissions process, and to connect
these processes to student achievement outcomes. It is
essential to the success of our triad system that accreditors
and their Federal and State partners work together to stem any
institutional abuses, such as those presented here today.
Unlike their Federal and State partners, accrediting
agencies are private, independent entities, focusing on
establishing standards and assessing their members and
institutions in relation to those standards on a peer review
basis.
As such, they are the best resource to make determinations
related to educational quality. Institutions eligible for title
IV funds must be accredited by an agency recognized by the U.S.
Department of Education. And the Higher Education Act creates
the rigorous regulatory structure to which all accrediting
agencies must adhere.
The Federal regulations require that all agencies,
regardless of the types of institutions that they accredit,
have and enforce standards in the areas of recruitment,
admissions, and advertising. The ACCSC standards of
accreditation create a whole school assessment process whereby
an institution's operational and education inputs can be
evaluated in the context of student achievement outcomes. Each
of a school's practices including recruitment, advertising, and
admissions can impact its overall success and the success of
its students. ACCSC has more than 50 standards that address
these areas directly.
Equally important to these standards are our processes to
evaluate an institution's compliance. We have a multi-step
process, which includes a self evaluation, onsite visits, and
determinations of compliance. There's ample evidence that the
commission holds its institutions accountable to its standards.
In the last 2 years, approximately 8 percent of our findings
resulted from site visits pertaining to the areas of
recruitment, advertising, and admissions.
Another indicator is provided from analysis of our student
surveys. Results from surveys during 69 onsite evaluations
between April and May of this year showed very high rate of
student satisfaction in areas related to admissions and
financial aid processes of their institutions, a rate high
enough to support the conclusion that the problems that do
exist are not widespread amongst our accredited institutions.
Between accreditation cycles, ACCSC relies on an interim
review and a robust complaint process to monitor potential
violations of standards. If a student believes that he or she
has been misled in the recruitment or admissions process, that
student can forward a complaint to the commission for
investigation.
Pursuant to Federal regulations, and in keeping with best
practices, we review every complaint received for compliance
with accreditation standards. The commission has received
complaints regarding recruitment and advertising practice, as I
outlined in my written testimony. And those complaints are
always troubling.
When findings of noncompliance do occur, we are diligent in
requiring institutions to take corrective action. And when none
occurs, we take adverse action. ACCSC has a number of actions
at its disposal to ensure compliance with the standards ranging
from reporting to revocation. And the commission can provide
examples of when it has taken those actions.
I also want to explain the important connection between the
issues discussed here today and student achievement. ACCSC
requires its institutions to submit a report annually of all
programmatic graduation and employment rates and monitors any
institution falling below that commissions establish
benchmarks. We view these benchmarks as tools by which an
institution can improve its own success and the success of its
students, but these outcomes also help us to identify related
problems at an institution, including an appropriate
recruitment, advertising, or admissions practices.
If students are lured to an institution or induced to
enroll when those students may not be a good fit in relation to
program objectives, then that institution will likely have
difficulty demonstrating competency achievement by its students
and acceptable rates of graduation and employment.
Overall, I believe that ACCSC has demonstrated its
commitment to establishing and enforcing standards related to
recruitment, advertising, and admissions. And I also believe
that accreditors can in all instances be expected to uncover
every instance of noncompliance.
However, the unacceptable and abhorrent activities
presented for this hearing do indicate that more vigilance
amongst all accrediting agencies with regard to all
institutions is necessary.
To that end, here are a few final thoughts. ACC will
continue to assess its standards and practices and policies in
these areas and commit to strengthening its accreditation
practices even further.
Second, it is important that the department and ACCSC
provide the appropriate oversight for all accreditors and
create a level playing field, holding all accreditors
accountable to establish and enforce rigorous and effective
standards.
Finally, ACCSC is committed to working with Congress should
it decide that accreditors need to do more in this area, and to
ensure sound policy to protect the integrity of our higher
education students and the higher education system and its
students. Thank you.
[The prepared statement of Mr. McComis follows:]
Prepared Statement of Michale S. McComis, Ed.D.
Thank you for the opportunity to testify. My name is Michale
McComis and I am the executive director of the Accrediting Commission
of Career Schools and Colleges (ACCSC). I am honored to appear before
the committee this morning to discuss the important issue of student
recruitment by higher education institutions. I hope to provide the
committee information about ACCSC's accreditation standards and process
in this area, but also to provide our perspective on the role of
accreditation in higher education more generally. Let me state
unequivocally at the outset that any form of student recruiting or
advertising practice that unduly induces students to enroll in an
institution is anathema to the mission of the organization that I
represent. As I outline in more detail below, ACCSC works diligently to
enforce its standards in the areas being addressed by this hearing and
is committed to eradicating inappropriate recruiting practices in its
accredited institutions. In addition, ACCSC looks forward to exploring
with this committee and Congress how oversight of the student
recruitment experience might be strengthened through the accreditation
process.
By way of introduction, ACCSC is a private, non-profit independent
accrediting agency recognized by the Secretary of Education continually
since 1967. ACCSC is national in scope and currently accredits 789
institutions with over 250,000 students throughout the country. These
institutions are predominantly private sector, career-oriented
institutions, offering programs at the non-degree, Associates Degree,
Bachelors Degree, and Masters Degree levels. Institutions accredited by
ACCSC prepare students for trade and technical careers in many areas
including allied health, nursing, information technology, automotive
technology, commercial art, and unique areas such as horology,
luthiery, and yacht building and restoration.
ACCSC's primary mission is to serve as a reliable authority on
educational quality and to promote enhanced opportunities for students.
To meet its mission, the Commission has a values-based framework for
accrediting focused on integrity, accountability, continuous
improvement, open communication, and teamwork. My tenure with ACCSC
began in 1994, becoming its executive director in 2008. I have recently
served on two of the Department of Education's negotiated rulemaking
panels--the 2009 Accreditation Panel and the 2010 Program Integrity
Panel. I also recently testified before the House Committee on
Education and Labor at a hearing regarding program length and credit
hour definitions.
summary of testimony
My testimony is divided into two primary parts. First, I will place
the issue of recruitment in the broader context of our higher education
system and regulatory structure. It is important to provide a bit of
background regarding the need for continued reliance on the regulatory
``triad'' that provides the student funding and quality-assurance
mechanisms for our institutions of higher education and to discuss ways
in which that structure might be strengthened.
The second part of my testimony will provide the committee with a
summary of ACCSC's standards on student recruiting and advertising and
its process for reviewing institutions generally, and with regard to
recruitment and advertising in particular. Developed based on four
decades of experience in the accreditation of career-oriented
institutions, ACCSC believes that its standards on recruiting and
advertising are amongst the most rigorous in the higher education
community and can serve as a model for accreditors' assessment. I also
would like to discuss with the committee how ACCSC's standards on
recruitment and advertising directly relate to our assessments of
student achievement at our institutions.
the broader context of higher education policy, accreditation,
and the evaluation of recruitment and advertising practices
As higher education continues to take a more diverse shape,
ensuring the quality and integrity of higher education institutions and
their programs continues to be a paramount concern, and historically,
the primary responsibility of accrediting agencies and the schools they
accredit. Unlike Federal and State governments, accrediting agencies
are private, independent entities, focused on establishing standards
and assessing their member institutions in relation to those standards
on a peer-review basis. As such, they are the best resource for making
determinations related to educational quality.
Despite the independent, private nature of accreditation,
accrediting agencies have been linked to the Federal student financial
aid program since the Congress established the Higher Education Act 45
years ago. Institutions eligible for title IV funds must be accredited
by an accrediting agency recognized by the U.S. Secretary of Education
and the Higher Education Act creates a structure for this recognition
process. Included in the act and regulations are criteria which all
accrediting agencies must include in their accreditation standards. In
this manner, accreditation has played an essential role in
institutional and programmatic quality assurance, an essential
component of the regulatory ``triad'' with Federal and State
governments in overseeing higher education.
The Federal regulation of criteria for accreditation standards set
forth the expectation that accrediting agencies have standards
regarding recruitment, admissions practices, and advertising (section
602.16(a)(1)(vii)). It is, therefore, paramount that all agencies adopt
and enforce such standards--regardless of the types of institutions the
agency accredits. All regulatory and oversight agencies in the triad
must work together to stem abuses in these areas. For example, if an
institution is found by the Federal Government to have violated Federal
regulations regarding recruitment practices, then there should be an
expectation that a State would also conduct a review to determine if
State law or regulation was violated and accreditors should investigate
to determine as to whether the agencies standards were violated. This
is a primary purpose of the triad and one that the Congress should
expect to occur. To that end, I am hopeful that the GAO will supply my
organization with information from its recent report on recruiting
activities regarding any institution accredited by ACCSC so that we can
conduct our own investigation into these matters.
The role of accreditation, in particular, is an increasingly
important one. Given the growing diversity of higher education
institutions and the growing demographic of career-focused, adult
learners, coupled with the growth of education access and opportunity,
accreditors must hold institutions accountable to ensure that only the
highest level of integrity is injected into the student recruitment and
admissions process. Moreover, all higher education institutions and
their accreditors must understand the connection between recruitment
and admissions processes and student achievement outcomes.
As I demonstrate in the next section of my testimony, ACCSC has
established rigorous standards in the areas of recruiting, advertising,
and admissions, intended to help ensure that institutions recruit and
admit only those students who are accurately and fully informed about
the institution's program and who are qualified and capable of
completing the program in which they intend to enroll.
accsc's standards and processes regarding recruitment, advertising,
and admissions
The ACCSC Standards of Accreditation and accreditation process
emphasize educational quality by focusing on outcomes. Essentially, the
Commission evaluates an institution's educational objectives and
assesses the institution's success in meeting those objectives. This
assessment process includes a review of an institution's compliance
with input standards and the institution's ability to demonstrate
acceptable output results in terms of student achievement outcomes,
specifically student learning assessment and rates of graduation and
employment.
ACCSC's Standards
In addition to having standards and processes to examine
institutional inputs, ACCSC has outcomes-based standards, including
graduation and employment rates, which the agency uses in its
assessment process. Specifically, the Commission is concerned about
institutional operations and how those operations contribute to student
achievement outcomes and the application in the workplace of skills,
knowledge, and competencies.
ACCSC's standards on recruitment, advertising, and admissions are
necessarily linked to its standards on student achievement; none of the
standards are viewed in isolation from another. ACCSC strives for a
``whole school'' assessment process whereby the appropriateness of an
institution's operational and education inputs can be evaluated in the
context of student achievement outcomes. Each component of the school
(e.g., recruiting, advertising, admissions requirement, program design
and curriculum, student services, the quality of the administration and
faculty, the inclusion of the employment community in curriculum
development and assessment, etc.) has an impact on the overall success
of an institution and the success of students. ACCSC has more than 50
standards that address the areas of recruitment, advertising, and
admissions directly (see Appendix I) and several more that do so
tangentially.
ACCSC's primary standards require institutions to operate in an
ethical manner with regard to recruitment practices and to demonstrate
that:
The institution describes itself to prospective students
fully and accurately;
The institution follow practices that permit prospective
students to make informed and considered enrollment decisions without
pressure;
The institution's recruitment efforts attract students who
are qualified and likely to complete and benefit from the training
provided by the school, instead of simply obtaining enrollments;
The institution observes ethical practices and procedures
in the recruitment of its students in areas including the following:
Only using school employees for recruitment;
No making of false or misleading statements;
No recruiting at or near welfare offices,
unemployment centers, or homeless shelters;
No promises (explicit or implicit) of employment;
No inducements to enroll;
No recruiters involved in admissions decision;
Allowance for a ``cooling off '' period and
implementation of cancellation policies; and,
No discrediting others schools or influencing
prospective students to leave another school.
The institution provides prospective students with a copy
of the catalog prior to enrollment for the purpose of full disclosure;
and
The institution provides prospective students with a copy
of the enrollment agreement (i.e., contract) prior to and after
signing, which sets forth clearly the obligations of the school and the
student.
ACCSC's primary standards in the area of advertising require
institutions to demonstrate that:
All advertising and promotional materials are truthful and
accurate and avoid leaving any false, misleading, or exaggerated
impressions with respect to the school, its location, its name, its
personnel, its training, its services, and its accredited status;
Advertising and promotional materials clearly indicate
that education, and not employment, is being offered and that no overt
or implied claim or guarantee of individual employment is made at any
time;
Employment or Help Wanted classifieds are not used for any
form of student recruitment;
Endorsements used in school catalogs, literature or
advertising are used only with the written consent of the authors and
are kept on file and subject to inspection and that under no
circumstances may currently enrolled students provide endorsements on
behalf of the school;
Advertisements and literature do not quote salaries for an
occupation unless they also accurately indicate the normal range or
starting salaries in the occupation for which training is provided and
include the source of this information;
Scholarships are not used as a recruiting device; and
Advertising of accredited status also indicates by what
agency or organization the institution is accredited and advertising of
financial aid includes an eligibility phrase (e.g., financial aid
available for those who qualify).
ACCSC's Process
Equally important to ACCSC's standards are the processes used by
the Commission to evaluate an institution's compliance with those
standards. ACCSC, therefore, has a multistep process by which the
Commission evaluates an institution's compliance with accrediting
standards. To prepare for the re-accreditation process, institutions
are required to prepare a Self-Evaluation Report (SER),\1\ which
requires institutions to demonstrate how their programs meet ACCSC's
standards. For example, institutions must explain how the institution
has determined that its recruitment practices are ethical and
appropriate, show that advertising in use is appropriate and not
misleading, and demonstrate the appropriateness and implementation of
admissions criteria.
---------------------------------------------------------------------------
\1\ Institutions seeking initial accreditation are also required to
complete a detailed SER, which would include a demonstration of
compliance with our advertising and recruitment standards.
---------------------------------------------------------------------------
ACCSC staff and peer-review evaluators then visit an institution
and make determinations regarding an institution's compliance with
standards based on the information presented in the SER and assessments
made during the on-site evaluation. If there is an area of non-
compliance cited by an on-site evaluation team, an institution has the
opportunity to demonstrate compliance to the Commission. If an
institution fails to make such a showing, ACCSC will take action
measured appropriate to the level of the offense.
ACCSC has ample evidence to show that the Commission holds its
institutions accountable to its standards to include, among many
others, those related to recruitment, advertising, and admissions
practices. Over the prior 2 years, ACCSC conducted 629 on-site
evaluations for a variety of purposes (i.e., initial and renewal of
accreditation, substantive changes reviews, and directed investigations
on an announced and unannounced basis). During those 629 on-site
evaluations, approximately 8 percent of our findings pertained to the
areas of recruitment, advertising, or admissions practices. Within
those findings, 70 percent were in the area of advertising, 25 percent
were in the areas of admissions practices, and 4 percent were in the
area of recruitment practices. Examples of these findings range broadly
from less severe non-compliance such as stating correctly that the
school is accredited without also stating that ACCSC is the accrediting
agency to more serious noncompliance. Examples of more serious
noncompliance include, in the area of advertising the use of a
subjective statement or other information that an institution might not
be able to fully support (e.g., ``state-of-the-art''), in the area of
admissions not collecting sufficient documentation to demonstrate that
admissions criteria were fully met prior to matriculation for all
students, and in the area of recruitment not sufficiently removing
recruitment personnel from the admissions decision process. While the
statistics show that findings related to recruitment, advertising, and
admissions practices are not indicative of substantial noncompliance by
our institutions, ACCSC does take each and every instance of
noncompliance seriously and the Commission is diligent in requiring
institutions to take corrective action necessary to demonstrate that
they achieve compliance.
Another indicator that the issues addressed herein are not
widespread among ACCSC-accredited institutions is the results of
student surveys that the Commission conducts during the on-site
evaluation. An analysis of student survey results from 69 on-site
evaluations conducted in April 2010 through May 2010 shows the
following:
Student Survey Results
----------------------------------------------------------------------------------------------------------------
Total Number Percentage Percentage
Survey question respondents Yes Number No Yes No
----------------------------------------------------------------------------------------------------------------
Were all entrance requirements explained to you 6,091 5,817 274 95.5 4.5
before you enrolled?................................
Were all costs that you are required to pay to attend 6,070 5,668 402 93.4 6.6
this school explained to you?.......................
Did you receive a copy of the school catalog before 6,073 5,539 534 91.2 8.8
you enrolled?.......................................
Did you receive a signed copy of the enrollment 6,067 5,962 105 98.3 1.7
agreement?..........................................
Did a school representative accurately provide you 6,057 5,456 601 90.1 9.9
with all necessary facts and details about the
school?.............................................
Did the school explain your loan payment 5,893 5,518 375 93.6 6.4
responsibilities?...................................
Are you clear about the size of your loan and what 5,890 5,060 830 85.9 14.1
your repayment plan will be?........................
Did the financial aid representative appear 5,927 5,289 638 89.2 10.8
knowledgeable and helpful?..........................
Do you feel good about your decision to attend this 5,920 5,413 507 91.4 8.6
school?.............................................
----------------------------------------------------------------------------------------------------------------
While the results of the surveys do not show 100 percent student
satisfaction, they certainly show a very high rate of student
satisfaction in areas related to the admissions and financial aid
processes of their institutions--a rate high enough to support a
conclusion that the problems that do exist are not widespread amongst
our accredited institutions.
With regard to enforcement, ACCSC has a number of programmatic and
institutional actions at its disposal to ensure compliance with its
standards and rules. As stated previously, when non-compliance with a
standard is found, the institution has an opportunity to demonstrate
corrective action and that the institution has achieved compliance. If
the Commission determines that an institution has not fully or
sufficiently made such a showing, the Commission can defer final
action, direct a school to show cause why accreditation should not be
revoked, place an institution on probation, direct a school to cease
enrollment in a program, or take an adverse action such as
accreditation revocation. Which action the Commission takes will often
depend on the severity of noncompliance or the amount of time that has
transpired where the school over time has failed to demonstrate
compliance. In at least one instance, ACCSC denied a school's
application for initial accreditation solely on grounds that the
institution did not meet the Commission's advertising standards. To
reiterate an important point regarding accountability, all accreditors
should have rigorous standards in the areas of recruitment and
advertising practices and enforce those standards, regardless of the
types of institutions accredited, insofar as all students must be
protected from inappropriate recruiting practices or misleading
advertising.
Between accreditation cycles, ACCSC relies on both its interim
monitoring process and its robust complaint process to monitor
potential violations of recruitment, advertising, and admissions
standards. With regard to interim monitoring, the Commission can direct
an institution to submit reports to demonstrate on-going compliance
over time. This function is used when a school has demonstrated
corrective action, but the Commission wishes to monitor the
institution's implementation of that corrective action and compliance
with applicable accrediting standards over time. ACCSC also requires
its institutions to submit a report annually of all programmatic
graduation rates and employment rates and will place an institution
into a monitoring phase should any reported rate of graduation or
employment fall below the Commission's benchmarks.
With regard to ACCSC's complaint process, if a student believes
that he/she has, for example, been misled in the recruitment or
admissions process, that student can forward a complaint to the
Commission for investigation. Pursuant to Federal regulations and in
keeping with best practices, ACCSC reviews every complaint received and
investigates those that raise a reasonable doubt as to an institution's
compliance with accrediting standards. The Commission believes that
this is a crucial component of its interim monitoring and therefore
requires every institution to publish in its catalog the ACCSC Student
Complaint/Grievance Procedure that provides students with detailed
information regarding how to file a complaint with the Commission.
In the prior 2 years, ACCSC has received 411 complaints from
students, parents, school employees, other accredited institutions, and
members of the public.\2\ Of those 411 complaints, 50--12 percent--
included at least one allegation regarding recruitment, advertising, or
admissions practices. Generally, these complaints allege issues such as
the use of misleading advertisements or that school personnel made
statements that the complainant believed to be inaccurate. Again, this
statistic indicates that while problems associated with recruitment,
advertising, and admissions practices exist and are troubling, the
instances do not appear to be widespread among our schools. This
notwithstanding, ACCSC takes all complaints seriously and in instances
where a complaint investigation has uncovered an area of noncompliance,
the Commission has required the institutions to demonstrate corrective
action necessary to achieve compliance. ACCSC has had instances where
an investigation predicated on a complaint ultimately led to a Show
Cause Order, Probation Order, or the revocation of an institution's
accreditation (although, not always for the same reasons set forth in
the original complaint).
