[Senate Hearing 112-774]
[From the U.S. Government Publishing Office]
S. Hrg. 112-774
BRIDGEPOINT EDUCATION, INC.: A CASE STUDY IN FOR-PROFIT EDUCATION AND
OVERSIGHT
=======================================================================
HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
ON
EXAMINING BRIDGEPOINT EDUCATION, INC., FOCUSING ON A CASE STUDY IN FOR-
PROFIT EDUCATION AND OVERSIGHT
__________
MARCH 10, 2011
__________
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Pensions
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
TOM HARKIN, Iowa, Chairman
BARBARA A. MIKULSKI, Maryland
JEFF BINGAMAN, New Mexico
PATTY MURRAY, Washington
BERNARD SANDERS (I), Vermont
ROBERT P. CASEY, JR., Pennsylvania
KAY R. HAGAN, North Carolina
JEFF MERKLEY, Oregon
AL FRANKEN, Minnesota
MICHAEL F. BENNET, Colorado
SHELDON WHITEHOUSE, Rhode Island
RICHARD BLUMENTHAL, Connecticut
MICHAEL B. ENZI, Wyoming
LAMAR ALEXANDER, Tennessee
RICHARD BURR, North Carolina
JOHNNY ISAKSON, Georgia
RAND PAUL, Kentucky
ORRIN G. HATCH, Utah
JOHN McCAIN, Arizona
PAT ROBERTS, Kansas
LISA MURKOWSKI, Alaska
MARK KIRK, Illinois
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
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STATEMENTS
THURSDAY, MARCH 10, 2011
Page
Committee Members
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.............................................. 6
Hagan, Hon. Kay R., a U.S. Senator from the State of North
Carolina, statement............................................ 49
Blumenthal, Hon. Richard, a U.S. Senator from the State of
Connecticut, statement......................................... 51
Merkley, Hon. Jeff, a U.S. Senator from the State of Oregon,
statement...................................................... 55
Durbin, Hon. Richard J., a U.S. Senator from the State of
Illinois, prepared statement................................... 66
Witness--Panel I
Tighe, Kathleen S., Inspector General, U.S. Department of
Education, Washington, DC...................................... 11
Prepared statement........................................... 12
Witnesses--Panel II
Willems, Arlie, Ph.D., Retired, Iowa Department of Education,
Anamosa, IA.................................................... 23
Prepared statement........................................... 25
Manning, Sylvia, President, The Higher Learning Commission,
Chicago, IL.................................................... 33
Prepared statement........................................... 34
Cruz, Jose, Vice President for Higher Education Policy and
Practice, The Higher Education Trust, Washington, DC........... 39
Prepared statement........................................... 40
ADDITIONAL MATERIAL
Statements, articles, publications, letters, etc.:
Why Do Ethics Stories Still Quote CREW's Melanie Sloan?, The
New Republic, article...................................... 9
Gregory D. Kutz, Managing Director, Forensics Audits and
Special Investigations, GAO, reissued testimony............ 70
GAO redlined summary of revisions............................ 91
GAO memorandum............................................... 97
Response to questions of Senator Enzi by:
Kathleen S. Tighe........................................ 98
Sylvia Manning........................................... 101
Jose Cruz................................................ 101
(iii)
Letters:
William J. Taggart, CEO, U.S. Department of Education's
Federal Student Aid (FSA).............................. 10
Michael D. Bopp, Gibson Dunn, from Daniel E. Smith, Staff
Director, Senate HELP Committee........................ 102
William O'Reilly, Jones Day, from the Hon. Tom Harkin.... 102
Duncan Anderson, Education Affiliates, from the Hon. Tom
Harkin................................................. 104
Hon. Lamar Alexander from:
Louis Gladney, student, Ashford University........... 106
Amanda Knochel, student, Ashford University.......... 107
Samantha Rhea, student, Ashford University........... 107
Hon. Michael B. Enzi, from Stehpanie Vallejo, student,
Ashford University..................................... 108
Arne Duncan, Secretary, U.S. Department of Education,
from Citizens for Responsibility and Ethics in
Washington, (CREW)..................................... 109
Kathleen Tighe, from the Hon. Richard Burr and the Hon.