---------------------------------------------------------------------------
\2\ Total enrollment in ACCSC-accredited institutions was 257,954
as of June 30, 2009.
---------------------------------------------------------------------------
Connection to Student Achievement
ACCSC believes that the evaluation of recruitment, advertising, and
admissions practices is linked to our evaluation of student learning
and outcomes at institutions. ACCSC therefore tightly aligns its
student achievement standards to institutional operations and input
standards. ACCSC views its graduation rate and employment rate
benchmarks as tools to identify issues, such as inappropriate
recruitment, advertising, or admissions practices, and to develop
institutional improvement objectives as a means to enhance
institutional and student success. In the area of student learning and
achievement outcomes, ACCSC requires that:
Student learning outcomes for each program are consistent
with the program objectives and meet any relevant academic,
occupational, or regulatory requirements;
Student learning outcomes for each program are aligned
with the program's objectives, the occupational area of study, and with
the level of education intended (e.g., non-degree, degree, degree
level);
Student learning outcomes for each program reflect the
necessary occupational and academic knowledge, skills, and competencies
as applicable;
The school has a developed and structured process to
assess and evaluate the defined student learning outcomes;
The school must demonstrate successful student achievement
by documenting through its assessment practices that students are
acquiring the knowledge, skills, and competencies intended by the
program objectives; and
The school must demonstrate successful student achievement
by maintaining acceptable rates of student graduation and employment in
the career field for which the school provided education.\3\
---------------------------------------------------------------------------
\3\ Appendix II includes further detail of ACCSC's student learning
and achievement outcomes standards.
If students are lured to an institution and induced or encouraged
to enroll when those students may not be a good fit in relation to
program objectives, then that institution will likely have difficulty
demonstrating competency achievement by its students and acceptable
rates of graduation and employment. These are the types of assessment
that are key and I have seen, anecdotally, where an institution's
graduation rates decreased in direct correlation to more aggressive
marketing schemes. In such instances, ACCSC has required an institution
to make a showing of corrective action in a manner that positively
affected student achievement outcomes.
Overall, I am proud of the Commission's diligence in enforcing its
recruitment, advertising, and admissions standards and while I believe
that the unacceptable and abhorrent activities presented for this
hearing are not in evidence for an entire sector of the higher
education community, I am aware that more vigilance among all
accrediting agencies, with regard to all institutions is necessary. To
that end, ACCSC will continue to assess its standards in these areas
and look for opportunities to strengthen its accreditation practices.
It is also important that the oversight of all accreditors through the
NACIQI process creates a level playing field and holds all accreditors
accountable to establish and enforce rigorous and effective standards
in the areas of recruitment, advertising, and admissions practices.
conclusion
ACCSC believes that its standards represent exemplary practices in
the areas of student recruitment, advertising, admission practices, and
student achievement outcomes measures for the kinds of institutions it
accredits. ACCSC also believes that accreditation has a significant
role to play in institutional assessments regarding recruiting,
advertising, and admissions practices and believes that all
accreditors, regardless of the type of institution accredited, should
establish and enforce similar rigorous standards in these areas.
ACCSC's standards work because they have been developed in a peer
review environment--an environment of for-profit institutions that are
committed to best practices and institutional and student success.
Accreditors can and should continue to be relied upon to establish
these standards in conjunction with their institutions keeping in mind
the best interest of students. Thus, Federal law and regulation should
also continue its historical reliance on professional accreditors to
make the appropriate assessments of its accredited institutions.
Accreditors, however, also must be committed to enforcing
accountability measures with their institutions and also must uphold
their role in the triad to ensure that students are always a paramount
consideration of our actions.
______
Appendix I
accsc recruiting, advertising, and admissions standards
Schools must describe themselves to prospective students fully and
accurately and must follow practices that permit prospective students
to make informed and considered enrollment decisions without undue
pressure. The school's recruitment efforts must attract students who
are qualified and likely to complete and benefit from the training
provided by the school and not simply obtain enrollments.
A. Recruitment
Schools must observe ethical practices and procedures in the
recruitment of its students. Ethical practices and procedures include,
at a minimum, the following:
1. A school shall use only its employees to conduct student
recruiting activities, except outside the United States, its
territories, or its possessions, where a school may use third-party
agents for recruiting.
2. Schools under common ownership may employ a single recruiter.
3. A school is prohibited from using employment agencies to recruit
prospective students.
4. A school is responsible to its students and prospective students
for the actions and representations of its recruiters and, therefore,
selects recruiters with the utmost care and provides adequate training
and proper supervision.
5. Each school complies with applicable State laws and regulations
on student recruitment.
6. A school that authorizes its recruiters to advertise, to prepare
advertising, or to use promotional materials must approve the materials
in advance and accepts full responsibility for the materials used.
7. A school shall ensure that its recruiters do not make false or
misleading statements about the school, its personnel, its training,
its services, or its accredited status.
8. A school shall not permit its recruiters or other school
personnel to recruit prospective students in or near welfare offices,
unemployment lines, food stamp centers, homeless shelters, or other
circumstances or settings where such persons cannot reasonably be
expected to make informed and considered enrollment decisions. Schools
may, however, recruit and enroll prospective students at one-stop
centers operated under government auspices, provided that all other
recruitment and admissions requirements are met.
9. A school may not make explicit or implicit promises of
employment to prospective students.
10. A school shall not permit the payment of cash or other
consideration to any student or prospective student as an inducement to
enroll.
11. A school shall not permit its recruiters to assist prospective
students in completing application forms for financial aid.
12. A school shall not permit its recruiters to become involved in
admission testing or admission decisions.
13. The school must be clearly identified in all contacts with
prospective students.
14. Cancellation Policies:
(a) Applicants who have not visited the school prior to enrollment
will have the opportunity to withdraw without penalty within 3 business
days following either the regularly scheduled orientation procedures or
following a tour of the school facilities and inspection of equipment
where training and services are provided.
(b) All monies paid by an applicant must be refunded if requested
within 3 days after signing an enrollment agreement and making an
initial payment. An applicant requesting cancellation more than 3 days
after signing an enrollment agreement and making an initial payment,
but prior to entering the school, is entitled to a refund of all monies
paid minus a registration fee of 15 percent of the contract price of
the program, but in no event may the school retain more than $150.
15. A school must provide the applicant with a receipt for any
money collected.
16. A school must provide the applicant with a copy of the
completed enrollment agreement.
17. When engaged in recruiting activities, a recruiter is not
permitted to use any title, such as ``counselor,'' ``advisor,'' or
``registrar,'' or credential that implies other duties.
18. School personnel do not discredit other schools by: falsely
imputing to them dishonorable conduct, inability to perform contracts,
or questionable credit standing; making other false representations;
falsely disparaging the character, nature, quality, value, or scope of
their program of instruction or services; or demeaning their students.
19. School personnel do not knowingly influence any student to
leave another school or encourage a person to change plans after
signing an enrollment application and paying the registration fee of
another school.
B. Catalog
1. A school's catalog must accurately portray the school; its
educational programs, resources and facilities; and policies and
procedures and include, at a minimum, all items listed on the Catalog
Checklist. (See also Section I (D)(6), Substantive Standards, Standards
of Accreditation.)
2. A school's catalog must be designed and written, to convey an
accurate and dignified impression of the school. The catalog's
illustrations, photos, and narrative must pertain directly to the
school and sources of illustrations and photos must be clearly
identified.
3. A school must provide each applicant with a current and complete
catalog prior to signing the enrollment agreement so that each
potential student may make an informed decision relative to the
school's educational programs, institutional policies, and procedures.
A school may provide either a printed and bound copy of the catalog or
a read-only format electronic copy that cannot be altered (e.g.,
portable document format (PDF), etc.). In either case, all versions of
the catalog must be identical and students that receive an electronic
copy of the catalog must also be able to receive a printed and bound
copy of the catalog upon request.
C. Enrollment Agreement
1.The enrollment agreement must include, at a minimum, all required
items listed on the Enrollment Agreement Checklist. (See also Section I
(D)(6), Substantive Standards, Standards of Accreditation.)
2. The enrollment agreement must clearly state the obligations of
both the student and school.
3. The school must ensure that each applicant is fully informed of
the rights, responsibilities, and obligations of both the student and
the school under the enrollment agreement before it is signed by the
applicant.
4. A complete enrollment agreement is furnished to the applicant at
the time the applicant signs.
5. No enrollment agreement is binding until it has been signed by
the student and accepted by the appropriate school official. A copy of
the fully signed enrollment agreement is furnished to the student.
D. Advertising and Promotion
1. All advertising and promotional materials are truthful and
accurate and avoid leaving any false, misleading, or exaggerated
impressions with respect to the school, its location, its name, its
personnel, its training, its services, and its accredited status.
2. A school may use the term ``University'' in its name only when
such use has been approved by the Commission and appropriate State
authorities.
3. The school's advertising and promotional materials must clearly
indicate that education, and not employment, is being offered. No overt
or implied claim or guarantee of individual employment is made at any
time.
4. A school may not use the Employment or Help Wanted classifieds
for any form of student recruitment.
5. Endorsements used in school catalogs, literature or advertising
are used only with the written consent of the authors and are kept on
file and subject to inspection. Such endorsements are used only when
they are a bona fide expression of the author's opinions and are
strictly factual and portray currently correct conditions or facts.
Under no circumstances may currently enrolled students provide
endorsements on behalf of the school.
6. School literature and advertisements may not quote salaries for
an occupation unless they also accurately indicate the normal range or
starting salaries in the occupation for which training is provided and
include the source of this information.
7. Scholarships are not used as a recruiting device.
8. A school may use the term ``accredited'' only if it indicates by
what agency or organization it is accredited. Publication of
accreditation must comply with the Advertising of Accredited Status
form.
9. Advertising of financial aid includes an eligibility phrase
(e.g., financial aid available for those who qualify).
10. A school may describe in its catalog, advertise, or promote new
programs, substantive changes, or degree programs only after receiving
Commission approval.
admission policies and practices
Schools may only admit those students who are capable of
successfully completing the training offered. Admission decisions must
be based on fair, effective, and consistently applied criteria that
enable the school to make an informed judgment as to an applicant's
ability to achieve the program's objectives.
A. General Requirements
1. The school must inform, prior to admission, each applicant for
enrollment of the program's admission requirements, process, and
procedures; the nature of the training and education provided; and the
program's responsibilities and demands.
2. The school must:
(a) Consistently and fairly apply its admission requirements;
(b) Determine that applicants admitted meet such requirements and
are capable of benefiting from the training offered;
(c) Determine that applicants rejected did not meet such
requirements;
(d) Ensure that each applicant admitted has the proper
qualifications to complete the training; and
(e) Secure documentation to demonstrate that each applicant meets
all admission requirements.
3. Documentation must exist, covering the last 5 years, that
demonstrates that admission requirements have been met or explains the
basis for any denial of admission.
4. The school determines that each applicant has no disabilities,
physical or otherwise, that would prevent use of the knowledge or skill
gained from the training offered for successful on-the-job performance
after completion of the training.
5. No school denies admission or discriminates against students
enrolled at the school on the basis of race, creed, color, sex, age,
disability, or national origin. Schools must reasonably accommodate
applicants and students with disabilities to the extent required by
applicable law.
6. Schools may not accept any enrollment from a person of
compulsory school age or a person attending a school at the secondary
level, unless it has established through contact with properly
responsible parties that pursuit of the training will not be
detrimental to the student's regular school work.
7. The Commission, at its discretion, may require a school to
conduct a study to document the effectiveness of its admission
requirements for all students.
B. Non-Degree Programs
If the school enrolls a person who does not possess a high school
diploma or recognized equivalency certificate (non-degree programs
only):
1. The determination of the applicant's ability to benefit from the
training offered must be confirmed by documentation of the applicant's
achievement of an approved score on a test or tests that have been
reviewed by a qualified, independent third party for appropriateness of
the instrument and specific score levels required for admission.
2. The acceptable score ensures that students will benefit from the
training provided and that a substantial number of students will
complete the training and be employed in the field for which training
was provided.
C. Degree Programs--Undergraduate
The school must use appropriate techniques to assess whether
applicants have the skills and competencies to benefit from the
training provided at the undergraduate level. Students admitted to
associate or baccalaureate degree programs must have earned at least a
high school diploma or recognized equivalency certificate prior to
starting class.
D. Degree Programs--Graduate
1. The school must use appropriate techniques to assess whether
applicants have the skills and competencies to benefit from the
training provided at the graduate level. A student admitted to a
master's degree program must possess an earned baccalaureate degree
from a recognized higher-education institution (e.g., accredited by an
agency recognized by the U.S. Department of Education or the
equivalent). All admission criteria, to include evidence of an earned
baccalaureate degree, must be met prior to matriculation.
2. For graduate level courses or master's degree programs,
standardized or national examinations may be required (e.g., GRE or
GMAT). The school may utilize other entrance tests that have been
reviewed by a qualified, independent third party for appropriateness of
the instrument and specific score levels required for admission. In any
case, the school must disclose the type and nature of examination and
the acceptable score and/or range of scores applicants must receive to
be admitted.
E. ESL Programs
1. Students enrolled in ESL programs must meet all other admission
requirements applicable to students enrolled in the school's career or
occupational programs, which may be established through testing in the
student's native language. During the enrollment process, adequate
translation resources must be available to assist students in their
comprehension of the process and all program requirements.
2. The school must demonstrate that, with appropriate teaching, the
students enrolled in front-loaded and integrated ESL programs can
qualify for specialized training or continue their occupational
education.
3. The school must demonstrate that students enrolled in stand-
alone ESL programs possess job skills, as evidenced by documentation of
credentials or test scores, and that proficiency in English is needed
by the student in order to obtain employment in the field for which
trained. The school must also document that students enrolling in a
stand-alone program have previously obtained occupational licensure or
document that the students possess educational experience that is
sufficient to obtain a job in the field for which trained.
Appendix II
accsc student learning and achievement standards
Student learning outcomes for each program are consistent with the
program objectives defined by the institution's program design and
development process and meet any relevant academic, occupational, or
regulatory requirements (Section VII (A)(1)(a), Substantive Standards,
Standards of Accreditation).
Student learning outcomes for each program are aligned with the
program's objectives, the occupational area of study, and with the
level of education intended (e.g., non-degree, degree, degree level)
(Section VII (A)(1)(b), Substantive Standards, Standards of
Accreditation).
Student learning outcomes for each program reflect the necessary
occupational and academic knowledge, skills, and competencies as
applicable (Section VII (A)(1)(c), Substantive Standards, Standards of
Accreditation).
The school has a developed and structured process to assess and
evaluate the defined student learning outcomes of the education and
training and established competencies (e.g., the application of
knowledge and skills to the standard of performance articulated in the
program objectives and as expected in the workplace). This process may
include a variety and combination of methods such as grading, portfolio
assessment, and criterion referenced testing based on developed and
appropriate rubrics (Section VII (A)(2)(a), Substantive Standards,
Standards of Accreditation).
The school demonstrates successful student achievement by
documenting through its assessment practices that students are
acquiring the knowledge, skills, and competencies intended by the
program objectives (Section VII (B)(1)(a), Substantive Standards,
Standards of Accreditation).
The school demonstrates successful student achievement by
maintaining acceptable rates of student graduation and employment in
the career field for which the school provided education. The school
supports these rates through student transcripts, the school's
verifiable records of initial employment of its graduates, or other
verifiable documentation (Section VII (B)(1)(b), Substantive Standards,
Standards of Accreditation).
accsc student achievement benchmarks
Established Benchmark Graduation Rates
----------------------------------------------------------------------------------------------------------------
Average rates of
graduation Established
demonstrates Standard benchmark
Program length in months acceptable deviation graduation rates
student [In percent] * [In percent]
achievement [In
percent]
----------------------------------------------------------------------------------------------------------------
1-3......................................................... 92 8 84
4-6......................................................... 82 13 69
7-9......................................................... 69 14 55
10-12....................................................... 69 15 54
13-15....................................................... 61 16 45
16-18....................................................... 59 17 42
19-24....................................................... 56 20 36
25-35....................................................... 55 22 33
36+......................................................... 47 15 32
----------------------------------------------------------------------------------------------------------------
* If a school reports a lower graduation rate for a program, that program will be subject to additional
monitoring or reporting as deemed appropriate.
Established Benchmark Employment Rate
----------------------------------------------------------------------------------------------------------------
Average rate of
employment Established
demonstrates Standard benchmark
acceptable student deviation [In employment rate*
achievement [In percent] [In percent]
percent]
----------------------------------------------------------------------------------------------------------------
All Programs........................................... 82 12 70
----------------------------------------------------------------------------------------------------------------
*If a school reports a lower employment rate for a program, that program will be subject to additional
monitoring or reporting as deemed appropriate.
The Chairman. Thank you very much, Dr. McComis. Now Mr.
Pruyn, welcome. Please proceed.
STATEMENT OF JOSHUA PRUYN, FORMER ADMISSIONS REPRESENTATIVE,
ALTA COLLEGE, INC., DENVER, CO
Mr. Pruyn. Thank you for inviting me today and for
conducting hearings on this issue. My name is Joshua Pruyn. I'm
a former admissions representative for, as Senator Mikulski
might have referred, a bounty hunter for Westwood College.
Westwood is a for-profit school with 17 campuses around the
country, an online division, which is where I worked. I applied
to be an admissions representative at Westwood, because of my
experience with my college hockey team.
As captain of the team, I would talk with prospective
students about the team and the university. I got satisfaction
on the experience and thought I'd feel the same about my role
as an admissions representative when I accepted the position at
Westwood in November 2007.
It didn't take long before I realized my new job was
essentially a sales job. During training, admissions
representatives learned sales techniques, a seven step sales
process in the cookie close. We were given a script that told
us to tell potential students that they can go and get accepted
into Westwood by interviewing with and securing a
recommendation from an admissions representative.
In reality, there's no recommendation process and no
standard for enrollment into Westwood. The interview process,
which is the psychological game to enroll students.
I finished the training, feeling ill prepared in my
knowledge about the programs, the classes, the instructors, and
the support systems the school offered.
After my initial training, the real training on the boiler
room sales floor began. Prospective students are referred to as
leads. I remember talking to one student shortly after he
requested information. When I called him the very next day, he
said he was put off by the whole experience because he received
34 voice messages from various online schools attempting to
recruit him, which doesn't stop just after 1 day.
In the location where I worked, there are well over 100
admissions representatives divided into about 10 teams. The
directors keep the teams in constant competition for prizes
with one another. Every time a team signed up a student, they'd
set off their signature sound effect, bang a drum, ring a bell,
or blow a whistle. An email was also sent out to the entire
admissions department to announce their latest enrollment. All
of this was designed to keep the energy high and the phones
dialing.
In addition to the hyped up atmosphere, representatives
were also kept motivated by the promise of rewards. Each
representative had a quota of two students to enroll per week.
An enrollment was nothing more than a completed and
electronically signed application. Individual enrollments could
be paid time off or gift cards. In a successful year, the top
representatives, an all expenses paid trip to Cancun.
Most importantly, each term, representatives needed to
return at least six of their enrollments into starts. A start
consisted of a student who completed all of their financial aid
requirements and attended classes for the first 14 days.
Fourteen was the magic number. I was told after 14 days,
Westwood could keep the student's Federal financial aid money,
even if the student dropped out.
It was this start number that determined salary and
promotions. It was all about the numbers. With high numbers,
the most successful representatives could earn about three
times their starting salary.
The emphasis on starts was brought home for me when I
enrolled a student named Jeffrey. In Jeffrey's 13th day of
school, he was called up from the Army Reserves into active
duty. He called me to tell me he withdrew from college. I spoke
to him and determined he was unable to attend school. I told my
director and she was furious. On her orders, I spoke to Jeffrey
again and reached the same conclusion.