Tom A. Coburn, M.D..................................... 116
Hon. Tom Harkin and Hon. Mike Enzi, from DicksteinShapiro
LLP.................................................... 119
Michael Zuver, student, Westwood College................. 122
Beth Stein, Esq., Chief Investigative Counsel, Senate
HELP Committee, from WilmerHale........................ 122
Andrew S. Clark, CEO, Bridgepoint Education, Inc., from
Daniel E. Smith, Staff Director, Senate HELP Committee. 123
Hon. Tom Harkin, from Andrew Clark, CEO, Bridgepoint
Education, Inc......................................... 124
Daniel E. Smith, Staff Director, Senate HELP Committee,
from WilmerHale........................................ 125
BRIDGEPOINT EDUCATION, INC.: A CASE STUDY IN FOR-PROFIT EDUCATION AND
OVERSIGHT
----------
THURSDAY, MARCH 10, 2011
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The committee met, pursuant to notice, at 10:02 a.m., in
Room SD-430, Dirksen Senate Office Building, Hon. Tom Harkin,
chairman of the committee, presiding.
Present: Senators Harkin, Hagan, Merkley, Blumenthal, Enzi,
and Isakson.
Opening Statement of Senator Harkin
The Chairman. The Committee on Health, Education, Labor,
and Pensions will come to order.
This is the committee's fourth hearing focusing on the
Federal investment in for-profit higher education companies and
whether the $26 billion in annual taxpayer money flowing to
this sector is a good value for students and taxpayers.
Now I intend to make quite a lengthy opening statement with
charts, and I certainly will yield whatever time I take to my
Ranking Member to use whatever time that he would like to take
also, just so that we are fair in terms of the time.
We have previously taken a look at the specific aspects of
this sector, including recruiting practices, placement,
accreditation issues, student outcomes, and, most recently, the
for-profit industry's targeting of veterans and GI educational
benefits. These were in previous hearings.
Today's hearing is our first opportunity to bring all of
these pieces together with a case study of a single for-profit
education company, Bridgepoint Education, Inc. This will give
us a window into the key elements of the for-profit education
business model and the implications of that model for students
and taxpayers.
Today's hearing will examine not only Bridgepoint, but also
the regulatory environment that allowed a school of just 300
students to grow into big business with a student body of
78,000 students in just 4 years, capturing more than $600
million in Federal subsidies annually.
All institutions of higher education that receive Federal
student aid are regulated by at least three different
entities--the Federal Government, the State in which the
institution operates, and an accrediting body recognized by the
Secretary of Education. Together, these three bodies are
referred to as ``the triad'' and are collectively tasked with
ensuring that the schools are meeting basic guarantees of
academic quality and fiscal soundness and are complying with
pertinent State and Federal laws.
With us today are representatives from each of the three
bodies with responsibility for regulatory oversight of
Bridgepoint. On our first panel is Kathleen Tighe, the
Inspector General of the Department of Education. The
Department of Education enforces basic Federal standards for
schools that participate in the Federal student aid programs.
These standards range from prohibitions on paying recruiters on
a per student basis, to prohibitions on having more than 30
percent of a school's loan recipients defaulting within 3 years
of leaving college. The Inspector General's office recently
found Bridgepoint in violation of several of these rules.
On our second panel, we will hear from Sylvia Manning,
executive director of the Higher Learning Commission of the
North Central Association of Colleges and Schools--HLC, for
short. HLC is the accreditor of Bridgepoint's two colleges:
Ashford University and the University of the Rockies.
Institutions that want to receive Federal student aid must
be accredited by 1 of 19 organizations recognized by the
Secretary of Education. Accreditors are private, nonprofit
organizations of schools that organize peer reviews of
institutions of higher education conducted by volunteers within
its membership. The organizations are funded by membership
fees.
The role of accreditors is to evaluate the academic quality
of institutions of higher education. For more than 50 years,
the Federal Government has relied on the judgment of
accreditors to ensure that schools eligible for taxpayer
support meet minimum standards of quality.
The third part of the triad is State government, which
provide colleges with the legal authorization to operate within
their borders. The State authorization role is very clear when
it comes to public, State-run universities like the University
of Iowa or Iowa State University. These institutions have
public boards of trustees, receive large amounts of State
dollars, and have corresponding State scrutiny.
However, very few States provide serious scrutiny of for-
profit colleges operating within their borders. Many allow
these institutions to operate with only a basic business
license. That, I believe, is a missed opportunity for oversight
because State regulators have the best knowledge of local
communities and are closest to the for-profit institutions that
have a significant impact on citizens.
We will hear today from Arlie Willems, recently retired
from the Iowa Department of Education, about her review of the
Bridgepoint teaching programs.
Now, for Bridgepoint. Bridgepoint Education, Inc., is run
by CEO Andrew Clark. I had, of course, invited Mr. Clark here
today to provide his company an opportunity to be a part of the
hearing, and I had even moved the hearing date to accommodate
concerns his company raised. But Mr. Clark decided not to join
us.
In 2005, Bridgepoint Education, Inc., a newly formed
corporation run by at least four executives formerly with the
University of Phoenix, received seed money from Wall Street
private equity giant Warburg Pincus. They used the money to
purchase a regionally accredited but struggling religious
school, which had already been approved to offer some distance
learning programs.
The small, religious, nonprofit school, Mount St. Clare
College of Clinton, IA, had an enrollment of just 332 students.
Between 2005 and 2010, Bridgepoint grew its enrollment to
77,892 students, becoming a behemoth, with 99 percent of
students taking classes exclusively online.
This first chart gives you an idea of how this small entity
grew from nonexistence, sort of like the ``big bang'' theory.
They didn't exist at this point in time and then, all of a
sudden, almost 78,000 students.
Despite this radical reinvention as a giant, for-profit,
overwhelmingly online institution, Bridgepoint--which I will
point out is 65 percent owned by Warburg Pincus--prefers to
market itself as a longstanding, traditional 4-year
institution. Here is the description they gave to U.S. News and
World Report.
''Founded in 1918, Ashford University is committed to
providing accessible, affordable, innovative, high-
quality degree programs to its campus, online, and
accelerated students.''
This statement is totally misleading.
Now let me read what they said to their investors. That is
what they said to their students and prospective students. Here
is what they said to their investors.
''One of the biggest advantages we have enjoyed as an
organization has been the fact that we started this
company ourselves 6 years ago.''
Not founded in 1918.
``We did not inherit any of the legacy systems that you
often do as I know when you come into other organizations.''
Which one is correct? Talk about duplicity.
This committee's analysis of records provided by
Bridgepoint is that for students who enrolled in 2008 and 2009,
as of September 2010, 84 percent of 2-year students and 63
percent of 4-year students had already dropped out of school.
That is what this chart shows.
This is the 63 percent. This is the bachelor's program.
Sixty-three percent had withdrawn. And on the associate, the 2-
year program, 84.4 percent had withdrawn. These are students,
mind you, who signed up in 2008 and 2009, and we wanted to know
where they were in 2010. Sixty-three percent already gone here.
Eighty-four percent in the associate's already gone.
These dismal outcomes should be deeply disturbing to all
American taxpayers. But remarkably, the withdrawal of nearly
two-thirds of its students in less than 2 years doesn't seem to
trouble Bridgepoint's executives in the least. Instead, they
are basking in the applause of Wall Street for growing the
company's student enrollment and increasing profits, increasing
profits, from $81 million in 2009 to $216 million in 2010.
This is profit. It went from $81 million in 2009 to $216
million in 2010. In the world of for-profit higher education,
spectacular business success is possible despite an equally
spectacular record of student failure.
This is Bridgepoint's profits in 2007, I am sorry, $3.9
million in profits. This last year, $216 million in profits in
just 4 years. In just 4 years, $3 million to $216 million.
Now here is why Bridgepoint's record is a matter of
necessary and urgent concern to this committee. Chart 6, in
2009, this company received 86.5 percent of its revenues
directly from the Federal Government, including $4.15 million
in military educational benefits, and not including an
additional $500,000, almost $500,000 from the State of Iowa.
So Bridgepoint is a private company, but it is almost
entirely dependent on public funds. The profits from this
enterprise go into private pockets, but the losses are borne by
the public--by students, who leave with a mountain of debt, but
no degree, and taxpayers, whose investment is often squandered
through Pell grants.
Now, to understand how Bridgepoint has been able to grow so
fast, let us take a look at how it spends the revenue brought
in from various Federal and State sources. In 2010, Bridgepoint
retained 30 percent of its revenues as profit--30.3 percent.
That is, the profit was $216 million, as we saw. The company
spent another 30 percent on recruiting, marketing. That
includes advertising, paying for names of prospective students,
called ``leads,'' paying the salaries of the extensive staff of
salespeople who are known as ``enrollment advisers.''