My assistant director and then my director both called
Jeffrey and was pushing him to stay enrolled. She wasn't
willing to lose this start, despite the fact that it was
clearly in Jeffrey's best interest to withdraw before he was on
the hook for his student loans.
I was disgusted by such a flagrant disregard for the
student, especially someone who's called on to serve in the
military. Deception was built into the admissions department.
To avoid reviewing the full $75,000 price tag for the online
bachelors degree, some representatives would simply lie about
the total cost. I overheard representatives say the final cost
of education at Westwood was less than half the actual price.
More often, representatives would tell the students the per
term cost of approximately $4,800. And the student incorrectly
assumed there were two or three terms per year, like most
traditional colleges. There was actually five terms per year.
I constantly overheard representatives promise that Federal
grants would cover almost the entire cost of education and even
make up or cite misleading salary information.
To my knowledge, none of these lies were ever discouraged.
And at times, they were even encouraged. The most appalling
example I can think of was when my assistant director of
admissions on my team was presented with a best liar award at a
team celebration. In training, we were told that from the
student's perspective, there's no significant difference
between national and regional accreditation. I started
investigating and discovered there's actually a big difference.
Not only was there a higher standard of education for
regionally accredited schools, but there's also a huge issue
with transferring credits. Yet for months, I'd worked under the
impression that there wasn't much difference between national
and regional accreditation at all.
One last example where students were often misled had to do
with Westwood's internal loans program, which we called Student
Supplemental Financing, which is basically a private loan from
a college that we were told not to call a loan.
We were told to tell students if their financial aid didn't
cover all the costs, Westwood would step in to help.
Representatives told students all they'd have to do to cover
the balance was pay a maximum of $150 a month while they're in
school.
Probably when I began enrolling more students, a financial
aid advisor eventually told me more about that loan. I was told
that monthly payments hardly put a dent in the amount a student
owed, and that the students would have to pay 12 percent on
what they owed after graduation.
I had no plan to quit Westwood as I drove to work on what
became my last day. Sitting at my phone, I just finally
accepted that I could no longer tell myself it was possible to
work for Westwood and consider myself to be working within any
degree of ethical standard.
When I left, I had no expectation or reasonable prospect
for finding another job quickly. I didn't really think about
that. I just thought about how naive I'd been, hoping to help
students make a better future for themselves through college.
Instead, I left fearing the students I enrolled would end
up with a mountain of debt, and little or nothing to show for
it.
Thank you.
[The prepared statement of Mr. Pruyn follows:]
Prepared Statement of Joshua Pruyn
Thank you for inviting me today and for conducting hearings on this
issue.
My name is Joshua Pruyn. I'm a former admissions representative of
Westwood College. Westwood is a for-profit school with 17 campuses
around the country and an online division, which is the division I
worked for. The parent company for Westwood College Online is Alta
Colleges, Inc.
I applied for the admissions representative position at Westwood
because of my experience with my college hockey team. As captain of the
team, I would periodically speak with prospective students about the
team and the university. I got satisfaction out of this experience, and
I anticipated that I would feel the same in my role as an admissions
representative when I accepted the position at Westwood in November
2007.
I remember the training for the position. It was essentially
training for a sales job. We learned sales techniques such as ``the
seven-step sales process'' and ``the cookie close.'' We were told how
enrolling a student was a psychological game. We were given a script
that told us to tell potential students they could only be accepted
into Westwood by interviewing with and securing a recommendation from
an admissions representative. In reality, that was not true. There was
no recommendation process and absolutely no standard for enrollment
into Westwood. A student only needed a high school diploma or GED and
$100 for the application fee. During the interview, we were taught to
portray ourselves as advisors looking out for the students' best
interests and ensuring they were a good fit for the school. This fake
interview would allow the representative to ask students questions to
uncover a student's motivators and pain points--their hopes, fears, and
insecurities--all of which would later be used to pressure a student to
enroll. For example, if a lead told you they wanted to go to school
because they hated their minimum wage job as a cashier, we were taught
how to remind the lead of the dead-end job if he or she later declined
to enroll.
I remember finishing the training feeling ill-prepared in my
knowledge about the programs, the classes, the instructors, and the
support systems the school offered. I did, however, learn a lot about
sales tactics.
After the official training, my real training on the boiler-room
sales floor began. Prospective students were referred to as ``leads.''
Leads came mostly from the Internet. Sometimes the student wouldn't
even know their information was sent to Westwood. They may have just
registered with a job Web site or contest that automatically sold their
information. The lead's phone number and other personal information
would immediately appear on our desk. We were urged to rush and call
the students immediately, because quite a few other schools would get
the same information and were also trying to call them right away. I
remember talking to one student for more than an hour shortly after he
requested information. When I called him the next day, he said he was
put off by the whole experience because he received 34 voice messages
from various online schools attempting to recruit him. This doesn't
stop after just 1 day. We'd continue to call leads several times a day
for 2 weeks.
In the location where I worked there were well over 100 admissions
representatives divided into about 10 teams. Each team had a name, like
``the drivers'' or ``sopranos.'' Teams consisted of 10-15 reps and were
supervised by a director of admissions and one or two assistant
directors. The directors kept the teams in constant competition with
one another. At any given time, multiple contests for gift-cards, paid
time-off and other incentives were offered in order to motivate
representatives to enroll as many students as possible. Every time a
team signed up a student, they would set off their signature sound
effect--bang a drum, ring a bell, or blow a whistle. An email was sent
out to the entire admissions department to announce our latest
enrollment--all of this was designed to keep the energy high and the
phones dialing.
I remember one email in particular (which has been provided to
you). It was sent out after a sales representative signed up his second
student of the day. A picture showed gangsters hanging out a car window
with assault weapons. The comment read, ``Everyone Hit the
DECK!!!!!!!!!!!!! A Drive BY JUST Occurred!'' As that email
illustrates, many recruiters looked at students as just another target
to nail to help meet their quotas. And that attitude was not isolated.
It was part of the corporate culture. I was taken aback by the general
disdain for prospective students. They were often characterized and
described among admissions staff as stupid, lazy, and generally unaware
of what was in their own best interest.
In addition to the hyped-up atmosphere, representatives were also
kept motivated by the promise of rewards. Each representative had a
quota of two students to enroll per week. An ``enrollment'' was nothing
more than a completed and electronically-signed application. Individual
enrollments could mean paid time-off or gift cards, and when I was
there, a successful year earned the top representatives an all-
expenses-paid trip to Cancun. Most importantly, each term
representatives needed to turn at least six of those enrollments into
``starts.'' A start consisted of a student who completed all of their
financial aid requirements and attended classes for 2 weeks. I was told
that after 2 weeks Westwood could keep the student's Federal financial
aid money, even if the student dropped out. It was the start that
determined most rewards including salary and promotions. It was all
about the numbers. With high numbers, the most successful
representatives could earn about three times their starting salary.
But rewards were not the end of the story. If a representative was
not meeting their numbers, supervisors would apply constant pressure.
If you fell behind in your enrollments or start quotas you'd be
expected to make at least 150 calls a day if you didn't want to be
harassed and threatened by your supervisor. If my supervisor's
monitoring system showed me slowing down on calls for a few minutes,
I'd receive an email with a computer screen shot showing my inactivity.
When I struggled to enroll students, I received more and more direct
coaching. I was told to replicate how various representatives talked
about financial aid or generated excitement for a program. The
representatives I was told to emulate would exaggerate expected salary
data, present misleading tuition information, and fabricate the
credentials of faculty members. Of course, at the same time I was being
constantly reminded that my job was on the line if I didn't hit the
quotas, whether through hints, blunt statements, or the sudden absence
of a co-worker.
Not surprisingly, this type of environment led to abuse. To avoid
revealing the full $75,000 price tag for a bachelor's degree, some
representatives would simply lie about the total cost. I overheard
representatives say the final cost of the education at Westwood was
less than half the actual price. More commonly, representatives would
tell students the per term cost of approximately $4,800 and let the
student incorrectly assume there were two or three terms per year, like
most traditional colleges. There were actually five terms each year. I
also overheard representatives promise that Federal grants would cover
almost their entire education. They'd make up or cite misleading salary
information, leading potential students to believe that they could
leave Westwood Online with a job that pays over $100,000 and at their
choice of employer. There simply were no boundaries. The most troubling
part about the job was that, to my knowledge, none of these lies were
ever discouraged. I worked on two different teams and under three
different directors of admissions. Our supervisors recorded every call
and listened to many of them, but not once did I witness any supervisor
step in to discourage any of the lies or deceptive statements. In fact,
lying was often implicitly or explicitly encouraged. The most appalling
example was when the assistant director of admissions on my team was
presented with a ``Best Liar'' award at a team celebration.
For months, I was able to convince myself that I wasn't like my
supervisors, or any one of the majority of representatives who lied and
deceived prospective students and mastered the art of pushing on pain
points and emotional triggers to pressure students into attending
school, regardless of what was in their best interest. But, eventually,
all the coaching I received started working, and I began enrolling more
students. I was becoming a better salesman. I was taken off probation.
My job was now safe, because, as my supervisor put it, I was
``fulfilling my potential.'' And I continued to convince myself I could
work this job ethically.
Sadly, when I started to see how students were treated after
enrollment, I became even more disillusioned with the company I worked
for. I learned that the lies don't stop at enrollment. The next
important thing was to make sure that students didn't drop out--at
least during the first 14 days of classes. Fourteen was the magic
number. After a student attended for 14 days, the school was allowed to
keep any financial aid it received as a result of enrolling that
student. I remember one particular student I enrolled named Jeffrey. He
was in the Army Reserves. On Jeffrey's 13th day of school, he was
called up from the Army Reserves to active duty to serve as a drill
sergeant, so he called in to withdraw from school. I spoke to him and
determined he was completely unable to attend and succeed in school. I
told my director, and she was furious. She ordered me to call him back.
I spoke to Jeffrey again for more than an hour and reached the same
conclusion. My director then had my assistant director call Jeffrey
and, not surprisingly, he reached the same conclusion: Jeffrey was
simply unable to go to school with his schedule. But my director still
wasn't satisfied. She called him and tried to pressure him for yet
another hour. I remember her saying she might even have my executive
director call. Jeffrey was just 1 day away from the deadline, and she
wasn't willing to lose the ``start'' regardless of the fact that it was
clearly in his best interest to withdraw before he was on the hook for
his Federal loans. I was disgusted by such a flagrant disregard for the
student and a member of the military.
The more I learned about the school's programs and operations, the
more it became clear that it wasn't just a few rogue representatives
under pressure lying to students. It was institutional, systematic and
often hidden from the representatives themselves, who often didn't
realize the information they shared with students was not true. Three
examples in particular stand out in my memory.
In training we were told that, from the student's perspective,
there was no significant difference between national and regional
accreditation. When Westwood announced they had applied for regional
accreditation, I started investigating and discovered there was a big
difference. Not only was there a higher standard of education for
regionally accredited schools, but there was also the huge issue of
transferring credits. Since Westwood was not regionally accredited,
most traditional schools would not accept the school's credits or allow
students to pursue an advanced degree. This meant that most Westwood
students would not be able to transfer their credits to other colleges.
Yet, for months I worked under the impression there wasn't much
difference between regional and national accreditation.
A second falsehood that started in training was the fictitious but
impressive sounding credentials of Westwood College's gaming programs.
They were the school's most popular programs, the easiest to get
students excited about, and the ``most prestigious.'' Representatives
often referred to Westwood as the ``Harvard'' of gaming schools.
Virtually every representative, encouraged by supervisors and
reinforced by training, would tell students about the endorsements the
gaming programs received from respected companies in the industry, the
sterling credentials of the faculty, and the promising prospects for a
graduate with a gaming degree from Westwood. But as I found out, the
endorsements did not exist. The credentials were fabricated, and the
prospects were dim for graduates. When I spoke with the career center,
which was supposed to help students with job placement, I learned they
only had a small staff of two or three, compared to the 200-plus
admissions representatives. It didn't seem like the school was equipped
to provide the incredible career assistance we had been promising
students. Even more disturbing, I was told the two gaming programs had
only been around for about 3 years. And in fact, we didn't have any
graduates working for the major gaming companies at all. In reality, we
only had three students total who had graduated from our gaming
programs. I found out that of the three graduates, one had an interview
with a gaming company, one was unemployed and the other was working as
a truck driver.
One last example where students were often misled had to do with
Westwood's internal loan program, which we called ``student
supplemental financing.'' It was basically a private loan from the
college that we were told not to call a loan. We were told to tell
students that if their financial aid didn't cover all their costs,
Westwood would step in to ``help.'' Representatives told students all
they would have to do to cover the balance was pay $150 a month while
they were in school. However, when I began enrolling more students, a
financial aid advisor eventually told me more about the loan. I learned
that the monthly payments hardly put a dent in the amount a student
owed. It was only a couple of weeks before I left Westwood when I
learned students would have to pay an oppressively high interest rate
of 12 percent on what they owed after graduation.
I began to realize that many of the things I accepted and told
people on the phone about Westwood were based on falsehoods. I had
graduated magna cum laude from my college, and yet I proved to be
embarrassingly naive, foolish and trusting about the school. I started
wondering how a student was supposed to navigate through these tricky
waters. How could they be expected to know they were being misled?
I quit my job at Westwood on a Monday morning. I had no plan to
quit as I drove to work that day. But I came across a quote by Hannah
Arendt that I had slipped under my keyboard months earlier while
thinking of one of my supervisors--someone who I thought was a fairly
likeable guy but didn't seem to have any sense of morality. As I read
that quote about how evil isn't conducted by people who are perverted
or sadistic, but by people who are terrifyingly normal, I started
admitting things to myself that I'd been avoiding for almost 6 months.
I accepted that I could no longer tell myself that it was possible to
work for Westwood and consider myself to be working within any degree
of ethical standards. That Monday morning, I walked out of the building
and never returned.
When I left I had no expectation or reasonable prospect for finding
another job quickly. I didn't really think about that. I just thought
about how naive I was when I applied for the job--hoping to help
students make a better future for themselves through college. Instead,
I left fearing the students I enrolled would end up with a mountain of
debt and little or nothing to show for it.
Attachments--Westwood Online Admissions Department Emails
Attachment 1
Attachment 2
Attachment 3
Attachment 4
The Chairman. Thank you, Mr. Pruyn. Senator Enzi has to
leave to go to the White House. I'm going to yield to him first
for questions.
Senator Enzi. Thank you, Mr. Chairman. I appreciate that.
And I'd also ask permission to put a series of charts of
information that we gathered on schools and dropout rates in
the record.
The Chairman. OK. Do we have them?
Senator Enzi. I don't think so. I just got this, so.
The Chairman. They're without----
Senator Enzi. Yes. I'll begin with Mr. Hawkins. What
disciplinary actions would the National Association of College
Admission Counseling take if one of its members was found to be
engaging in a type of behavior revealed by the GAO
investigation?
Mr. Hawkins. Typically, our enforcement is that we could,
if our internal admission practices committee found that there
was a violation, could censure the member who was in violation.
If it was a violation of our ethical principles, could censure
them and prohibit them from participating in certain programs,
pending a change in the practices or if they deemed it
appropriate according to our bylaws, could expel the
institution from membership.
Senator Enzi. OK. Now the GAO investigation shows
admissions representatives refusing to allow perspective
students the opportunity to speak with the financial aid
office, how does that differ from admission counseling
practices at public and nonprofit schools? Are there legitimate
reasons why a school would not provide access to financial aid
offices to the students who've either applied, neither applied
nor enrolled?
Mr. Hawkins. I can't think of a reason why an admission
officer at a not-for-profit college would not let a prospective
student talk to someone in the financial aid office. If no one
was in the financial aid office that day would be one thing,
but our standard practice for our institutions is to allow
students to ask the kinds of questions that they feel they need
about financial aid. And many admission officers are prepared
to answer those questions. And if they can't, again, standard
practice is to walk them over to the financial aid office.
Senator Enzi. OK, thank you. What role do the incentive
compensation safe harbors play in encouraging the behavior
revealed in that GAO investigation? How will the department's
proposed elimination of the safe harbors impact recruiting
practices at for-profit schools?
Mr. Hawkins. The safe harbors carved out a number of
exceptions to the original incentive compensation ban. And in
our association's opinion, each one of those safe harbors
chipped away at the law's ability to be enforced. So the first
safe harbor is the one I think is probably the most to blame
here. And that is that they poked a little hole in the statute
by saying you couldn't base the salary solely on the number of
students enrolled.
So if you put some minimal evaluatory criteria out for 10
percent of the--or whatever percent you want to call it--of the
admission officer's salary, you could base the other 90 percent
on whether they enrolled the student or not. That is
essentially commission sales. And that is what Congress sought
to outlaw in 1992.
To answer the second question, I feel like the department's
proposed rule that would eliminate the safe harbors would
really put the teeth back into that statute, and in our
opinion, would go a long way toward providing enforceability.
And a number of you have mentioned enforceability and how the
department can do that. I think this puts the teeth back into
it. And combined with greater oversight, it would really
tighten things up.
Senator Enzi. Thank you. Mr. McComis, what role do a
school's recruiting practices have in the accreditation
process? Is there any?
Mr. McComis. Senator, as I outlined in my written and oral
testimony, we have several standards that address recruiting,
advertising, and admissions practices.
The goal of those standards is to ensure that the
activities that are engaged in by institutions lead to fully
informed students, who are able to make enrollment decisions
without any pressure, and that they are fully informed before
they choose to do so. And it's something that we look at very
closely.
Senator Enzi. What actions would the ACCSC take if one of
the schools it accredited was found to be engaging in the
behavior that was revealed in the videos that we saw in that
GAO investigation?
Mr. McComis. Clearly, based upon the information that was
presented there, I'm confident that our board would go into a
full investigatory process to try and find out from the
institution what were the specific instances and occurrences
that went with that. And there are a range of actions that the
commission can take with regard to findings. And they range
with the severity of the actions. So some of the issues that
were presented in the GAO report are certainly more severe than
others, particularly with regard to fraud. And the commission
has actions ranging from sanctions on programs, up to
revocation of accreditation.
Senator Enzi. Thank you. And Mr. Chairman, I thank you for
letting me go first so that I can make it to the White House. I
appreciate it. I yield.
The Chairman. Thanks, Senator Enzi. Mr. Hawkins, in your
testimony--both written, which I read last night and perused
again this morning, but also in your verbal presentation--I
made note of the fact that you said that there's enough
evidence to suggest that compensating admissions officers based
on the number of students enrolled is standard practice. First
of all, why do you think that? And what's wrong with that?
What's wrong with paying people an incentive for enrolling low-
income students?
Mr. Hawkins. Mr. Chairman, to answer your first question,
since the safe harbors have been passed, we've been collecting
stories that are readily available in news accounts, State,
Federal regulatory actions, and in lawsuits that have proceeded
through the courts. We have in our written testimony 10 pages
of bullet summaries of this kind of evidence. Combined with
what we saw from the GAO today, there's no doubt in my mind
that because of the safe harbors, and because of what we see in
front of us, there is a preponderance of evidence, in fact,
that this practice is pervasive, that it's not one or two rogue
people here and there, that this is in fact industry practice.
And of course, the question that I ask is how much more
evidence do we need? How many more students are going to have
to go through this for us to take some action? So all of that
leads me to believe that this is a standard practice.
To answer your second question, we feel strongly that
whenever you reduce the basis for compensation for admission
officers to a simple commission, you are effectively boiling
the students interests out of the equation. Our principles for
practice suggest that there is a significant need for
counseling. When it comes to low-
income students, that need for counseling has never been
greater. And that when you do not provide that counseling, the
students are starting off at a disadvantage. And worse yet,
when you give them misinformation, you are really, really
stacking the deck against them.
So we feel very strongly that admission officers should not
be compensated based on the commission.
The Chairman. Thank you very much, Mr. Hawkins. Mr. Pruyn,
a couple of preliminary questions. I understand there is a
lawsuit by Westwood students being handled by a Florida law
firm. Are you personally suing Westwood or seeking money from
the school?