Enrollment advisers, these are the people that go out and
recruit these students.
That left just 40 percent of revenues for spending on
everything else--instructional expenses, student services,
faculty salaries, administrative expenses, and, of course,
executive compensation, which ate up another $36.7 million just
to the top 5 executives. Let me repeat, $36.7 million of the
other 40 percent went just to the top 5 executives.
Meanwhile, students are paying at least $46,000 to $50,000
for tuition and fees for a 4-year program. As for a comparison,
at the University of Iowa, it is about $24,500 for those 4
years. Of course, if you don't actually provide much in the way
of student services, the actual education piece doesn't cost
your company very much.
And this chart, as you can see, while Bridgepoint employs
1,703 recruitment sales staff--you know, those, what did they
call them, ``enrollment advisers''--1,703. They have plans, we
got from their internal documents, to add at least 500 more
this year.
Got that? Seventeen hundred and three people to go out and
get students, but the company employs just one person charged
with job placement for all 77,892 students. One person.
Mr. Clark himself told an interviewer, ``We don't provide
them with job placement. They are using education to further
their career within the company they are working for.''
I think this statement would come as a surprise to the many
students at Bridgepoint who are unemployed or are looking to
enter a totally new field than the one they are in right now.
They may be working at McDonald's, and they want to do
something else.
So given what we know about the withdrawal rates and the
lack of quality education services, it shouldn't come as a
surprise to see what has happened to instructional costs per
student as Bridge-
point has rapidly grown the student body at Ashford University.
As you can see, this is a chart that shows what Bridgepoint
spends on instruction on a per student basis.
When they purchased Mount St. Clare, run by the nuns, the
college was spending about $5,000 per student on instruction.
That went down last year to $700 per student in 2009. In fact,
internal Bridgepoint documents show that spending on faculty
costs alone plummeted from $1,133 per student in 2007 to $377
in 2008, in just 1 year. Their own internal documents, spending
on faculty alone plummeted from $1,133 per student to $377 per
student in just 1 year.
I asked committee staff to compare this to per student
spending at other Iowa schools. Here are the comparisons with
the University of Iowa--Bridgepoint is on the left in the
blue--the University of Iowa, Iowa State, and Kirkwood
Community College in terms of just showing a perspective on how
much money is spent by these schools on instruction. So I think
that sort of kind of speaks for itself.
As I said, last year, Bridgepoint's top 5 executives took
home combined compensation of $36.7 million. The CEO alone
received compensation of $20.5 million in 2009. That is more
than 20 times the compensation of the president of Harvard
University.
And while they were making all this money, mind you, not
off of making a product that someone is going to sell competing
with somebody else. Now they are not making software. They are
not making hardware. They are not making a better pencil or a
pen or anything else. This is all public money. It is coming
from the taxpayers directly and from student loans guaranteed
by the Federal Government.
And Bridgepoint, while they were making all of this--
Bridgepoint left in its wake tens of thousands of drop-outs
burdened with a mountain of debt. And so, I guess you could say
that 86 percent of Mr. Clark's $20 million, $17.4 million, came
from U.S. taxpayers. I think this is a scam, an absolute scam.
Data reviewed by this committee paints a picture of a
company, and perhaps an industry, that is premised on
aggressively recruiting largely low-income, disadvantaged
students. Why? That is the best business model because the
poorer the students you can get, the bigger Pell grant. The
more in student loans you get, the poorer students you get,
poorer people you get.
And these are, many times, kids who got through high school
with a D average or a C average, but they get recruited
heavily. And I have other documents to show how recruiters push
the pain points and how they recruit these students--I spoke
about this on the floor of the Senate--to get these kids to
sign up. And they handle all the paperwork. They handle all the
Pell grants, all the requests for student loans.
So they aggressively recruit largely low-income,
disadvantaged students. They collect their Federal grants and
loans, even as the vast majority, as we have seen, drop out.
And then, their executives and shareholders get a lot of money,
get a lot of money.
We listened in on the last investor call including Warburg
Pincus and Ashford. Nothing about students and how they are
doing. Profit, how much profit did they make? And
congratulating each other on how much profit they made.
Now I am not against making a profit. But when this is done
only basically 86 to 90 percent of it from taxpayers' money or
going after the military--it is both taxpayers' money--and
disadvantaged students, who then drop out with a mountain of
debt, I get disturbed. I think we all ought to be disturbed by
that.