Mr. Pruyn. I'm not, no. After I left Westwood, I had
obvious ethical concerns about them and reached out to a friend
of mine, who's a freelance journalist. And during the course of
his research, had uncovered a law firm that was investigating
the school. And through him, they had contacted me, but I'm not
suing Westwood, and nor do I have plans to.
The Chairman. If you left Westwood 2 years ago, why are you
willing to take the time off of work and from your life to come
and tell us about your experiences?
Mr. Pruyn. I would say that it's a minor inconvenience to
try to help inform people about what goes on there. I mean,
it's so egregious. And personally--I graduated from my
undergraduate college with a lot of student debt. So I have a
firsthand experience with that. And I guess it makes me a
little bit more acute to what it can actually do to a student
who graduates with significant student debt. And so, I think
it's obviously something that needs to be addressed.
The Chairman. Mr. Pruyn, we hear a lot of rhetoric about
bad recruiting practices being asked of rogue recruiters, the
sort of bad apples. Did you ever hear other recruiters say
misleading or inappropriate things? And what was the
disciplinary policy? Was there any reprimand or discipline for
an employee who lied to a student on the phone?
Mr. Pruyn. I never once witnessed anybody be reprimanded or
disciplined at all. And supervisors monitored a lot of calls.
Everyone was recorded. And you'd match up with your supervisor
at least once or twice a week to go over calls and so forth.
And we've also, I mean, it's very much in the open. I
remember one person in particular who in my mind was probably
the most rogue of anybody, who'd just stand up, and who's very
loud, and would just spout off whatever came into his head.
He'd tell students they could make over $100,000 at their
choice of a video game company after they graduated.
And he would do this and everybody would hear him. But as
far as I know, he's never been disciplined, because he never
stopped.
The Chairman. Again, I'm reading some of the feedback from
some of the for-profit schools and their representatives, who
are saying that basically we have 200,000 people that work in
this industry. Of course there's going to be a few out there
that do these bad things. So it gets to the issue of, is this
coming from the employees or is this something that's coming
from the top down? What do you think? Is it just a few bad
managers out there? Or is this something higher up coming down
through the system itself?
Mr. Pruyn. There's certainly a range of ethics among
admissions representatives. There's certainly ones that try to
do a good job and are ethical. And there's certainly ones that
don't seem to care.
I worked for at least 4 months when--and I had been trained
by multiple directors, multiple assistant directors--in my
initial training, about how wonderful our gaming program was.
I was told about how we had all these wonderful graduates
that went to these different major gaming companies, and these
wonderful salaries they're making. And I believe the number was
about 85 percent of the students that graduated from the
program had a job there and in a video game company.
I assumed these things were true, because they're being
taught to me during training and reinforced through coaching
for several months. And then one day, I decided to get more
specific information. So I went to the career center. And I
talked to the woman that ran this little career center with
about two or three people. And she told me that, in fact, one
of our two gaming programs didn't have a single student that
had graduated from it. And the other had three. One of them was
a truck driver, one of them was unemployed, and the other did
have an interview with a gaming company.
And so, for several months, I was lying to students,
telling them that our program was very successful. We used to
say it was the Harvard of gaming schools. And, in the end, it
was--there was nothing behind it. And that's something that
every representative is taught and every representative says.
And that's not rogue representatives. That's institutional.
The Chairman. Thank you very much, Mr. Pruyn. I will come
back to this during our second round.
Senator Alexander.
Statement of Senator Alexander
Senator Alexander. Thanks, Mr. Chairman and thank you for
the hearing. Mr. Hawkins, as I understand your testimony, if
the things that you saw that the GAO presented were brought to
you about a specific institution, you said that that might
result in anything from censure to expulsion, is that correct?
Mr. Hawkins. Yes, sir.
Senator Alexander. Dr. McComis, you've got a fairly
rigorous set of recruiting, advertising, and admissions
standards for your commission. Did I understand you to say that
if the information that the GAO discovered was brought to your
attention, that that might result in a investigation of that
institution, which could lead to a variety of things, including
a withdrawal of accreditation?
Mr. McComis. That is correct, Senator.
Senator Alexander. Mr. Hawkins, you recommend as Secretary
Duncan does, reinstating the safe harbor or removing the safe
harbor exception to the reform that was made in 1992. I was
Education Secretary in 1992 when that was done. What happened
between 1992 and 2002? Did it pretty well dry up the practice
of incentive compensation?
Mr. Hawkins. My experience in admission policy at that time
is limited. I was not at the association during that time, but
my understanding of the issue, and I'm sure the Department of
Education would be able to give a better answer, my
understanding is that practice did in fact improve, and that
the number of actions that the department had to take went down
fairly substantially.
Senator Alexander. But it would take us back to the
position of there can't be incentive compensation. That would
be the rule, right?
Mr. Hawkins. That's correct.
Senator Alexander. That's your recommendation?
Mr. Hawkins. Exactly, yes, sir.
Senator Alexander. Dr. McComis, you accredit institutions,
more than 800? What percent of the for-profit institutions of
the country does your organization accredit?
Mr. McComis. I don't have that percentage precisely.
Senator Alexander. Most of them or?
Mr. McComis. I would say, well we accredit 800. So whatever
the total population of that is.
Senator Alexander. Well, there are 3,000. You know the
number, don't you?
Mr. McComis. About a third or so.
Senator Alexander. Yes. And what percent of the students
attend those institutions?
Mr. McComis. Our census count is about 250,000 as of June
2009.
Senator Alexander. For all for-profit institutions or just
the ones you accredit?
Mr. McComis. Just for our accredited institutions.
Senator Alexander. Yes. So generally speaking, for-profit
institutions are a large number of institutions--about 3,000 of
the postsecondary institutions we have in the country, but a
relatively small part of the students, about 9 or 10 percent of
all the students in postsecondary education in the United
States are in for-profit institutions? And is it correct that
most of them are low-income or they're predominantly low-
income, minority students and somewhat older than other
postsecondary students?
Mr. McComis. Our demographic data that we collect would
support that.
Senator Alexander. Is it your impression, Dr. McComis, that
the problem here is a lack of rules or a lack of enforcement of
the rules?
Mr. McComis. Most likely it's a lack of enforcement, but it
could be a combination of both. I don't know the accreditation
standards for every agency. I know that many agencies like my
own have very rigorous standards, particularly those that have
a predominance of for-profit institutions within their
membership. But it's likely a combination of both of those.
Senator Alexander. Are there other accreditation agencies
other than yours that accredit for-profit institutions?
Mr. McComis. Yes.
Senator Alexander. How many others?
Mr. McComis. Six others at the national level. And then,
each one of the regional accreditors also have some population
of for-profit institutions.
Senator Alexander. But the way I read your standards,
they're pretty tough about recruitment. And if any of the
things that we're talking about were done, a school where they
violate it, the school could have a tough time keeping its
accreditation?
Mr. McComis. That is correct, Senator.
Senator Alexander. Yes. Mr. Chairman, if I could get your
attention just for a moment. I'm going through the
accreditation. I found something out, when I was Education
Secretary 20 years ago, in that the Education Secretary
accredits the accreditors basically. In other words, Dr.
McComis was saying there are six or seven accrediting
institutions that are for-profit institutions. And there are
3,000 for-profit institutions you might choose among. And here,
standards looks to me like they are pretty tough.
So, one avenue for dealing with the problem you've
outlined, Mr. Hawkins has suggested one. Go back to the 1992
ban on incentive compensation. But another one is to go to work
on the accrediting agencies a little bit. Secretary Duncan may
very well choose to do so, and say we're going to rely more on
you. I think you almost invited that in your comments. You said
you'd be willing to work with us if the committee and the
Congress is worried about this, that we could work with the
accrediting agencies, tighten up the rules and prove
investigations have more enforcement. Is that correct?
Mr. McComis. Yes, Senator.
Senator Alexander. My time is up, Mr. Chairman, but as I
think about this in this light, We've got 6,000 higher
education institutions in the country. Together, they're the
best system in the world. I mean, we altogether. That's one of
the things the United States does well. I think one reason is
because they're autonomous. People have a choice of those
institutions. They can go to a national auto diesel college, or
they can go to Harvard, or they can go to University of Iowa,
or wherever they choose to go. And the money follows them.
Now whenever that happens, though, you're going to have
some problems. And we've seen some today. So I think as almost
every Senator has said, we want to make sure when we do
something about this, that we separate those who are doing the
job of helping achieve the President's goal of increasing the
college graduation rate. And we don't shoot quail with a
cannon, in other words, and miss the quail and hit some
innocent people.
Or to use another analogy, if you have somebody singing out
of tune on the Grand Ole Opry, you don't cancel the Opry. You
cancel the act. So in looking for a way to cancel the act, I'm
thinking that working with the accreditors is a very promising
opportunity, because we really rely on them to make sure that
the institutions are right. And if they're looking at things
like graduation rates, student loan default rates, job
placement rates, even passage into professional exams, and if
they're enforcing the recruitment efforts, and we also go back
to the 1992 rule on compensation incentive that Secretary
Duncan has recommended, that those would be two steps that
could make a big difference in achieving the goal that I think
you set out for the hearing. Thank you for your attention and
for your time.
The Chairman. Thank you, Senator.
Senator Franken.
Senator Franken. Thank you Mr. Chairman. Mr. McComis, in
your testimony you say that your agency has established
``rigorous standards'' to ensure the schools you accredit
``recruit and admit only those students who are accurately and
fully informed about the institution's programs and who are
qualified and capable of completing the program in which they
intend to enroll.''
Yet three of the schools found to be engaging in deceptive
recruitment in the GAO report are accredited by your agency.
And also Westwood is accredited by your agency. There seems to
be a discrepancy here.
What are these rigorous standards that you use to ensure
that schools that you accredit, recruit and admit only students
who are accurately and fully informed about the institutions?
Mr. McComis. Senator, as I provided in the written
testimony, the list of standards that you have there are the
actual standards that we require of our institutions--that they
only engage in ethical practices and ensure that they do not
make misstatements to students.
They require that institutions only engage in ethical
practices and ensure that they do not make misstatements to
students. That they do not make guarantees. That they ensure
that students are provided with sufficient information such
that they understand the program requirements.
Senator Franken. I don't think you're quite answering my
question. You say that you have rigorous standards to ensure
that the schools you accredit, recruit and admit only those
students who are accurately and fully informed. I understand
that the fact that they have to be accurately and fully
informed is one of your standards.
I'm asking you what your rigorous standards are to ensure
that the schools you accredit, recruit and admit only those
students who are accurately and fully informed about the
institutions when we've seen that three of the schools that you
have accredited were involved in giving false information and
inaccurate information to prospective students who were not
fully informed about the institutions, or the institution.
Mr. McComis. So the processes that we use then for that
assurrance process is one whereby through a very high touch
accreditation onsite evaluation requirements that we have
within our institutions. Annual reporting of student
achievement outcomes, robust complaint processes, robust
interaction in the triad are all methods that we use to find
out whether or not any of those rigorous standards have been
violated.
Senator Franken. And why do you believe--how do you explain
the discrepancy then? That these three schools, that you
accredited, were misleading to the GAO prospective students
that came in? In other words, rigorous means rigorous. And yet,
to me, this doesn't seem like there was much rigor in your
process.
Mr. McComis. So certainly I think it's fair to say that our
agency is, I guess to quote Senator Mikulski, a bit crabby
about this. That we would find institutions that are engaged in
activities that might look like clear violations of our
standards. And the important part of that process now is that
we investigate that fully and that we sanction the institutions
appropriately.
Senator Franken. Do you think perhaps that maybe your
rigorous standards aren't rigorous enough?
Mr. McComis. I don't think that's the case Senator. I think
that the standards themselves are----
Senator Franken. OK, to me there is a real discrepancy
here. Because you describe saying in your testimony, the
rigorous standards to ensure that the schools accredit only
those schools that recruit and admit students who are
accurately and fully informed. And yet, we see that the 3
schools that you accredited in this group of 15 didn't do that.
So what I'm saying to you is, I think that your rigorous
standards aren't rigorous enough. But you think they are. And I
don't know how you think they are. Doesn't this industry--what
bothers me--I know my time is up, but let me ask one last
question. Doesn't this industry have any interest in self-
policing itself?
Mr. McComis. I believe that it does Senator and I think
that accreditation----
Senator Franken. Is there any evidence that you can provide
me, that your industry has any interest in self-policing
itself?
Mr. McComis. The best evidence that I can provide to you is
my 16 years of experience in working in the accreditation
industry, particularly with for-profit institutions and seeing
rigorous self-
policing through that process.
Senator Franken. And yet, what clearly was not rigorous you
described as rigorous.
You said that you have rigorous standards to ensure that
schools you accredit, recruit and admit only those students who
are accurately and fully informed about the institution's
programs. And we saw that the three schools that you accredit
misled the people that came in there.
I asked you about that, and you said that you were
satisfied with the rigor of your standards. That just seems to
be, on its face, clearly wrong. And I'm sitting here--I have a
responsibility to the taxpayer, OK? I have a responsibility to
the taxpayer.
And I'm supposed to take solace from you from your
experience in this business when you're the one that just told
me that what was clearly not rigorous is rigorous enough?
Explain to me why I should believe you?
Mr. McComis. I believe that the standards themselves are
rigorous. In these particular instances, the schools'
compliance with those standards certainly fell short.
Senator Franken. You don't understand what the standards
are. You are saying you have rigorous standards to ensure that
the schools you accredit recruit honestly. I'm not talking
about the standards you have that they do recruit honestly.
It's your standard to ensure that they recruit honestly. That's
the standard I'm asking you about. And you said you were
satisfied with the rigor on that. I don't know how you can be.
Mr. McComis. Yes, as I indicated in the conclusion of my
oral statement. You know certainly our Commission and hopefully
other accreditors will certainly look at this and find whether
or not there can be greater vigilance put forth. I agree with
that.
Senator Franken. Thank you. I'm sorry to go over.
The Chairman. Thanks Senator Franken.
Senator Bennet.
Senator Bennet. Thank you Mr. Chairman. Mr. Pruyn I want to
start with you by first saying thank you for coming all this
way from Colorado for this testimony and for your courage in
speaking out. I wanted to ask you a question that has been
asked of other panel members. Which you talked about the effect
of the training on your pitch and so forth.
I wondered whether you'd share with the committee your view
about whether the incentive structure, the way you were paid
and others were paid, contributed or didn't contribute to the
pitches that were made. Would changing the incentive structure
have made a difference do you think? What are your thoughts on
that?
Mr. Pruyn. It would help to a degree for sure. But, there's
a lot that goes in to why the culture is there. Certainly the
incentives motivate some people. But as they're dangling a
carrot with one hand they have the axe in the other. I mean for
quite a while I wasn't enrolling many students at all.
And, I was on probation and threatened with my job on a
regular basis. So there's that piece. A lot of it is just lies
that are withheld from the representatives themselves. You know
there were programs at Westwood that were not--while the school
was accredited, the program itself wasn't accredited.
One example is our paralegal program. I didn't know that
for months of working there. I could give examples like that
where I found something out close to the time I quit, all day.
And that, that sort of information isn't provided to the
representative. So changing the way a representative is
compensated I don't think will have any effect on that, on that
portion of the problem.
Senator Bennet. Just to go back to the incentive for a
second. When you said it would help, it might help a bit.
Mr. Pruyn. Yes.
Senator Bennet. Why would it help? And if you really don't
think it would help to change it, to tell me that too. I want
to hear your honest thought about it.
Mr. Pruyn. It would help, but I don't think it would fix
the problem.
Senator Bennet. OK.
Mr. Pruyn. I think it would help because some of the
representatives that are more--rogue, I guess you could say,
are really motivated by that piece. And so I think it would
help rein in some of the more egregious claims. But I still
think the fundamental problem is still going to be there.
Senator Bennet. Thank you. Thanks again for being here. Dr.
McComis, do you think, just to pick up on where Mr. Pruyn took
my question, which was--rather than the direction I was headed
which is always a good thing because you learn things. To what
extent can some of the issues that he's raising be solved
through better public disclosure of these issues that we're
confronting?
For example, the idea that they'd have programs, his
testimony would suggest, that were not accredited even though
the school is accredited. Is that sort of information publicly
available and widely available?
Mr. McComis. The differences between programmatic and
institutional accreditation----
Senator Bennet. As an example.
Dr. McComis [continuing]. As an example?
Senator Bennet. I mean of the kind of information that
anybody would want to know before they even picked up the phone
to call Westwood and say, ``you know, I'm thinking about your
program.''
Mr. McComis. It would likely take a little bit of digging
by a consumer or prospective student to get to that. I don't
know that I would say that it's necessarily readily available.
Senator Bennet. Would you say that it's as readily
available as the equivalent information for public
institutions?
Mr. McComis. Yes. In either instance it's--in this
particular case, what you're referring to, is to what degree
does the institution itself decide to disclose that
information.
So if I wanted to know about whether or not a gaming
program or some other kind of program was programmatically
accredited, the institution's lack of disclosure has to lead
the student to assume that it's not accredited.
What we're mainly focused on is when the school does use
claims of accreditation that they accurately describe that
status and the agency by which its institution or program is
accredited.
Senator Bennet. I think I'd make the opposite assumption
probably, as a student. That if the school were accredited that
that meant that the programs were accredited. But it doesn't
matter. The question is, it seems to me it's in everybody's
interests, the students, the schools, the taxpayers certainly,
that people have access to this kind of information.
It just feels to me, in these hearings, as though it's not
out there in a way that makes sense to people. And it would
have, I would think, based on what Mr. Pruyn and others have
said, have the effect of making it harder to do the kind of
stuff we were watching on the television earlier.
One last question Mr. Chairman, thank you so much. I just
wanted for you, Doctor, to describe--just to come back to
something that Senator Franken was talking about. Can you tell
the committee a little bit what the onsite part of your
accreditation process looks like? What does it look like when
you're on the ground at a Westwood or any of the other schools
that you accredit?
Mr. McComis. The process begins through the attendance at
an accreditation workshop whereby then the applicant to agency
or institution submits a self-evaluation report. Which is
essentially our standards of accreditation in a question
format. Then the institution will need to go through and answer
those questions and provide documentation and description about
how they comply with those standards.
The role of the onsite evaluation team is to go through and
evaluate the information that's provided in that self-study, do
some sampling and some testing to ensure its veracity to the
extent that they're able to. The team is comprised of subject
matter specialists for each one of the program areas, education
specialists and management specialists for that kind of
institution.
The self-evaluation report is the key document that they
use in going through that process as well as reviews and
interviews, onsite. A report is then generated from that. We'll
list any findings of noncompliance and the institution will
have an opportunity to respond to that. All that information
then goes in front of our Board and they make a final decision
relative to the application.
Senator Bennet. How long--Mr. Chairman, thank you. Can you
give me a sense, I've seen this in the K-12 context, not in a
higher education context, the length of time that that onsite
visit takes place generally?
Mr. McComis. Generally the average enrollment in our school
is under 300 students. So we can typically do an onsite
evaluation in about 2 days.
Senator Bennet. OK. And then just by order of magnitude in
terms of the process of gathering the accreditation information
that you have and then responding to the institution saying,
we've detected the following problems before you take it to
recommend it to the Board.
Can you just give us a sense, by order of magnitude of how
often you actually do go back and say, we've got this list of
issues that have concerned us and then you're not satisfied by
the response that comes back from the institution and therefore
you can't recommend the accreditation?
Mr. McComis. Well we've taken 12 adverse actions in the
last 2 years against institutions. But that's the most extreme.
So if an institution goes through and submits a response to a
team report that has findings on noncompliance, they'll have an
opportunity to respond to that.
The Board could take a variety of actions. They could defer
final action on that and try to get more information. They
could place the school into a probation phase, again, through
investigation.
Senator Bennet. How many have been put on probation over
the last 2 years?
Mr. McComis. Oh I think we, on average, have somewhere
between 6 and 10 institutions on probation at any time.