It is very closely akin to the subprime. A lot of the
subprime mortgages happened because people were chasing the
American dream. They wanted a home, and we wanted to promote
people to have homes, their own homes. But a few very bright
individuals figured out how to take that and securitize it and
get derivatives on it and make a ton of money.
Well, I think the same thing is happening here in the for-
profit industry. For-profit schools in the past have done a
good job in many ways, in providing good instruction for
technical schools. Most of them started out as welding schools
and truck driving schools and secretarial schools and things
like that. But now, because of the Federal Pell grants and the
amount of loans, a few bright people have figured out how to
turn this and how to make it into a huge profit-making
industry.
The difference between the subprime and this is at least in
the subprime mortgage crisis you could walk away from your
home. You could walk away from it. These students with these
debts cannot walk away from them. They will be around their
necks until they pay them off. They won't be able to get other
loans. They won't be able to get credit ratings, and they can't
walk away from it.
So, from a strictly moneymaking perspective, what I have
described is a highly successful model. But I must say, from an
educational perspective and from the perspective of public
moneys and disadvantaged students, from an ethical perspective,
I think it is a deeply disturbing model.
I would like to take this opportunity to introduce into the
record a number of documents provided to the committee by
Bridgepoint and by Higher Learning Commission that we will be
using today.
[The information referred to is retained in committee files
and may be accessed at http://help.senate.gov.]
The Chairman. I would also like to take this opportunity to
enter into the record over 700--here they are. I have over 700
student complaints, student complaints received by Bridgepoint.
[The information referred to is retained in committee files
and may be accessed at http://help.senate.gov.]
We will hear more about these complaints later in the
hearing. But let me say they paint a very grim picture of the
student experience at Ashford University, owned by Bridgepoint.
Now I have taken a lot of time. As I said, in all fairness,
I will yield to whatever time my Ranking Member would like to
have.
Senator Enzi.
Statement of Senator Enzi
Senator Enzi. Thank you, Mr. Chairman.
I noted from your first slide that there must be a
tremendous demand for nontraditional education that they are
able to pull that many students in. And also, there must be
some problems with their financial literacy if they are
spending $50,000 instead of $24,000.
So I appreciate those points in the information. But
throughout these hearings, I have been consistently requesting
that we examine the issues you have identified objectively and
across all sectors of higher education--issues such as high
default rates, rising tuition, low graduation rates, poor
student outcomes. These are problems for nonprofit and for
public institutions of higher education, and they deserve the
attention of this committee.
Unfortunately, my request has been ignored, and the result
has been three of the most biased and poorly executed hearings
in my nearly 15 years in the Senate. The highlight of the first
hearing on June 24 was the inflammatory testimony of a Wall
Street investor who possessed no expertise in education.
Many questioned the propriety of his appearing as a
witness, given his possible financial interest in the for-
profit sector. Since then, documents obtained through the
Freedom of Information Act requested by the congressional
watchdog Citizens for Responsibility and Ethics in Washington
(CREW) have provided credible information that this witness was
not only attempting to influence Department of Education
rulemaking but may have improperly received information from
department officials regarding this rulemaking.
I ask unanimous consent to submit to the record the
Citizens for Responsibility and Ethics in Washington's March 1,
2001, letter to Secretary Duncan.
The Chairman. Without objection.
[The information referenced above may be found in
additional material.]
Senator Enzi. At the second hearing on August 4, we heard
testimony regarding a GAO ``secret shopper'' investigation,
which you requested and pressed for. That testimony was
ultimately found to contain so many factual errors and
mischaracterizations that it was substantially revised and
reissued.
Since then, the GAO has reassigned the managing director
responsible for the investigation, reorganized the entire
Forensic Audit and Special Investigations Unit, and is now the
subject of a House Oversight and Government Reform Committee
investigation.
I ask unanimous consent to submit to the record the revised
October 4 GAO testimony and redlined summary of the revisions,
as well as GAO's memo detailing the reorganization of the FSI
unit.
The Chairman. Without objection.
[The information referenced above may be found in
additional material.]
Senator Enzi. At the same hearing, we heard testimony from
a witness who recounted his experience as a recruiter at a for-
profit school. Since then, credible information has been
provided to both the majority and minority staff that suggests
this witness may have given false testimony to the committee.
I ask unanimous consent to submit to the record the
December 17, 2010, letter from Mark Paoletta regarding the
testimony of Joshua Pruyn.
The Chairman. Without objection.
[The information referenced above may be found in
additional material.]
Senator Enzi. Unfortunately, it appears this hearing is no
different. In a March 1, 2011, letter to Bridgepoint regarding
their appearance at this hearing, your staff director states
that,
``You should be aware that it would be made clear at
the hearing that your failure to appear is based on
nothing other than your own apparent unwillingness to
testify regarding how a company that receives over 86
percent of its revenue from the Federal Government saw
a 1-year increase in profit from $81 million to $216
million, but also has student withdrawal rates of at
least 65 to 75 percent.''
Notwithstanding my concern that your staff would send such
a heavy-handed letter on behalf of the committee, it disturbs
me that the majority would indicate its willingness to
intentionally mischaracterize a desired witness's legitimate
reasons for declining an invitation to testify.
As this letter to your staff from Bridgepoint's attorney
shows, Bridgepoint had expressed to you in detail its
reservations about appearing before it had fully responded to
the Inspector General's audit and while the Department of
Education's process is ongoing.
I ask unanimous consent to submit to the record the March
1, 2011, letter from the HELP Committee majority staff
director, Daniel Smith, and the March 7, 2011, response from
Bridgepoint's CEO, Andrew Clark.
The Chairman. Without objection.
[The information referenced above may be found in
additional material.]
Senator Enzi. Make no mistake, the Inspector General's
findings trouble me as much as they do you. These are
potentially serious violations of the law, which need to be
pursued. However, a process is in place to objectively review
these matters without interference from Congress.
This hearing is an agenda-driven rush to judgment. It is a
cart before the horse, a verdict before the trial. The first
step in this process is an IG audit, but a final decision by
the Secretary will not be made until Bridgepoint has had a
chance to respond to the IG's findings. Bridgepoint is
currently in the process of responding, and it deserves to do
so without our interference.
This process has worked countless times before, and I trust
that Secretary Duncan will take the appropriate actions. I see
no reason why we have reached this point. There are many
problems in higher education that have to be addressed. Most
exist throughout all sectors of higher education. And yes, many
are more acute for the for-profit sector.
Had you come to us at the outset, I am quite certain we
could have found common ground to address these issues in an
objective and bipartisan successful way. That tradition of
bipartisanship and respect for the views of all Senators is
what has made this one of the most productive committees over
the past decade. Unfortunately, that tradition has been
abandoned with these hearings, and I fear we will do lasting
damage to this committee's ability to conduct credible
oversight and investigations.
As I have said repeatedly, I do not condone any
inappropriate behavior. If a school is improperly using Federal
money, it needs to be dealt with immediately. However, if these
problems are systemic, we need to work toward solutions on how
to address them. Unfortunately, by only focusing these hearings
on individual examples of a problem in one sector of higher
education, we have no understanding of the true extent of the
problem, nor have we heard any constructive solutions for
solving that problem.
So I am going to leave to see if I can put the horse in
front of the cart for a change.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Enzi.
I have some documents I would like to include in the record
regarding the CREW allegations against the Department of
Education.
[The information referenced above may be found in
additional material.]
I would also like to enter into the record a March 4 post
from The New Republic on the subject of CREW and its executive
director that looks at this question as well.
[The New Republic, March 4, 2011]
Why Do Ethics Stories Still Quote CREW's Melanie Sloan?
(By James Downie)
Kudos to the New York Times for a well-done investigation,
published yesterday, on how companies operating in Louisiana are
donating large amounts of money to Bobby Jindal's wife's charity. Of
course, that does not immediately prove something unethical has
actually taken place, but, well, I'll let a quote from the Times piece
sum it up:
``The motives might be good,'' said Melanie Sloan, director
of Citizens for Responsibility and Ethics [in Washington],
which has also examined public records detailing the operations
of Mrs. Jindal's charity. ``But the donations that come in to
charities like this are almost always from folks who want
something from a politician. It is a troubling phenomenon.''
Melanie Sloan is exactly right: Even if your motives are well-
intentioned, if the surrounding relationships look unethical, then
people should be troubled. It reminds me of another news item from last
November:
When the executive director of a prominent Washington ethics
watchdog group goes to work for a well-known corporate
lobbyist, it's bound to raise a few eyebrows.