Senator Bennet. And this is out of a total of how many?
Mr. McComis. Eight-hundred institutions.
Senator Bennet. And how often are they reviewed?
Mr. McComis. The maximum accreditation cycle is 5 years.
It's 3 years maximum for schools that are receiving their first
grant----
Senator Bennet. I'll stop you, but the 12 and the 6, if you
look at--well let's stick with the 12. The 12 that lost their
accreditation over the last 2 years, that's out of how many
accrediting examinations that you did over that period of time?
Because it's not 800, right?
Mr. McComis. No, we don't do 800 a year.
Senator Bennet. Right.
Mr. McComis. So we would probably do somewhere in the
neighborhood of 125 renewal onsite evaluations. And
approximately another 150 or so of other kinds of evaluations
for substantive change or unannounced or other investigations.
Senator Bennet. I'd like to thank the panel and thank you
Mr. Chairman for letting me go over.
The Chairman. All right Senator Bennet. Dr. McComis, let me
follow-up on that a little bit. When you do these onsite
evaluations, as you said to Senator Bennet, and you take action
on 6 to 10 over the last couple of years or something like
that--was the figure I heard. Six to ten?
Mr. McComis. No, he asked me how many were on probation.
The Chairman. Yes. And then you said on others that you
take action against them. And let's just take the probation.
That's not the entire school, that's just the site, is it not?
In other words, if you went to a location for the
University of Phoenix and you found an offense and you put them
on probation, you don't put the whole University of Phoenix on
probation, you just do that one site? Is that correct?
Mr. McComis. That is correct.
The Chairman. OK, so it's the location. So whatever you put
them on probation for might be going on someplace else but you
just put that site on probation.
Mr. McComis. We have instances, however Senator, where we
have put entire systems on probation.
The Chairman. And you'll provide that to this committee?
Mr. McComis. Yes sir.
The Chairman. I'd appreciate that. Now Mr. Hawkins, I heard
Dr. McComis say something that caught my attention on a
question I believe that was asked by Senator Franken. That the
same information is provided to prospective for-profit students
and other college students.
Is that what you said Dr. McComis? I think Senator Franken
asked you, he said do you feel that the same kind of
information is provided to prospective for-profit students as
other college students. And I believe your answer was, yes.
Mr. McComis. I thought that what the Senator was asking me
was regarding disclosures relative to accreditation status in
programmatic versus institutional. Regardless of the
institution you go to it depends on what that institution
chooses to disclose and how they choose to disclose it.
There's no requirement in our standards that you have to
disclose programmatic accreditation. Although, I can't imagine
why you wouldn't as long as you did it truthfully and
accurately.
The Chairman. Mr. Hawkins, what happens when a student
wants to go to a private or nonprofit college, one of the ones
that you are involved in and they ask for that kind of
information about finances and accreditation and all that. What
does the school say? Do they say you have to sign up first?
Mr. Hawkins. No, that information is supposed to made
readily available. Particularly about financial aid and the
cost. Admission officers from the very junior admission
officers, that we call our ``road warriors''--they go to high
school and visit students, all the way up to the Dean and VP of
enrollment--are pretty well versed in all the types of
information that a student and their family might ask for.
So that information is generally readily available. And as
I said earlier, if they have questions that the admission
office can't answer, standard practice again is to forward
those types of questions to the people on campus who might be
able to answer them, such as the financial aid office.
The Chairman. So Dr. McComis, I see a clear delineation
here between what the for-profit schools are doing and the
schools that Mr. Hawkins covers in terms of how they answer
student inquiries into finances, accreditation, and all other
information. It seems to me a lot different.
They seem to have a set of standards that they follow. And
what I hear from you is, well each school kind of does it
differently.
Mr. McComis. Senator I was only referring to whether or not
they choose to disclose accreditation status or not. With
regard to all of the other instances that you've laid out,
certainly it is our expectation that students are fully
informed of all obligations prior to signing any kind of
enrollment agreement.
And that would include tuition, fees, all of the policies,
the program objectives, the opportunities that the program
leads to. Everything that we require to be disclosed to
students through the catalogue and through the enrollment
agreement.
The Chairman. We had in our last hearing, a young woman who
had gone to a for-profit school, spent a lot of money, went
quite a bit into debt. She was told it was accredited but when
she graduated she couldn't find a job because the for-profit
school was accredited but the program that she was in was not,
and she was not told that. And so a student goes to a school,
they call up and say ``are you accredited'', and they say,
``sure''. But they don't give them all the information.
Mr. McComis. You know in that particular case Senator I
think that if there needed to be disclosure about the need to
graduate from a programmatically accredited program in order to
obtain employment, that institution had an obligation to inform
the student as such.
The Chairman. Well they had an obligation, but they didn't
do it. Dr. McComis again, your written testimony focuses
extensively on your use of student outcomes to judge school
quality.
According to calculations by my staff, you accredit more
than 41 institutions with 3-year cohort default rates of 30
percent or higher. That means that at 41 schools, where you
evaluate quality, more than 3 in 10 students default within 3
years of leaving school.
That includes ATI Technical Training Institute of Dallas,
where the default rate was 49.5 percent. I have a whole list of
them here. At Lincoln Technical Institute of Philadelphia, 42.2
percent defaulted within 3 years. And yet these are accredited
by you. So what does that say about the quality of these
schools?
Mr. McComis. We certainly have standards relative to
student loan repayment. And we don't just apply those standards
in terms of Federal financial Aid. Our standards apply to any
kind of loan repayment obligations that students receive,
should receive a fair amount of counseling that goes along with
that to ensure the repayment of those loans.
We also monitor student loan defaults at our institutions
and place them into monetary mechanisms if they reach certain
thresholds. We don't necessarily look at default rates,
themselves, as a direct indicator of the quality of education
that's provided by that institution.
The Chairman. So you don't look at default rates as an
indication of the quality of the education? Is that right? Is
that what you just said?
Mr. McComis. That is correct. We use other metrics such as
graduation rates, employment rates, where applicable passing
exams for State--for certification, other indices of student
learning.
The Chairman. So student default rates, let me get this
straight, just don't factor into your accreditation process?
Mr. McComis. I didn't say that Senator.
The Chairman. What did you say?
Mr. McComis. I said that we have standards that deal with
student loan repayment, but we don't use it as a primary
indicator of quality of education.
The Chairman. Well is it a secondary or a tertiary
indicator?
Mr. McComis. We have standards that deal with it. And we
look at whether or not institutions are fulfilling their
obligations to assist students and providing them with
information about their loan repayment obligations.
The Chairman. So this doesn't seem to bother you and your
association that you have 41 schools here that have default
rates of over 30 percent in the first 3 years? Would that
require you to look at these schools or maybe go out and do
some more evaluations? Or do you just sort of look at that and
say, ``Well that's what they say it is?''
Mr. McComis. Those rates would certainly put them into a
monitoring mechanism.
The Chairman. Are you monitoring these schools? Are you
monitoring ATI Technical Training Institute of Dallas?
Mr. McComis. I don't think that those rates are the
official rates that have been distributed as of yet.
The Chairman. I'm told by my staff that these rates came
from the Department of Education last fall.
Mr. McComis. The way that the rates----
The Chairman. But if they came out last fall, you've had
since last fall to look at them. Now I'm asking you, have you
taken any action or investigated or done something about these
41?
Mr. McComis. Those are based on, I believe, the 3-year
default rates.
The Chairman. Yes.
Mr. McComis. Now we're currently still using the 2-year
default mechanism for our monitoring.
The Chairman. So you only do 2-year?
Mr. McComis. Currently, because that's what the law has
been up to this point.
The Chairman. Yes, because it's going up to 30 percent as
you know.
Mr. McComis. Exactly, and so we've already looked at and
our Board has already begun to talk about, as the law changes
and the regulations change, we will change our monitoring
mechanisms to accommodate that.
The Chairman. So again, this doesn't say anything to you
about the educational quality of those schools?
Mr. McComis. In our data, we found no correlation
necessarily to indicate that it is a--default rates are
directly, statistically correlated to the quality of education.
We find there to be a much more substantial connection between
graduation rates and employment rates.
The Chairman. Dr. McComis, in your written testimony, again
you make note of the fact that you have standards on
recruitment, admission processes, and advertising. Again, I'm
interested in how you uphold those standards. The numbers that
you provide demonstrate that over the prior 2 years you
conducted 629 onsite evaluations.
And that was also in response to Senator Franken's
question, 629 onsite evaluations. You did not find any
``substantial noncompliance by our institutions.'' That's in
your written testimony. GAO randomly sampled three of your
institutions and had adverse findings at all of them.
How am I supposed to reconcile those two different
versions? You visit them, you say you didn't find any
substantial noncompliance. GAO randomly sampled three and had
adverse findings at all of them. How do I reconcile those two
facts?
Mr. McComis. The process that we use for onsite evaluation
I think is different from the way that the GAO has
investigated. I'm not sure that our standard process would find
substantially the kinds of fraud that the GAO has alleged has
occurred.
The onsite evaluation process through accreditation starts
from a vantage to work with those institutions to understand
their practices and for them to describe those practices and
give us an opportunity to see those occur. We don't secret shop
our institutions to see what they're recruitment practices are.
And so in the normal course of an onsite evaluation I'm not
sure that we would find those particular occurrences.
Now having said that, the findings that we do have,
particularly with respect to advertising and recruitment come
to us from a variety of sectors, as I've indicated. So we rely
not only upon what the school tells us but hopefully what we
find out from our member partners in the triad, States and
Federal Government, and also through student complaints.
And use that information quite rigorously to understand the
activities that occur at our institutions in those interim
periods between our onsite evaluations. As I believe all
accreditors should.
The Chairman. So Dr. McComis if your process, and I say
this by the way, as the Chairman of this committee I think it's
become I think apparent to me that we need a hearing on
accreditation and what that means.
But if your process doesn't detect readily apparent fraud,
who's protecting the students and the taxpayers? We rely upon
the accreditation people, that's what I thought. So if your
evaluations don't even uncover fraud, who can we go to to
protect the taxpayers and the students?
Mr. McComis. I think the Congress purposefully set up a
triad system because accreditation first and foremost, is a
system designed to evaluate quality of education, not to detect
fraud. There are other opportunities within the triad for that
to occur.
The Chairman. I beg your pardon, quality education has
nothing to do with fraud? It seems to me that fraud has a lot
to do with a quality education.
Mr. McComis. Senator, what I meant to say is----
The Chairman. Maybe I'm wrong.
Mr. McComis. The first and foremost goal of accreditation
is the evaluation of the educational quality at the
institution. Certainly if we find fraud within that process
we're going to act upon it.
The Chairman. But again, your onsite evaluations didn't
detect one. You said we had no substantial noncompliance. GAO
sampled three and found adverse findings at all three of them.
I'm still trying to understand.
Mr. McComis. We survey findings of noncompliance.
The Chairman. I'm getting the sense you don't do the kind
of investigations that GAO does.
Mr. McComis. That is correct.
The Chairman. You kind of go to the school and ask them
what they're doing and they tell you and you just say fine. It
seems like you accept the school's word on what they're doing.
Mr. McComis. We look at other evidence points as well to
support that information through, again student surveys. As
I've indicated, the surveys that we did just over the last 2
months indicated a very high rate of student satisfaction
within those processes. We rely heavily on that kind of
information that we receive.
The Chairman. Again I saw that. I read that in your
testimony last night when I was going through it on these
student surveys. But I didn't see how those students were
picked and whether or not those students also included students
who had dropped out. Or are these just students who
successfully completed the program?
Mr. McComis. They are students----
The Chairman. I need to know what the mix of those students
are.
Mr. McComis. Those are students that are currently enrolled
at the time of the onsite evaluation. They are conducted in-
person at the time that we are there.
The Chairman. OK. So no students that dropped out were
interviewed?
Mr. McComis. That is correct.
The Chairman. In your written testimony Dr. McComis, you
say that,
``accreditors must hold institutions accountable to
ensure that only the highest level of integrity is
injected into the student recruitment and admissions
process.
``Moreover, all higher education institutions and
their accreditors must understand the connection
between recruitment and admissions processes and
student achievement outcomes.''
Let me repeat that because it gets to what we were talking
about earlier.
You said that accreditors, that's you,
``must hold institutions accountable to ensure that
only the highest level of integrity is injected into
the student recruitment and admissions process.
Moreover, all higher education institutions and their
accreditors must understand the connection between
recruitment and admissions processes and student
achievement outcomes.''
That seems to me to have something to do with the quality
of the education about which you just spoke.
Can you explain how the practices observed by GAO in
schools you accredit are consistent with the highest level of
integrity in the student recruitment and admissions process?
How are they consistent with what you just said? Accreditors
must hold institutions accountable to ensure that only the
highest level of integrity is injected into the student
recruitment and admissions process. Well how can these
practices observed by GAO be consistent with the highest level
of integrity?
Mr. McComis. Clearly, the GAO report puts forth some
troubling practices. And I believe that those institutions need
to be investigated and held accountable. There are findings of
non-compliance with standards, non-compliance with law,
violation of regulation, those institutions must be held
accountable.
The Chairman. Dr. McComis, how many accrediting
institutions are there in the United States that accredit for-
profit schools? How many different accrediting agencies
accredit for-profit schools?
Mr. McComis. I believe there are 13.
The Chairman. Thirteen. Thirteen. And Mr. Hawkins, how many
accreditors are there for the private, the nonprofit and the
public schools?
Mr. Hawkins. That's a question I actually don't know the
answer to sir.
Mr. McComis. And Senator, just to make clear the issue
there of when I gave you the number 13, there are some that do
predominately for-profit and then the regional accreditors do
both not-for-profit and for-profit.
The Chairman. Six of the twelve companies that were visited
by GAO have some campuses accredited by the ACCSC. Three of
these companies were visited twice. Anthem College in
Springfield, PA, ATI Career Training Center in Dallas, Everest
College in Mesa and Dallas, Kaplan College, Riverside and
Pembroke Pines, West Tech College in Ontario, Westwood in
Dallas.
Seven other Westwood campuses are accredited by you.
Thirty-eight other Everest College Campuses are accredited by
you. Three other Anthem Colleges are accredited by you. Twenty-
seven Kaplan College campuses are accredited by ACCSC. So what
are you going to do about these?
Mr. McComis. Certainly as I've already expressed, we're
very interested in finding and gathering additional information
from that GAO report, looking at ways that we can begin an
investigation now that the disclosure of the institutions has
been brought forward. We will certainly be forwarding this
information to our Board to begin the processes that we have
for these kinds of complaint reviews.
I think it's important to know, and I'll go back, we have
in the past taken action that began at a single campus or a
number of campuses, and when we've seen that there seems to be
a systemic problem we have placed the entire system on
probation. I think largely if we were to find something similar
in these instances our Board would look to take a similar kind
of action.
The Chairman. How old is ACCSC? How old is your
institution? How long has it been in existence?
Mr. McComis. Since 1967 as an accrediting body recognized
by the Department.
The Chairman. Since 1967. How many people work for ACCSC?
Mr. McComis. I think currently we have 32 full-time
employees.
The Chairman. Thirty-two? There are 32 employees, you
accredit 629 schools, you do onsite evaluations. Do you
contract that out or something?
Mr. McComis. No Senator.
The Chairman. You do all of these evaluations with 32
employees?
Mr. McComis. And a cadre of volunteers as well.
The Chairman. Pardon?
Mr. McComis. A cadre of volunteers as well.
The Chairman. Volunteers?
Mr. McComis. Yes.
The Chairman. From where?
Mr. McComis. As with most accrediting bodies the volunteers
come from the education sector, they come from the employment
sector for subject matter specialist, and they come from other
accrediting institutions.
The Chairman. So you might get volunteers from the
institution that you are evaluating?
Mr. McComis. No Senator. You would never send anybody that
had any kind of conflict of interest with the institution that
you are evaluating.
The Chairman. So no volunteers would come from an
institution that you were evaluating?
Mr. McComis. No Senator.
The Chairman. They would come from someplace else?
Mr. McComis. Yes, and typically we try to bring them from
out of State so that there is no conflict with regard to
competition, try not to find volunteers that would have any
other kind of a conflict that might exist along those lines.
The Chairman. I think that we need to look into it more.
Now ACCSC, you receive your income how? How do you pay for what
you do? Where do you get your money?
Mr. McComis. The sustaining fees of our organization come
from the member institution and from user fees.
The Chairman. From where?
Mr. McComis. User fees. Those are fees that are paid to us
when an institution applies for a new program or a new branch
campus, there's a fee that's associated with that application.
The sustaining fees are based upon gross tuition revenue,
annually.
The Chairman. So the institutions you accredit pay for you
to do their accrediting?
Mr. McComis. That is correct.
The Chairman. I do think we need to look into that some
more. Mr. Pruyn, what did it cost to go to Westwood?
Mr. Pruyn. An Associates Degree was approximately $40,000,
a Bachelor was approximately $75,000 depending on the program.
The Chairman. What portion of the students that were paying
those higher amounts, say $75,000 were attending online?
Mr. Pruyn. All of the students that I helped enroll were
online students.
The Chairman. What were you trained to tell people about
the cost at Westwood? And how did the people you worked with
handle the cost issue?
Mr. Pruyn. Our official training would have us tell
students that the cost were, we would phrase it in terms of per
term. So we would say the cost per term is approximately $4,800
per term.
The problem with that is that often times the student will
automatically assume there's only two or three terms like a
traditional school, and there is in reality, five per year. And
so it can mislead the student on the total cost.
Representatives each had their own methods of explaining
the cost. And there was no--I've never seen--the method on
telling you is how we were initially trained. Once you get into
individual coaching and you're on the sales floor, that
deviates widely.
And when I struggled to enroll students, one of the things
I was told was that the way I explained the cost of the school
and financial aid wasn't very effective. Because I was saying
that the school costs $75,000 for a Bachelors Degree. I was
told to emulate other representatives who had various tricks or
would just straight up lie about the cost of the education.
The Chairman. What did you do if a student asked to speak
with someone in financial aid?
Mr. Pruyn. They were absolutely not allowed to speak with
someone in financial aid. What you saw in the video is pretty
much identical. Because that would come up fairly frequently
and our response was that, this is step one of the process, you
can't jump to step two.
We would absolutely not let them talk to someone in
financial aid. The reason I was given for that policy was that
we just simply can't overburden our financial aid staff. And
when that happens, what you saw in the video is basically them
pressuring the student into making that up front commitment
with the application fee and signing their enrollment
documents.
What we would have done is use information about that
student to use back at them. So you heard them say--I can't
remember what exactly that director of admissions said, but we
would say similar things like, ``well I thought you wanted to
make a change,'' I think is actually the phrase they use in the
video, and we would use that same terminology or that same
methodology to push a student to first sign their enrollment
documents before they had a discussion with financial aid.
The Chairman. Dr. McComis hearing this, I understand that
you accredit Westwood.
Mr. McComis. We do have some Westwood campuses that we
accredit, yes.
The Chairman. Do you accredit this one in Colorado?
Mr. McComis. We do.
They have chosen to leave my agency. They are currently
accredited though they're in a deferral status with us. They've
chosen to make an application with another agency.
The Chairman. But during the time that Mr. Pruyn was there,
you did accredit them?
Mr. McComis. We do--we still do accredit them.
The Chairman. You still do accredit them.
Mr. McComis. Yes.
The Chairman. I guess I'm still a little concerned that you
do onsite evaluations. This seemed to be pervasive at this
campus. I mean it wasn't just one person, it was everyone. And
you said, as I kept repeating, that in your written testimony
you said that, ``the highest level of integrity injected into
the student recruitment and admissions process.'' How could you
do onsite evaluations at Westwood when this was so pervasive
and not see it?
Mr. McComis. We had that campus operating under a Show
Cause Order. We were very concerned about the outcomes at that
institution. We placed them on Show Cause. They responded by
indicating that they were going to cease enrollment in six of
the eight programs that we had identified as being low
outcomes. I believe that the low outcomes were indicative of
the kinds of practices that are being discussed here.