But in the case of Melanie Sloan of Citizens for
Responsibility and Ethics (CREW), who last week announced she
is [leaving CREW and] joining the new firm of lobbyist Lanny
Davis, there's another layer of intrigue: Sloan came under fire
over the summer for appearing to go to bat for the for-profit
schools industry, which is currently a paid lobbying client of
Davis. At the time, Sloan and CREW explicitly cited a column
Davis wrote defending the for-profit industry. Now, Sloan is
going to work for Davis.
In interviews with Salon, Sloan and Davis both said that the
concatenation of events is a pure coincidence . . . ``It was a
coincidence'' that CREW cited Davis' column in July, Sloan
says. ``This is not any different than anything else CREW does
where people automatically ascribe a motive to us--it's not
true.'' She argues that there is disturbing evidence that short
sellers are pushing the new regulations, adding that ``I'm
really comfortable with where we are on this.''
Sloan eventually reversed course and announced she would stay at
CREW, but she has continued to lash out at groups advocating against
for-profit colleges. And since the transparency group does not release
its donor list, we still do not know exactly why Sloan has decided to
make for-profit colleges a crusade. Given that the Times story was
otherwise well-reported, it's a shame that the quoted ethics source has
undermined herself so thoroughly, and reporters will (or at least
should) think twice in the future before citing Sloan.
The Chairman. I also want to introduce into the record
statements from the GAO regarding its investigation and
reorganization, especially the statement from GAO,
``We were pleased to see that the inspection showed
the revised report was fully supportable, and there was
no bias or conflict of interest at all involved in the
work. We continue to stand by the overall message of
our report, and we have no plans to withdraw it.''--
Statement from the GAO.
And in fact, the tapes of all of the GAO investigations are
both on the committee Web site and my own Web site. So I would
like to introduce those into the record.
[The information referred to may be accessed from the
committee Web site at http://help.senate.gov.]
And a letter from the Chief Operating Officer of the
Department of Education, dated March 9.
``This letter is to confirm that the U.S. Department
of Education's Federal Student Aid has no concerns or
reservations with representatives of Bridgepoint
Education testifying on March 10, 2011. FSA met with
counsel for Bridgepoint's Ashford University on March
4, 2011, provided them with an opportunity to share
information which they considered relevant to the
Office of Inspector General audit of Ashford University
that FSA is currently resolving. There was nothing in
that meeting that FSA believes would have any impact on
Bridgepoint's ability to testify.''
I want to introduce that also into the record.
[The information referred to follows:]
U.S. Department of Education,
March 9, 2011.
Hon. Tom Harkin, Chairman,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20510-6300.
Dear Mr. Chairman: This letter is to confirm that the U.S.
Department of Education's Federal Student Aid (FSA) has no concerns or
reservations with representatives of Bridgepoint Education, Inc.
(Bridgepoint) testifying on March 10, 2011.
FSA met with counsel for Bridgepoint's Ashford University on March
4, 2011 and provided them with an opportunity to share information
which they considered relevant to the Office of Inspector General's
audit of Ashford University that FSA is currently resolving. There was
nothing in that meeting that FSA believes would have any impact on
Bridgepoint's ability to testify.
Please let me know if you have any additional questions.
Sincerely,
William J. Taggart,
Chief Operating Officer (CEO).
The Chairman. Now we will start with our witnesses. I
appreciate your patience and appreciate your being here today.
And first, we will start with Kathleen Tighe, the Inspector
General, who was sworn in as Inspector General for the
Department on March 17, 2010.
Prior to that, she was Deputy Inspector General at the U.S.
Department of Agriculture. And from 1995 to 2005, she served as
counsel to the Inspector General of the GSA and before that as
assistant counsel for the Office of Inspector General.
Ms. Tighe has lectured frequently to both Government and
industry groups. She earned her law degree with honors from
George Washington University, her master's degree in
international relations from American University, graduated
with distinction from Purdue, a member of Phi Beta Kappa.
So, Ms. Tighe, again, I welcome you. Your statement will be
made a part of the record in its entirety, and I would ask if
you could basically sum it up for us in several minutes.
STATEMENT OF KATHLEEN S. TIGHE, INSPECTOR GENERAL, U.S.
DEPARTMENT OF EDUCATION, WASHINGTON, DC
Ms. Tighe. Thank you, Mr. Chairman.
Good morning. Good morning, Senator.