After that action was taken, Westwood indicated to us that
they had chosen to make application to another agency. They
told us directly that it was because they were unable to meet
our standards particularly with regard to student achievement.
I think that's indicative of a problem throughout with regard
to accreditation shopping and the opportunity for that to
occur. And I would encourage the committee to look at this as a
particular issue.
I'd also like to just follow-up on the last point that you
had made with regard to membership dues. All accreditors
receive their sustaining fees, membership dues from their
accredited institutions. It is an opportunity for that self-
policing peer review evaluation process to ensue. It doesn't
matter whether you're a for-profit or not-for-profit.
The Chairman. Yes, I'm going to look into that. That seems
to me to be a situation that would be rife with a kind of a
conflict if I'm inspecting somebody and they're paying me to
inspect them and they can leave my organization and go
someplace else and take their money someplace else.
Mr. McComis. Well I think that accreditation shopping is
a--I mean there are very legitimate reasons why it happens,
particularly with regard to transfer of credit. Because, as
we've even talked about here today, that there are some
discriminatory practices with regard to transfer of credit.
The Chairman. I guess I still come back to the fact that
with all of this stuff going on at Westwood, you still accredit
them. Why didn't you just see this during an onsite evaluation
and say, ``we're taking your accreditation away.'' Bang, just
like that. Why can't you do that? You can't do that?
Mr. McComis. I don't know that we identified the specific
instances, nor did we have evidence of the specific instances
that were brought forward in this particular hearing. We
certainly have identified issues that have led us to have
concerns about their outcomes.
The Chairman. Well I'd be wondering why your onsite
evaluation didn't pick that up. Just like the other 41 that I
mentioned here that have a high cohort default rate.
Mr. Pruyn, again I just wanted to get back to one other
thing here. And that is, this idea that there are just a few
bad apples out there. I keep hearing that all the time, that
you have to separate the bad actors from the good.
I asked you a question earlier about whether this was just
at the managerial level at a site, or was it something higher
up that was filtering down through the organization. And the
reason why I focus on that is to help us determine whether or
not there is a systemic problem in the for-profit situation. Or
is it really just a few bad apples?
I'm going to show this chart right here because this just
came in to us yesterday from the largest for-profit school in
America. And we all know which one that is, University of
Phoenix. This is a copy of the instructions, I had it put on a
chart so people could see it, it came from the University of
Phoenix to their recruiters and their people that sign up
students.
``Creating urgency, getting them to apply now.
Remember students don't buy benefits, they buy to ease
or avoid pain. Finding and burrowing into that pain
moves the sale to a close. Also the close of the sale
is really just the beginning.''
That doesn't come from some employee. That comes from the
top, the University of Phoenix, the largest of the for-profit
colleges.
That's why I keep wondering about whether or not we are
talking about a few bad apples or are we talking about the
entire orchard being contaminated by a business model that
churns students, that provokes the kind of recruitment and
unethical conduct that we saw through the GAO because of the
need, both to increase profits, to answer to Wall Street and
expectations for earnings, and also the easy availability of
taxpayer money.
Now my generation, when I was a young man we had a lot of
for-profit schools. The 1950s, 1960s, 1970s, these schools
provided an avenue for kids who didn't want to go to a 4-year
college to get an engineering degree or a liberal arts degree,
but they wanted an occupation.
We had these schools that at that time, taught women to be
secretaries and stenographers and nurses assistants, and taught
men to be welders and truck drivers. That's sort of blended
now, but that was the idea, that not every student was suited
for a 4-year college general degree but they could do an
occupation.
And quite frankly a lot of these for-profit schools did a
good job in that area but also in the 1960s, 1970s, 1980s in
transitioning the workforce in America. A workforce that was
moving from one type of employment to another type.
These were older people, older workers, maybe their skill
set was no longer needed and they needed to learn a new skill
set. These for-profit schools provided that and helped us
transition from one economy to another. But that was then.
Today we see a different system and setup with these for-
profit schools. Because at that time we didn't have so may Pell
grants and guaranteed student loans. But there were instances,
starting in the 1980s of for-profit schools incentivizing
enrollments.
That led to the Nunn Commission. And Senator Nunn's
hearings that he held at that time led to the Higher Education
Act of 1992, in which it was absolutely forbidden to have
incentive payments for recruitment.
Well then less than 10 years later, an Administrative
Ruling, and Mr. Hawkins, you pointed this out in your
testimony. It wasn't legislation passed by Congress, an
Administration issued a ruling providing for 12 safe harbors.
Which as you said, and I wrote your statement down, you said
basically gutted what we had done in 1992 to close incentive
compensation.
I was interested to note in your testimony that the
Inspector General at that time did not concur with that action
taken by the Department. And the fact that you or others had
asked for information under a Freedom of Information Act, the
reasons for the IG not concurring and you were denied access to
that information. That raises all kinds of questions.
But nonetheless, the floodgates were opened again. And now,
with Congress putting more money into the Pell grants. As I
said, over the next 10 years $300 billion will go into the
program. And we see now what's happening in the for-profit
schools and this is what alarmed us in the first place.
Nine percent of the students in higher education are in our
for-profit schools. They're consuming 23, almost 24 percent of
the Pell grants, and that's going up, escalating, and they have
44 percent of the default rates. Get that?
Nine percent of the students, 24 percent of the Pell grants
at an ever-increasing rate, 44 percent of the default rates.
And to me it seems that when we talk about recruitment and
things like that some say, ``well private colleges they do
advertising, they do recruiting.'' It's true they do, but at
the end of the line they don't have to meet Wall Street
expectations on earnings. They don't have to pay shareholders
or private investors. So they don't have those kinds of
incentives.
So it seems to me what we have done with this industry, or
what's happened to the industry is that with the easy
availability of Pell grants and increased Pell grants and
guaranteed student loans, and with incentive payments, and with
a kind of almost a cloak of secrecy about what their graduation
rates are. We don't know what the graduation rates are in the
for-profit schools. We just don't know.
I mentioned in my opening statement about how many
thousands of students this one school had as of March 31,
21,000 more were added in April, May, and June. But at the end
of June they only had 143 more students. That's got to raise
some questions. And also with what Mr. Pruyn said, they had the
14-day thing.
Well we know that, if a student's there 60 percent of the
time for the term they get to keep the money. So that's why you
had that 14-day rule. So you stay there 14 days, they don't
care what happens to you, you walk away they keep the Pell
grants.
And guess where that goes? Does that go to help other
students? No. Maybe some of it does but a lot of it goes to pay
for very high paid administrators and executives. And a lot of
it goes to pay investors, profits into either the public arena
or into the private investor arena.
So when we look ahead we say, ``look, education is too
important for the future of this country. Education is too
important for our students.'' And facing the budget problems
that we have in the next 10 years, we just can't permit more
and more of the taxpayers' dollars that are supposed to go for
education, and quality education to go to investors on Wall
Street. And I might add more and more of the student debt that
these students have racked up, to be going to pay shareholders
or private investors because they want to increase their
profits. I can't blame them. I mean that's the profit motive.
But it seems like what we've done here is we have
privatized the profits and socialized the risk. Which is what
we saw in the sub-prime lending problem that we had. That's why
I'm concerned about this area. I think that's why a lot of us
are concerned about this.
And I will say that tomorrow I will issue a request for
information and document requests to 30 for-profit schools. I
believe the information I am requesting will help us form a
more full picture than we have at this time. It's nearly
impossible to figure out graduation rates. I want to know.
I want to know what that one school I talked about in my
opening statement, I want to know what happened to those 20,000
students that enrolled but that didn't show up in June. Where
did they go? How much churning is taking place among students
in order to get the Pell grants. You get the student loans
they've paid in and the students are out.
I guess there's a lot of these things in these videos that
appalled me. But the one that got me the most I think was when
the individual that worked for the school said, ``this is not
like a car loan, they can't come after you.'' Or the one
recruiter that said, ``well I have all this debt I owe to the
University of Florida and I don't intend to pay it back.''
Here's the difference between the sub-prime problem that we
had, the mortgage problem, or the car loan and student loans.
That person was right, student loans and car loans or mortgage
loans are completely different. You see if I have a debt that's
on a car I walk away from the car. If I have a debt on a
mortgage I can walk away from the house. But a student who has
debt can't walk away from that debt. They never, never can walk
away.
It is not dischargeable in bankruptcy or any other way.
That debt follows that student the rest of that student's life
until it's paid off, with interest. They could come after your
Social Security checks, believe it or not if you have defaulted
on your student loans. They can come after your paychecks.
They can garnish your paycheck when you get a job later on.
You're married, you got two or three kids and you're trying to
make ends meet and all of a sudden the government comes in and
takes some of your money back. It's being done today. So there
is a difference. And the difference is students cannot get rid
of those debts. And I don't know how many of them really know
that, or what the interest rates are.
I'd like to thank each of our witnesses for being with us
today. We'll leave the record open for 10 days. Witnesses may
submit statements for the record or supplemental statements. I
think what we have seen today from the GAO and our witnesses is
very concerning.
Let me just repeat, in 15 of the 15 schools that GAO
investigated they found instances of fraud, deceptive
practices, or made misleading statements to prospective
students--15 out of 15. This is unacceptable. Especially when
the students these schools are serving need the greatest help.
These are our lowest income students. Maybe they don't have
parents that went to college that would say, wait a minute
let's take a look at this, let's examine this, and then they
sign up, and the school gets the Pell grants.
That's another misnomer, the students think they get the
Pell grants, it goes to the school. So they come from the
lowest income families, and yes, they want a better life. I
continue to be amazed by the questionable and sometimes
outright illegal practices occurring in this for-profit sector
that Mr. Pruyn talked about.
Again I say that, critics say it's only a few bad apples.
But again I question, is the entire orchard contaminated, to
use an analogy. Does something need to be done systemically, to
make the for-profit institutions viable and an asset to society
rather than a debt to these students and our taxpayers.
So, as I said, I will issue a request for information and
documents tomorrow. And I believe I might even issue more later
on. And I will tell you that we will have additional hearings
in September, not in October, probably in November and maybe in
December.
I intend to follow this trail to wherever it leads to get
as much information as possible. Because we have to get to the
bottom of this. And Mr. Hawkins, you mentioned the fact that
the Department is issuing new regulations now.
Well I put out a statement yesterday saying fine, it's a
nice first step. But that's a regulation. Another
administration could come in and overturn that regulation. I'm
not certain regulations will suffice. I believe, and I think
where we're headed, is very clear cut legislation that can't be
overturned by another administration. That can't put in ``safe
harbors'' and say it complies. But really tightly designed
legislation to correct these practices.
And quite frankly, because of the testimony this morning
and the information that we get into our committee, I believe
Dr. McComis we are going to have to take a look at
accreditation and different accrediting agencies, how they
work, what they can do, what their power is and how they fit
into this overall structure of making these schools accountable
for what they're doing. So you may be back here again. I don't
know but we're going to look at the accreditation process also.
The hearing of the HELP Committee is adjourned and we'll
have another hearing, at least one in September.
Thank you all very much.
[Additional material follows.]
ADDITIONAL MATERIALS
Prepared Statement of Senator Bennet
Mr. Chairman, thank you for having this hearing today. I
want to start by emphasizing that the big picture here is the
need to increase access to quality, affordable higher education
opportunities; especially for low-income students. We need
institutions that bring students who have historically been
left out of higher education into the fold. For-profit
universities have filled in gaps left by more traditional
colleges and universities, and they have an important role to
play in helping us remain competitive in the 21st Century.
However, the government should not support institutions
that bring students into programs and do not provide them with
a quality education, or fail to provide accurate information
about costs and outcomes. There is absolutely no excuse for
fraudulent behavior or misleading students about the quality of
education they are going to get, or defrauding the government.
I'm extremely concerned about the well-documented evidence
being presented today that there is a widespread problem with
recruitment practices at many for-profit universities. We
should hold those wrongdoers accountable, and then determine
what needs to be done to prevent this kind of exploitative
behavior from recurring.
------
Response to Questions of Senator Enzi, Senator Hagan and Senator
Alexander by Gregory D. Kutz
U.S. Government Accountability Office (GAO),
Washington, DC 20548,
September 10, 2010.
Hon. Tom Harkin, Chairman,
Committee on the Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20150.
Hon. Michael Enzi, Ranking Member,
Committee on the Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20150.
Subject: Posthearing Responses to August 4, 2010, Hearing on For-
Profit Schools: The Student Experience
On August 4, 2010, we testified before your subcommittee at a
hearing entitled For-Profit Schools: The Student Experience. This
letter responds to your request that GAO respond to a number of post-
hearing questions. The questions and our answers are provided in the
enclosure. The responses are based on work associated with previously
issued GAO products, which were conducted in accordance with generally
accepted government auditing standards and investigative standards from
the Council of the Inspectors General on Integrity and Efficiency. We
did not obtain comments on our responses from the Department of
Education.
If you have any further questions or would like to discuss these
responses, please call me on (202) 512-6722.
Gregory D. Kutz,
Managing Director,
Forensic Audits and Special Investigations.
______
senator enzi
Question 1. What is the role of accrediting agencies?
Answer 1. In order to participate in certain Federal programs, such
as Federal student aid programs authorized under Title IV of the Higher
Education Act of 1965, postsecondary institutions must be accredited by
an agency recognized by the Department of Education (Education).
Accreditation is designed to ensure that schools provide basic levels
of quality in their educational programs. Accrediting agencies develop
evaluation criteria to assess the quality of educational programs at
schools and conduct peer reviews to assess whether or not those
criteria are met. For example, accreditors must have standards for
assessing institutional and/or programmatic quality in areas such as
student achievement, admissions, curricula, faculty, facilities,
student support services, and fiscal and administrative capacity.
Accrediting agencies are, for the most part, private educational
associations of regional or national scope. These accreditors, along
with Education and State oversight agencies, are part of what is often
referred to as the ``triad'' of Federal, State, and private entities
that oversee postsecondary institutions. An accreditor's decision to
approve accreditation for an institution of higher education can extend
up to 10 years.
Question 2. What is the role of accrediting agencies in regulating
the recruitment practices of institutions of higher education?
Answer 2. All institutions of higher education that participate in
the title IV programs must be accredited by an accrediting agency
recognized by Education. The standards that accreditors use to assess
schools must also address recruiting and admissions practices, academic
calendars, catalogs, publications, grading, and advertising, records of
student complaints received by, or available to, the accreditor, and
records of compliance with the institution's program responsibilities
under Title IV of the HEA,\1\ among other requirements.
---------------------------------------------------------------------------
\1\ These records should include information based on the most
recent student loan default rate data provided by the Secretary of
Education, the results of financial or compliance audits, program
reviews, and any other information that the Secretary may provide to
the agency.
Question 3. What is the Department of Education's role in
regulating the recruiting practices of institutions of higher
education?
Answer 3. Education is responsible for overseeing Federal student
aid programs authorized under Title IV of the Higher Education Act of
1965, as amended. In this role, Education is responsible for enforcing
the statutory ban against incentive compensation which prohibits
schools that receive title IV student aid funds from providing ``. . .
any commission, bonus, or other incentive payment based directly or
indirectly on success in securing enrollments or financial aid to any
persons or entities engaged in any student recruiting or admission
activities or in making decisions regarding the award of student
financial assistance . . .'' The ban applies to all schools, including
private, for-profit institutions as well as public and private non-
profit schools. In our February 2010 congressionally mandated report on
incentive compensation, we found that between 1998 and 2009 Education
substantiated incentive compensation violations at 32 schools and
entered into settlement agreements with another 22 schools.\2\ We plan
to issue a follow-up report in fall 2010 on Education's enforcement of
the incentive compensation ban.
---------------------------------------------------------------------------
\2\ Higher Education: Information in Incentive Compensation
Violations Substantiated by the U.S. Department of Education, GAO-10-
370R, February 23, 2010.
---------------------------------------------------------------------------
In addition to enforcing the ban on incentive compensation,
Education is responsible for enforcing the statutory ban against
schools misrepresenting the nature of their educational programs,
financial charges, or the employability of their graduates (section
487(c)(3)(A) of the Higher Education Act of 1965). As with other
violations of statute or regulation, Education may fine schools or
limit, suspend, or terminate their participation in Federal student aid
programs for misrepresentation or violations of the incentive
compensation ban.
Question 4. According to your testimony, schools are required to
make certain disclosures regarding graduation and/or completion. What
exactly do schools have to disclose regarding graduation or completion
rates and how must they make that disclosure. Please provide a
reference to the statutory provisions you believe were violated during
GAO's investigation.
Answer 4. Pursuant to 20 U.S.C. Sec. 1092(a)(1)(L), institutions
that participate in title IV are required to produce and make ``readily
available upon request, through appropriate publications, mailings, and
electronic media'' to any prospective student the ``completion or
graduation rate of certificate- or degree-seeking, full-time,
undergraduate students entering such institutions.'' Furthermore, under
Sec. 1092(a)(3), the completion or graduation rate must cover the 1-
year period ending on August 31 of the preceding year, and must be made
available to prospective students prior to the students enrolling or
entering into any financial obligation.
The Department of Education has promulgated regulations, such as 34
CFR Sec. 668.41(b)(2) and (d)(4), that further clarify this
requirement. Specifically, the regulations state that institutions may
satisfy their disclosure requirements by posting the information on a
Web site.
Prior to July 1, 2010, the language that is currently in
Sec. 668.41(d)(4) was contained in Sec. 668.41(d)(3). The pre-July 1
language more closely mirrored the language of 20 U.S.C. Sec. 1092(a),
by stating that ``an institution must make available to any enrolled
student or prospective student, on request, through appropriate
publications, mailings or electronic media, information concerning''
several different pieces of information, including the institution's
completion or graduation rate.
Effective July 1, however, new regulations removed the words ``on
request'' from the regulation. In its rulemaking, Education explained
that, even though the statute contains the words ``upon request,'' it
chose to remove ``on request'' because of its conclusion that
institutions could simply refer students who asked for a completion or
graduation rate to their Web site that contained this information.
Specifically, Education explained that ``institutions typically compile
and make the information available on their Web sites, but possibly in
paper form as well. Consequently, [Education] view[s] the inclusion of
the phrase ``upon request'' to mean that this information is readily
available to students who wish to see it. As a matter of course,
students coming to an institution's Web site to learn about the
institution should be able to find this information, and students
inquiring directly may be referred to the Web site or provided with the
information on paper.'' 74 Fed. Reg. 55,902 (Oct. 29, 2009). For this
reason, in our testimony we specifically noted when completion or
graduation information was available on the Web sites of the colleges
we visited, and further explained that those that did list the
information on the Web sites were in compliance with Education
regulations.
The method by which institutions must calculate completion or
graduation rates is explained in 20 U.S.C. Sec. 1092(a)(3)-(7). In
summary, a student must be counted as a completion or graduation if,
within 150 percent of the normal time for completion of or graduation
from the program, the student has completed or graduated from the
program, or enrolled in any program of an eligible institution for
which the prior program provides substantial preparation. Institutions
may exclude from this calculation students who leave to serve in the
Armed Forces, on official church missions, or with a recognized foreign
aid service of the Federal Government (such as the Peace Corps).
Educations regulations at 34 CFR Sec. 668.45 further clarify the proper
method to calculate completion or graduation rates.
Finally, institutions have additional completion and graduation
rate disclosure requirements that are applicable to current students
and prospective student-athletes that may receive athletically related
student aid. Our undercover tests were not designed to test these
scenarios, and thus we have not fully analyzed the legal framework that
would apply.
Question 5. According to your testimony, Federal statutes and
regulations require colleges to make available information on financial
assistance programs to all current and prospective students. Please
explain your understanding of what constitutes information on financial
assistance programs and how this differs from a financial aid package.
Answer 5. The terms ``financial assistance program'' and
``financial aid package'' are not specifically defined in title IV
statutes or regulations. ``Financial aid package,'' in fact, is never
used in title IV statutes, and appears only once in regulations (34 CFR
Sec. 668.59(c)(1)(ii), which deals with the consequences of a change in
financial aid application information). Use of the term ``financial
assistance program'' in our testimony was intended to cover all
financial assistance-related information in statutes and regulations
which institutions are required to make available to any prospective
student.
Specifically, pursuant to 20 U.S.C. Sec. 1092(a)(1)(A)-(F) and (M),
institutions that participate in title IV are required to produce and
make readily available upon request, through appropriate publications,
mailings, and electronic media to any prospective student a number of
financial assistance-related pieces of information. These include: the
student financial assistance programs available to students who enroll;
the methods by which such assistance is distributed among student
recipients who enroll at such institution; any means, including forms,
by which application for student financial assistance is made and
requirements for accurately preparing such application; the rights and
responsibilities of students receiving financial assistance; the cost
of attending the institution (including tuition and fees, books and
supplies, estimates of typical student room and board costs or typical
commuting costs, and any additional cost of the program in which the
student is enrolled or expresses a specific interest); the requirements
of any refund policy with which the institution is required to comply
and the requirements for the return of grant or loan assistance
provided; and the terms and conditions of the loans that students
receive under title IV. Under Sec. 1092(c), each institution is
required to designate employees who ``shall be available on a full-time
basis to assist students or potential students in obtaining'' the
financial assistance-related information described above.
Furthermore, pursuant to Sec. 1092(d), Education must make
available to institutions information regarding Federal student
assistance programs in order to assist students in gaining information
through the institutions and to assist institutions in carrying out
their responsibilities. Under the statute, ``such information shall
include information to enable students and prospective students to
assess the debt burden and monthly and total repayment obligations that
will be incurred as a result of receiving loans of varying amounts
under'' title IV. Institutions must also determine each specific
student's eligibility for free; under 20 U.S.C. Sec. 1094(a)(3),
institutions are required to enter into program participation
agreements with Education, one provision of which prohibits the
institution from charging any student a fee for processing or handling
any application, form, or data required to determine the student's
eligibility for assistance under title IV or the amount of such
assistance.
Finally, Education has promulgated regulations that further
implement the above, including 34 CFR Sec. 668.42.
Question 6. During your ``secret shopper'' investigation, how many
admissions representatives did the undercover students meet with and at
which schools? How many financial aid representatives did the
undercover students meet with and at which schools?
Answer 6. During our investigation we visited a total of 15
schools. We visited each school at least twice, once posing as a
student eligible for Pell grants and subsidized student loans, and once
posing as a student with a $250,000 inheritance and a salary high
enough to disqualify the student from receiving Pell grants and
subsidized loans. Sometimes our fictitious students were told by campus
representatives to return on another day. In these cases, we visited
the campus twice, under one scenario. Our aim was to speak with both an
admissions representative and a financial aid representative at each
school. This was not possible in all cases. For example, at some
schools we asked to speak to a financial aid representative but were
not able to because a financial aid representative was not available.
At other schools, our student was told they had to enroll in the school
before speaking with financial aid. In total we spoke with 32
admissions representatives and 14 financial aid representatives. We did
not use outside sources to confirm the job positions the
representatives held.
The following table provides details on the number of admissions
and financial aid representatives spoken to during undercover tests.
----------------------------------------------------------------------------------------------------------------
Number of Number of
admission financial aid
State Case Number representatives representatives
with whom with whom
student spoke student spoke
----------------------------------------------------------------------------------------------------------------
AZ........................................... Case 1, applicant 1............ 1 0
AZ........................................... Case 1, applicant 2............ 1 0
AZ........................................... Case 2, applicant 1............ 1 1
AZ........................................... Case 2, applicant 2............ 1 1
CA........................................... Case 3, applicant 1............ 1 1
CA........................................... Case 3, applicant 2............ 1 1
CA........................................... Case 4, applicant 1............ 1 0
CA........................................... Case 4, applicant 2............ 1 0
DC........................................... Case 5, applicant 1............ 1 1
DC........................................... Case 5, applicant 2............ 1 0
DC........................................... Case 6, applicant 1............ 1 1
DC........................................... Case 6, applicant 2............ 1 1
FL........................................... Case 7, applicant 1............ 1 1
FL........................................... Case 7, applicant 2............ 1 1
FL........................................... Case 8, applicant 1............ 2 0
FL........................................... Case 8, applicant 2............ 2 0
IL........................................... Case 9, applicant 1............ 1 0
IL........................................... Case 9, applicant 2............ 1 0
IL........................................... Case 10, applicant 1........... 1 0
IL........................................... Case 10, applicant 2........... 1 0
PA........................................... Case 11, applicant 1........... 1 0
PA........................................... Case 11, applicant 2........... 1 0
PA........................................... Case 12, applicant 1........... 1 0
PA........................................... Case 12, applicant 2........... 1 1
TX........................................... Case 13, applicant 1........... 1 0
TX........................................... Case 13, applicant 2........... 1 1
TX........................................... Case 14, applicant 1........... 1 1
TX........................................... Case 14, applicant 2........... 1 1
TX........................................... Case 15, applicant 1........... 1 0
TX........................................... Case 15, applicant 2........... 1 1
----------------------------------------------------------------------------------------------------------------
Question 7. During your testimony, you described how your
undercover students signed up on Internet lead generators to be matched
with schools offering programs they were interested in. You testified
that the undercover students subsequently received numerous calls from
a variety of schools. You illustrated the frequency of calls with the
``Hi Amy'' video. However, your video provided no information about the
content of the calls. Please provide the following information about
the calls arising from the use of the lead generator by the undercover
students. What are the names of the schools that placed calls to the
undercover students? How many times would each school call? How long
did the conversations between the schools and the undercover students
last? What type of information did each of the schools that called
provide in their phone conversations with the undercover students? Did
any of the undercover students ask not to be called again? Did any of
the schools call again if the student asked not to be called? Did only
schools offering programs the student expressed interest in place
calls?
Answer 7. We were not able to confirm the identities of some
schools contacting our undercover students because the representatives
did not identify where they were calling from in a voicemail or because
we were unable to trace the call back to a specific individual or
business. However, we were able to confirm that the following schools
called our undercover students: American InterContinental University,
Anthem College Online, Art Institute, Ashford University, Bryant &
Stratton College, DeVry University, Herzing College, Jones Companies,
Jones International University, Kaplan University, Keiser University,
Laureate Ed Inc., Liberty, Miller-Motte Co, My Little College,
Pennsylvania Culinary Institute Le Cordon Bleu, Redstone, Strayer
University, University of Maryland University College, University of
Phoenix, Virginia College, Western Governors University, and Westwood
College.
The following table documents at least how many times a school/
entity called each student. If the cell is blank, then the student did
not receive a phone call from the school/entity. In some cases,
students received calls, but we were unable to identify who called.
------------------------------------------------------------------------
College/entity name Student 1 Student 2 Student 3 Student 4
------------------------------------------------------------------------
American InterContinental ......... ......... 15 .........
University.................
Anthem College Online....... ......... ......... ......... 5
Art Institute............... ......... 1 ......... .........
Ashford University.......... ......... ......... 48 .........
Bryant & Stratton College... ......... ......... 11 .........
DeVry University............ ......... ......... ......... 7
Education Management ......... 1 ......... .........
Corporation................
Herzing College............. ......... ......... 2 13
Jones Companies............. ......... ......... 1 4
Jones International ......... ......... 25 10
University.................
Kaplan University........... ......... ......... ......... 20
Keiser University........... ......... ......... 19 .........
Laureate Ed Inc............. ......... ......... 5 .........
Liberty..................... ......... ......... 15 .........
Miller-Motte Co............. ......... ......... ......... 54
My Little College........... ......... ......... 1 .........
Pennsylvania Culinary ......... 4 ......... .........
Institute Le Cordon Bleu...
Redstone.................... ......... ......... ......... 3
Strayer University.......... ......... ......... 21 5
University of Maryland ......... ......... 5 .........
University College.........
University of Phoenix....... ......... ......... ......... 25
Virginia College............ ......... 12 ......... .........
Western Governors University ......... ......... 6 .........
Westwood College............ ......... ......... ......... 1
Unknown Callers............. 3 54 8 32
-------------------------------------------
Total..................... 3 72 182 179
------------------------------------------------------------------------
When schools representatives called our undercover students, the
initial phone call was not answered. Schools did, on occasion, leave
voice mails which lasted on average 30 seconds. In the voice mails, the
school representative typically stated his/her name, the school he/she
was affiliated with, the program he/she was calling about, and a call
back telephone number. Our undercover students did call back several
schools. The call back conversations lasted for approximately 15
minutes. During these conversations, the school representative
discussed the student's current situation, why the student wanted to
enroll in the program, and program details such as program length and
types of classes. In addition, some school representatives asked the
student to come in for a campus visit to further discuss enrolling.
None of the students asked the schools not to be called back. According
to the voice mails, only schools offering programs the student
expressed interest in placed calls.
senator hagan
Question 1. Given the prevalence of abuses in the relatively small
sample of schools you investigated, is it your belief that these
questionable practices are widespread throughout the for-profit
industry? As the ``congressional watchdog,'' tasked with investigating
how the Federal Government spends taxpayer dollars and advising
Congress on ways to make government more efficient, effective and
ethical, what comes next for GAO? Do you intend to make specific
recommendations to Congress?
Answer 1. Our work was not designed to be able to project the
results of our undercover tests to the entire population of for-profit
colleges, and therefore we cannot make a definitive statement about the
prevalence of abusive practices throughout the industry. However, given
that all 15 schools we visited engaged in some type of questionable
behavior, and given the numerous allegations of abuses occurring at
other for-profit colleges that we have received subsequent to the
hearing on August 4, it is clear that the problems we identified are
likely not limited to the schools we visited.
In addition, GAO does not have specific recommendations for
Congress or the Department of Education (Education) as a result of our
investigation. However, during corrective action briefings with
Education, GAO and Education officials discussed our methodologies and
potential ways that Education personnel could perform similar tests in
order to increase compliance with existing regulations. We have
referred the four cases of fraud to the Department of Education Office
of Inspector General. We will be referring information from all 30
visits to the Department of Education for program staff to review.
Based on a review of existing laws and regulations associated with
title IV funds, many of the abusive and questionable behaviors
exhibited by for-profit college personnel, such as the failure to
disclose program graduation rates, are already covered by existing law.
Therefore, in many cases efforts to ensure greater compliance with
existing laws and regulations may be necessary.
Question 2. While your report indicates that schools are required
to present tuition information upon request, has the GAO examined
whether existing Department of Education guidelines are sufficient to
ensure that this information is presented in a clear and accurate
manner?
Answer 2. GAO has not examined whether Education's guidelines as
specified in 34 CFR 668.43 are sufficient to ensure that information
about tuition is provided to students in a clear and accurate manner.
Question 3. Has the GAO examined whether there are sufficient
guidelines in place to ensure that this information is READILY
available to prospective students?
Answer 3. GAO has not examined whether there are sufficient
guidelines in place to ensure that information about tuition is readily
available to prospective students.
Question 4. Has the GAO examined enforcement mechanisms at the
Department of Education to ensure that taxpayer dollars are used to
support only institutions that are complying with the law? How might we
improve the agency's ability to enforce these rules?
Answer 4. We have reviewed Education's monitoring and enforcement
efforts in several areas. Specifically, we have examined Education's
oversight of schools with regard to enforcement of Federal student aid
eligibility requirements and compliance with the ban on inducements.
In 2009, we reported weaknesses in Education's oversight of student
eligibility requirements.\3\ In particular, we found vulnerabilities in
Education's oversight of the ability to benefit test process, which
enables students without a high school diploma or GED to gain access to
Federal student aid funds if they pass a test of basic math and English
skills. In addition, we found that Education did not provide guidance
to prevent Federal student aid funds from going to students with fake
high school diplomas. Accordingly, we made recommendations to Education
to improve oversight in these areas.
---------------------------------------------------------------------------
\3\ Proprietary Schools: Stronger Department of Education Oversight
Needed to Help Ensure Only Eligible Students Receive Federal Student
Aid, GAO-09-600, August 17, 2009.
---------------------------------------------------------------------------
In 2007, we found that Education lacked oversight tools to
proactively detect violations of the ban on improper gifts or
inducements between student loan companies and schools.\4\
Consequently, we made recommendations to improve Education's oversight
of lenders and schools. Congress recently terminated the authority to
make new loans under the Federal Family Education Loan Program.
---------------------------------------------------------------------------
\4\ Federal Family Education Loan Program: Increased Department of
Education Oversight of Lender and School Activities Needed to Help
Ensure Program Compliance, GAO-07-750, July 31, 2007.
Question 5. Has the GAO prepared an assessment of financial aid
counseling at non-profit institutions?
Answer 5. We have not conducted a broad assessment of financial aid
counseling. However, our work completed at non-profit institutions has
considered what has been done to assist students in understanding the
various Federal student aid options for financing their postsecondary
educations. For instance, in 2007, we reported on the challenges Asian
Americans and Pacific Islanders face in completing postsecondary
education degrees.\5\ To help students overcome these challenges, we
found that some non-profit institutions provided additional financial
aid counseling to this group of students. Additionally, when we
reviewed options for simplifying the application process for financial
aid in 2009, some GAO study group participants told us that any
simplification efforts needed to be accompanied by increased outreach
to the States and the general public on college affordability, aid
eligibility, and the process of applying for financial aid.\6\
---------------------------------------------------------------------------
\5\ Higher Education: Information Sharing Could Help Institutions
Identify and Address Challenges Some Asian Americans and Pacific
Islander Students Face, GAO-07-925, July 25, 2007.
\6\ Federal Student Aid: Highlights of a Study Group on Simplifying
the Free Application for Federal Student Aid, GAO-10-29, October 29,
2009. In addition, in 2009 we recommended that the Department undertake
similar outreach efforts to States and high schools for the purposes of
announcing targeted grants for students (see Federal Student Aid:
Recent Changes to Eligibility Requirements and Additional Efforts to
Promote Awareness Could Increase Academic Competitiveness and SMART
Grant Participation GAO-09-343, March 25, 2009).
---------------------------------------------------------------------------
senator alexander
Question 1. What conditions would you need to apply to be able to
make this a representative sample that could provide extrapolations
beyond the schools you surveyed? Would it be possible for you to
conduct a similar review of non-profit institutions of higher education
using the same methodology to determine if these practices are limited
to one sector or the other? What would the methodology for that project
look like?
Answer 1. In order to be able to extrapolate the results of similar
tests, several steps would need to be taken. At a minimum, schools
would have to be selected at random. Given that there are approximately
2,000 for-profit colleges, operating in 50 States and the District of
Columbia, it is possible that a random sample would require site visits
in all 50 States and DC. In addition, the number of schools tested
would likely have to be increased significantly in order to create an
acceptable confidence interval for test results, and a standard set of
questions would have to be asked at all tested locations to ensure
comparability between the different schools tested. Given the fluid
nature of undercover testing and our experience with certain schools
not allowing students to obtain answers concerning financial aid
questions, a statistical sample with projectable results would require
a substantial increase from the scope, timeframes, and resources
associated with the investigative results presented at the August 4
hearing.
In addition, if requested to do so, GAO could conduct similar
undercover tests at non-profit colleges offering bachelors degrees,
associates degrees, and certificates. GAO has not researched all
requirements for admissions into the various public and private non-
profit colleges, but based on our general understanding, at least some
4-year non-profit colleges require extensive application processes and
have many more applicants than classroom seats available. This
situation is different than many for-profit colleges that operate under
an open enrollment policy which allowed our investigators to apply for
admissions and be accepted in the same visit. Therefore the methodology
for testing non-profit colleges could differ substantially.
Question 2. The Department of Education has recently proposed
regulations on misrepresentation to crack down on misleading
advertising, misrepresentation by an institution, and other forms of
fraud that hurt students and the taxpayer. Do you think that these
proposed regulations will prevent the types of misrepresentation that
your investigators have discovered?
Answer 2. Although GAO is not in a position to comment on the
proposed rules, we believe that it is important for Education to take
steps to strengthen its oversight in this area.
Response to Questions of Senator Enzi, Senator Hagan, and Senator
Alexander by David Hawkins
senator enzi
Question 1. What is the role of an admissions officer?
Answer 1. The primary function of an admission officer/counselor is
to counsel students and families through the admission process, from
search to selection and enrollment, aiming to match students' talents,
interests, and abilities with an institution. Admission officers meet
with students individually or in small and large groups at on-campus
visitation events and at high schools and college fairs to communicate
information about the admission process in general and the details
about admission to their institution. Providing general information,
the level of which is determined by the students' knowledge of the
college admission process, and institutional details enables students
to begin determining if a college/university will match their goals and
be a good ``fit.'' While admission officers generate interest to create
an application pool for their institution, they focus on the interests
of the student during the admission process and counsel students on
fit, even if it means directing students to another institution.
In addition to representing the institution to students and
families, admission officers work to establish relationships with
secondary school counselors and community-based organizations in their
assigned recruitment territories and local communities by providing
information that will help the students served by those professionals
learn about their institutions when working to find the right fit for
postsecondary education.
Establishing internal relationships at the college/university is
equally important in counseling students through the admission process.
Full admission offices and individual admission counselors communicate
frequently with offices of student financial aid, academic affairs,
student life, housing, and the registrar; the exchange of information
enables admission counselors to provide updated and accurate general
information to students and families, as well as know where to direct
students with detailed and specific questions for each of these
offices. Such questions include those regarding cost and financial aid
options, program offerings and faculty, involvement opportunities, and
academic advising and course selection.
Admission counselors review applications for purposes of selecting
an appropriate class for the institution. Factors used in the process
help counselors craft a class by selecting students who are predicted
to be successful at the institution and return each year through degree
completion and graduation.\1\
---------------------------------------------------------------------------
\1\ For more information on factors in the admission decision, see
NACAC State of College Admission report, 2009.
---------------------------------------------------------------------------
Admission counselors also provide administrative support, based on
their interest and area of expertise, to office operations, such as
work in communications and publications, event planning, data
management and analysis, institutional strategic planning, and
institutional committees.
In our written testimony to the committee, we attached the NACAC
Statement on the Counseling Dimension of the Admission Process at the
College/University level. For the committee's purposes, this statement,
which we link again below, represents a critical element of the
admission process that is largely absent in the current for-profit
admission business model.
NACAC Statement on the Counseling Dimension of the Admission
Process at the College/University Level: http://www.nacacnet.org/
AboutNACAC/Policies/Documents/StmtCounsDimAdPrcsCol_UnivLvlNEW.pdf.
Question 2. What is the role of a financial aid officer? \2\
---------------------------------------------------------------------------
\2\ Responses to Senator Enzi's questions nos. 2-5 were completed
in conjunction with the National Association of Student Financial Aid
Administrators (NASFAA).
---------------------------------------------------------------------------
Answer 2. Financial aid administrators (FAAs) coordinate Federal,
State, institutional and private sources of aid, ensuring that
eligibility criteria are met, students' financial need is met, and
overawards are avoided. This process is generally known as
``packaging'' and includes formulating costs of attendance. FAA
responsibilities include verifying, when required or otherwise
necessary, the family's financial data on the Free Application for
Federal Student Aid (FAFSA). FAAs also counsel students regarding
financing options and terms and conditions of aid. FAAs exercise
professional judgment to adjust normal expectations for family
contributions and costs of attendance if a family's circumstances
deviate from the usual and warrant such treatment. FAAs also ensure
that reporting requirements to the Department of Education are met and
that allocations are fully and properly utilized.
Question 3. Please describe the circumstances under which an
admissions officer may take on the responsibilities of a financial aid
officer.
Answer 3. In practice, the functions of admission and financial aid
officers are largely separate. Exceptions include senior-level managers
who may serve as dean of admission and financial aid, or vice president
for enrollment management and financial aid. In addition, admission
counselors may be asked questions by students and families about
financial aid. Admission officers are well-versed in general
information pertaining to aid, and will often refer families to
financial aid officers if the questions are of sufficient detail or
complexity.
Generally speaking, admission and financial aid are separate
professions and require different expertise. Good practice and ethical
considerations dictate a degree of separation between recruitment and
financial aid functions.
Question 4. What types of financial aid information are required to
be provided to prospective students? Does this require schools to
provide prospective students with estimates on specific amounts of aid
that may be awarded?
Answer 4. Federal title IV regulations require disclosure of
certain financial aid information to prospective and current students,
as shown below. Although criteria for selecting aid recipients and
determining the amount of a student's award must be disclosed, an
estimate of specific amounts of aid for a given student is not
required; in many cases, it would not be possible or even desirable to
do so unless the student has specifically applied for aid and a
financial aid package has been developed.
Schools typically include allowable ranges of aid (minimum, if
there is one, and maximum) in student consumer information. Schools
typically send tentative or actual award packages to students who have
been accepted for admission, recognizing that financial assistance is
one of the essential factors a student uses to decide where to attend.
Once an aid award (package) is sent, regulations under cash management
rules require additional information, also cited below.
PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS
Subpart D--Student Consumer Information Services
Sec. 668.42 Financial assistance information.
(a)(1) Information on financial assistance that the institution
must publish and make readily available to current and prospective
students under this subpart includes, but is not limited to, a
description of all the Federal, State, local, private and institutional
student financial assistance programs available to students who enroll
at that institution.
(2) These programs include both need-based and non-need-based
programs.
(3) The institution may describe its own financial assistance
programs by listing them in general categories.
(4) The institution must describe the terms and conditions of
the loans students receive under the Federal Family Education Loan
Program, the William D. Ford Federal Direct Student Loan Program, and
the Federal Perkins Loan Program.
(b) For each program referred to in paragraph (a) of this
section, the information provided by the institution must describe--
(1) The procedures and forms by which students apply for
assistance;
(2) The student eligibility requirements;
(3) The criteria for selecting recipients from the group of
eligible applicants; and
(4) The criteria for determining the amount of a student's
award.
(c) The institution must describe the rights and
responsibilities of students receiving financial assistance and,
specifically, assistance under the title IV, HEA programs. This
description must include specific information regarding--
(1) Criteria for continued student eligibility under each
program;
(2)(i) Standards which the student must maintain in order to be
considered to be making satisfactory progress in his or her course of
study for the purpose of receiving financial assistance; and
(ii) Criteria by which the student who has failed to maintain
satisfactory progress may re-establish his or her eligibility for
financial assistance;
(3) The method by which financial assistance disbursements will
be made to the students and the frequency of those disbursements;
(4) The terms of any loan received by a student as part of the
student's financial assistance package, a sample loan repayment
schedule for sample loans and the necessity for repaying loans;
(5) The general conditions and terms applicable to any
employment provided to a student as part of the student's financial
assistance package; and
(6) The exit counseling information the institution provides
and collects as required by 34 CFR 674.42 for borrowers under the
Federal Perkins Loan Program, by 34 CFR 685.304 for borrowers under the
William D. Ford Federal Direct Loan Program, and by 34 CFR 682.604 for
borrowers under the Federal Stafford Loan Program.
Subpart K--Cash Management
Sec. 668.165 Notices and authorizations.
(a) Notices. (1) Before an institution disburses title IV, HEA program
funds for any award year, the institution must notify a student of the
amount of funds that the student or his or her parent can expect to
receive under each title IV, HEA program, and how and when those funds
will be disbursed. If those funds include Direct Loan or FFEL Program
funds, the notice must indicate which funds are from subsidized loans
and which are from unsubsidized loans.
* * * * * * *
In addition, NACAC's Statement of Principles of Good Practice contains
the following references to financial aid:
Introduction
To enable all students to make the dream of higher education a reality,
these institutions and individuals develop and provide programs and
services in postsecondary counseling, admission and financial aid.
Member Conventions
3. Members will provide accurate admission and financial aid
information to students, empowering all participants in the process to
act responsibly.
6. Members will strive to provide equal access for qualified
students through education about financial aid processes and
institutional financial aid policies.
All Members--Mandatory Practices
B. Admission, Financial Aid and Testing Policies and Procedures
Members agree that they will:
1. not publicly announce the amount of need-based aid awarded
to any student without his/her permission;
2. not guarantee admission or specific college placement or
make guarantees of any financial aid or scholarship awards prior to an
application being submitted, except when pre-existing criteria are
stated in official publications;
3. not make unethical or unprofessional requests of other
admission counseling professionals;
4. send and receive information about candidates in confidence;
6. not use minimum test scores as the sole criterion for
admission, advising or for the awarding of financial aid;
Post-Secondary Members--Mandatory Practices
1. state clearly the requirements for the first-year and
transfer admission and enrollment processes, including secondary school
preparation, standardized testing, financial aid, housing and
notification deadlines, and refund procedures;
B. Admission, Financial Aid and Testing Policies and Procedures
Postsecondary members agree that they will:
1. accept full responsibility for admission and financial aid
decisions and for proper notification of those decisions to candidates;
3. permit first-year candidates for fall admission to choose,
without penalty, among offers of admission and financial aid until May
1. (Candidates admitted under an Early Decision program are a
recognized exception to this provision);
5. work with their institutions' senior administrative officers
to ensure that financial aid and scholarship offers and housing options
are not used to manipulate commitments prior to May 1;
7. state the specific relationship among admission and
financial aid practices and policies;
8. notify accepted aid applicants of financial aid decisions
before the enrollment confirmation deadline, assuming all requested
application forms are received on time;
9. clearly state policies on renewal of financial aid that will
typically include a review of students' current financial
circumstances;
10. not knowingly offer financial aid packages to students who
are committed to attend other institutions, unless the students
initiate such inquiries. Athletic scholarships, which adhere to
nationally-established signing periods, are a recognized exception to
this provision;
All members--Interpretations of Mandatory Practice
B. Admission, Financial Aid and Testing Policies and Procedures
All members agree that they will:
6. Financial aid is defined as grants, loans, work-study and
scholarships. This practice does not apply to scholarship and financial
aid programs that fall under state mandates.
Early Decision (ED) is the application process in which students
make a commitment to a first-choice institution where, if admitted,
they definitely will enroll. While pursuing admission under an Early
Decision plan, students may apply to other institutions, but may have
only one Early Decision application pending at any time. Should a
student who applies for financial aid not be offered an award that
makes attendance possible, the student may decline the offer of
admission and be released from the Early Decision commitment. The
institution must notify the applicant of the decision within a
reasonable and clearly stated period of time after the Early Decision
deadline. Usually, a nonrefundable deposit must be made well in advance
of May 1. The institution will respond to an application for financial
aid at or near the time of an offer of admission.
Interpretations of Mandatory Practices--Postsecondary Members
A. Promotion and Recruitment
All postsecondary members agree that they will:
1. state clearly the requirements for the first-year and
transfer admission and enrollment processes, including secondary school
preparation, standardized testing, financial aid, housing and
notification deadlines, and refund procedures by:
d. providing students, families and secondary schools with
the most comprehensive information about costs of attendance
and opportunities for all types of financial aid, and state the
specific relationship between and among admission and financial
aid practices and policies;
i. clearly stating all deadlines for application,
notification, housing, and candidates' reply requirements for
both admission and financial aid;
B. Admission, Financial Aid and Testing Policies and Procedures
All postsecondary members agree that they will:
3. permit first-year candidates for fall admission to choose,
without penalty, among offers of admission and financial aid until May
1. Candidates admitted under an Early Decision program are a recognized
exception to this provision.
a. It is understood that May 1 will be viewed as the
postmark date and/or the receipt date for electronic
submissions. Colleges that solicit commitments to offers of
admission and/or financial assistance prior to May 1 may do so
provided those offers include a clear statement in the original
offer that written requests for extensions and admission
deposit refunds until May 1 will be granted, and that such
requests will not jeopardize a student's status for admission
or financial aid;
b. When May 1 falls on a Sunday or holiday, May 2 becomes
the recognized date.
4. not offer exclusive incentives that provide opportunities
for students applying or admitted Early Decision that are not available
to students admitted under other admission options. Examples of
exclusive incentives include special dorms for ED admits; honors
programs only for ED admits; full, need-based financial aid packages
for ED admits only; special scholarships for ED admits only; or any
promise of an advantage in the admission process if student(s) convert
from Regular Admission to Early Decision.
7. state the specific relationship among admission and
financial aid practices and policies. Colleges and universities may
apply enrollment strategies to decisions to admit, wait list or deny
students on the basis of stated or unstated financial need.
Examples include:
a. colleges that might prioritize wait lists by students'
level of financial need;
b. institutions that employ ``need aware'' admission for
the bottom 10 percent of the class.
10. not knowingly offer financial aid packages to students who
are committed to attend other institutions, unless the students
initiate such inquiries. Athletic scholarships, which adhere to
nationally established signing periods, are a recognized exception. The
National Collegiate Athletic Association (NCAA) has established bylaws,
operational manuals and legislative directives guiding Division I, II,
and III sports for men and women. Each NCAA division has its own set of
rules and bylaws that govern intercollegiate athletics. In addition to
divisional regulations, there are playing rules committees that set
rules for specific sports. Each sport includes calendars regulating
quiet periods, dead periods, evaluation periods, contact periods, and
eventually, National Letter of Intent signing dates that occur in
November, February and April. All such dates are in advance of May 1,
the National Candidates Reply Date for admission. NACAC will continue
to work with the NCAA to recognize May 1 as a critical date on the
admission calendar. For more information on NCAA deadlines, dates and
requirements, visit www.NCAA.org.
II. Postsecondary Members--Best Practices
B. Admission, Financial Aid and Testing Policies and Procedures
All postsecondary members should:
1. provide in the notification letter of those applicants
offered a place on the wait list a history that describes the number of
students offered places on the wait lists, the number accepting places,
the number offered admission, and the availability of financial aid and
housing;
5. admit candidates on the basis of academic and personal
criteria rather than financial need. This provision does not apply to
international students ineligible for Federal student assistance;
9. view financial aid as supplementary to the efforts of
students' families when students are not self-supporting;
10. meet the full need of accepted students to the extent
possible, within the institution's capabilities;
11. should state that eligibility for, and packaging of, need-
based and merit aid will be comparable for students admitted under
Early and Regular programs;
12. utilize an equitable process of needs analysis methodology
in making expected estimates or awards of the amount of financial aid
that may be available to students after documentation is provided;
13. notify accepted aid applicants of financial aid decisions
as soon as possible before the enrollment notification deadline date,
assuming all requested application forms are received on time;
II. Postsecondary Members--Interpretations and Monitoring
B. Admission, Financial Aid and Testing Policies and Procedures
All postsecondary members agree that they will:
3. permit first-year candidates for fall admission to choose,
without penalty, among offers of admission and financial aid until May
1. Candidates admitted under an Early Decision program are a recognized
exception to this provision.
a. It is understood that May 1 will be viewed as
the postmark date and/or the receipt date for
electronic submissions. Colleges that solicit
commitments to offers of admission and/or financial
assistance prior to May 1 may do so provided those
offers include a clear statement in the original offer
that written requests for extensions and admission
deposit refunds until May 1 will be granted, and that
such requests will not jeopardize a student's status
for admission or financial aid;
b. When May 1 falls on a Sunday or holiday, May 2
becomes the recognized date.
4. not offer exclusive incentives that provide opportunities
for students applying or admitted Early Decision that are not available
to students admitted under other admission options. Examples of
exclusive incentives include special dorms for ED admits; honors
programs only for ED admits; full, need-based financial aid packages
for ED admits only; special scholarships for ED admits only; or any
promise of an advantage in the admission process if student(s) convert
from Regular Admission to Early Decision.
7. state the specific relationship among admission and
financial aid practices and policies. Colleges and universities may
apply enrollment strategies to decisions to admit, wait list or deny
students on the basis of stated or unstated financial need.
Examples include:
a. colleges that might prioritize wait lists by
students' level of financial need;
b. institutions that employ ``need aware''
admission for the bottom 10 percent of the class.
10. not knowingly offer financial aid packages to students who
are committed to attend other institutions, unless the students
initiate such inquiries. Athletic scholarships, which adhere to
nationally established signing periods, are a recognized exception. The
National Collegiate Athletic Association (NCAA) has established bylaws,
operational manuals and legislative directives guiding Division I, II,
and III sports for men and women. Each NCAA division has its own set of
rules and bylaws that govern intercollegiate athletics. In addition to
divisional regulations, there are playing rules committees that set
rules for specific sports. Each sport includes calendars regulating
quiet periods, dead periods, evaluation periods, contact periods, and
eventually, National Letter of Intent signing dates that occur in
November, February and April. All such dates are in advance of May 1,
the National Candidates Reply Date for admission. NACAC will continue
to work with the NCAA to recognize May 1 as a critical date on the
admission calendar. For more information on NCAA deadlines, dates and
requirements, visit www.NCAA.org.
II. Postsecondary Members--Best Practices
B. Admission, Financial Aid and Testing Policies and Procedures
All postsecondary members should:
1. provide in the notification letter of those applicants
offered a place on the wait list a history that describes the number of
students offered places on the wait lists, the number accepting places,
the number offered admission, and the availability of financial aid and
housing;
5. admit candidates on the basis of academic and personal
criteria rather than financial need. This provision does not apply to
international students ineligible for Federal student assistance;
9. view financial aid as supplementary to the efforts of
students' families when students are not self-supporting;
10. meet the full need of accepted students to the extent
possible, within the institution's capabilities;
11. should state that eligibility for, and packaging of, need-
based and merit aid will be comparable for students admitted under
Early and Regular programs;
12. utilize an equitable process of needs analysis methodology
in making expected estimates or awards of the amount of financial aid
that may be available to students after documentation is provided;
13. notify accepted aid applicants of financial aid decisions
as soon as possible before the enrollment notification deadline date,
assuming all requested application forms are received on time;
III. Counseling Members--Best Practices
A. Admission, Financial Aid and Testing Policies and Procedures
Counseling members should:
3. provide information about opportunities and requirements for
financial aid;
13. refrain from encouraging students to apply to particular
colleges and universities to enhance the high schools' statistical
records regarding the number or amount of scholarship awards received;
Question 5. Please describe the information a financial aid officer
would be able to accurately provide a student who has neither applied
nor enrolled.
Answer 5. This question could encompass a number of scenarios,
depending on whether ``applied'' refers to application for admission to
the school or application for financial assistance, and on whether
``enrolled'' means the student has accepted the offer of admission or
has actually registered for classes.
Typically, a student who has not applied for assistance (i.e.,
filed a FAFSA) can be provided accurate information only regarding the
general student consumer information described in Q&A #4, above.
A student who has filed a FAFSA but has not applied for or accepted
an offer of admission may be provided a tentative aid package or not,
depending on school policy. A student who has applied for aid but not
for admission would likely get only general student consumer
information. A student who has applied for aid and has been offered
admission would probably be offered an aid package, as that is part of
the student's decisionmaking process.
These likelihoods result from the limited nature of at least some
forms of aid: given limited available amounts, a school would not be
able to accurately determine individual student awards unless it knows
roughly how many students will likely attend. So, a balance must be
achieved between providing specific award amounts and offering funds to
the students most likely to attend the school. Thus, some schools would
offer a financial aid package including estimated award amounts to all
accepted students who applied for aid, having based those amounts on an
analysis of past experience with numbers of admitted students who
actually attend, while other schools would offer an aid package only
after a student has accepted the offer of admission.
Question 6. One of NACAC's strategic goals is to ``proactively
encourage, welcome and value diverse perspectives in membership.''
(http://www.nacacnet.org/AboutNACAC/Pages/strategicpriorities.aspx)
NACAC appears to restrict its institutional and counselor membership to
only non-profit organizations and admissions personnel. Do you have any
members from for-profit schools in any other membership categories? Why
does NACAC restrict its membership to non-profit and public schools?
Wouldn't for-profit schools and counselors also benefit from NACAC's
programs and training?
Answer 6. At present, NACAC's bylaws only allow for non-profit
institutional membership for postsecondary institutions. Twice in the
last decade, the NACAC membership has voted on proposals to allow for-
profit colleges to become members. On both occasions, the measure
failed by relatively close margins. Members do generally believe that
admission professionals at for-profit colleges could benefit from
NACAC's programs and services. Perhaps more importantly, a large number
of members believe that the students who are potentially interested in
for-profit colleges stand to benefit from a more ethical recruiting
environment. However, a majority of members on both occasions were
unconvinced, given the state of practice at many for-profit
institutions and the apparently widespread disregard for Federal laws,
that for-profit institutions would be seriously committed to ethical
practice.
A large number of our members, as well as our leadership and staff,
remain open to for-profit membership in the future, particularly if
institutions demonstrate a commitment to ethical practice in admission
and recruiting.
Question 7. Does NACAC take a position on the fact that tuition at
all higher education institutions is increasing at above the rate of
inflation and has been for many years? Does NACAC believe higher
education is providing the same value for the money as it did in 1992?
Please explain.
Answer 7. NACAC believes in the value of higher education, and
believe that it continues to be a worthwhile investment. Data from the
Census Bureau's Current Population Survey (http://www.census.gov/
compendia/statab/2010/tables/10s0227.pdf) continues to suggest that
individuals who obtain a Bachelor's degree earn nearly twice as much in
annual salary as those who hold only a high school diploma.
While we know college costs are a major challenge to many families
in the United States, we also understand that the circumstances that
have led to the current college pricing structure are complex and not
easily reversed. Several important factors for the committee to
consider include \3\:
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\3\ Excerpted from the College Board's Trends in College Pricing,
2009.* http://www.trends-collegeboard.com/college_pricing/
highlights.html.
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Published Tuition and Fee and Room and Board Charges
Published tuition and fees at public 4-year colleges and
universities rose at an average annual rate of 4.9 percent per year
beyond general inflation from 1999-2000 to 2009-10, more rapidly than
in either of the previous two decades. The rate of growth of published
prices at both private not-for-profit 4-year and public 2-year
institutions was lower from 1999-2000 to 2009-10 than in either of the
previous two decades.
Published charges do not reflect the prices most students
pay. About one-third of full-time students pay without the assistance
of grant aid, and some of these students receive Federal tax credits
and deductions to help cover expenses.
Published in-state tuition and fees at public 4-year
institutions average $7,020 in 2009-10, $429 (6.5 percent) higher than
in 2008-9. Average total charges, including tuition and fees and room
and board, are $15,213, up 5.9 percent.
Published out-of-state tuition and fees at public 4-year
colleges and universities average $18,548, $1,088 (6.2 percent) higher
than in 2008-9. Average total charges are $26,741, up 6.0 percent.
Published tuition and fees at public 2-year colleges
average $2,544, $172 (7.3 percent) higher than in 2008-9.
Published tuition and fees at private not-for-profit 4-
year colleges and universities average $26,273 in 2009-10, $1,096 (4.4
percent) higher than in 2008-9. Average total charges are $35,636, up
4.3 percent.
Estimated published tuition and fees at private for-profit
institutions average $14,174, $859 (6.5 percent) higher than in 2008-9.
Largely due to fluctuating energy prices, the Consumer
Price Index (CPI) declined by 4.0 percent from July 2008 to January
2009 and then rose by 2.0 percent from January 2009 to July 2009,
yielding a decline of 2.1 percent for the year. This decline means that
inflation-adjusted increases in prices this year are larger than
current dollar increases.
All students, whether they live in campus housing or not,
must buy books and supplies and pay for food, housing and other living
expenses while in school. They would face many similar expenses if they
were not in school, but would be able to devote more time to the labor
force.
Variation in Tuition and Fees
Half of all full-time public and private not-for-profit 4-year
college students attend institutions charging tuition and fees less
than $8,679, and half attend institutions with higher published prices.
In 2009-10, published in-State tuition and fees at public
doctorate-granting universities are $7,797, compared to $6,094 at
public master's universities, and $5,930 at public baccalaureate
colleges.
About 24 percent of all full-time students attending 4-
year colleges are enrolled in institutions with published prices below
$6,000 per year. This includes 33 percent of public college students
and 5 percent of private college students.