Thank you for inviting me here today to discuss our recent
audit report on Ashford University's administration of Federal
student aid for its distance education programs. We chose to
audit Ashford due to the tremendous growth in the amount of
Federal student aid it disbursed to its students over the last
several years and its rapid expansion into distance education.
I note that in a 5-year period, the title IV funds that
Ashford received grew from about $3 million to $613 million.
Our initial objectives were to focus on the types of problems
we had identified at other institutions that provide distance
education, such as Federal student aid disbursements and return
of Federal student aid funds.
After we began our onsite audit work, though, we decided to
add to our review Ashford's compliance with the incentive
compensation safe harbor regulations because of the significant
increase in the number of Ashford's enrollment advisers, which
in a 2-year period had increased from about 100 to nearly
1,000.
Our audit identified significant deficiencies in Ashford's
administration of the Federal student aid programs. We first
found that Ashford had established a highly incentivized
compensation plan for its enrollment advisers but could not
demonstrate that it qualified for the regulatory safe harbors.
Ashford had designed a compensation plan using a complex matrix
to evaluate its enrollment advisers' performance and related
salary adjustments, assigning points for factors tied to
enrollments and other factors based on performance measures.
Initially, 35 out of 100 possible points were based on
securing enrollments. In April 2007, Ashford increased the
points assigned for securing enrollments to 74 points out of
100. We reviewed Ashford's salary adjustments and found that
fully 92 percent of the actual salaries did not match the
amounts they should have under the compensation plan.
We also found that Ashford's processes for determining
academically related activity in the distance education
environment did not meet Federal requirements. Institutions are
required to ensure that students receiving Federal student aid
are engaged in academically related activities.
Ashford considered mere clicks into the learning block of
its online educational software as equating to academic
activity. In our own analysis, we looked instead for evidence
of submissions of homework assignments, participation in
quizzes, and the like.
We found that Ashford also disbursed Federal student aid
for students who were ineligible because the students had not
yet completed the prior payment period. Seventy-five percent of
the improper disbursements in our sample were made for students
who never became eligible. We estimated that the total amount
of ineligible disbursements Ashford made during the award year
we looked at to be between $3.7 million and $8.9 million.
In addition, Ashford's procedures for charging tuition and
fees and disbursing Federal student aid resulted in credit
balances on students' accounts. Schools may hold credit
balances if they follow Federal requirements. We found that
Ashford violated these requirements by holding credit balances
for which there were no currently assessed institutional
charges and by not properly obtaining the students'
authorization to hold a credit balance.
Ashford also did not maintain a subsidiary ledger account
to identify those credit balances it was holding, as required
by regulation. So we could not readily identify the total
amount of credit balances Ashford was, in fact, holding.
When students cease attending an institution, institutions
are required to follow specific regulations to determine if
Federal student aid must be returned to the department or to
the lender. We found that Ashford did not properly calculate
the amounts it was to return because of a combination of
factors.
It did not properly calculate the payment period end date
for students who did not complete their credits according to
schedule. It didn't always use the correct last day of
attendance as the withdrawal date, and it didn't always
correctly project the applicable tuition charges. For the award
year we looked at, we estimated that Ashford improperly
retained about $1.1 million for its students.
The findings we identified at Ashford and through our
related audit work, as well as our investigative work,
highlight the difficulty that all institutions face in
administering Federal student aid in the distance education
online environment. The overarching challenge, we believe, in
this area is adapting to distance education the regulatory and
oversight environment that is based on traditional semester-
based classroom instruction.
To help address the challenges facing higher education, my
office--in the area of distance education, my office recently
initiated an audit to determine what the department has done
and can do to help reduce the risks associated with distance
education at all institutions--public, nonprofit, and for-
profit. We are also compiling a report on the vulnerabilities
we have identified through our investigative work in the
distance education area that we will use to recommend program
enhancements to help mitigate these vulnerabilities.
That concludes my statement, and I am happy to answer any
questions.
[The prepared statement of Ms. Tighe follows:]
Prepared Statement of Kathleen S. Tighe
summary
Inspector General Kathleen S. Tighe will testify before the U.S.
Senate Health, Education, Labor, and Pensions Committee on Thursday,
March 10 on the U.S. Department of Education (Department) Office of
Inspector General's (OIG) audit of Ashford University's administration
of the Title IV, Higher Education Act programs, issued on January 21,
2011.
Inspector General Tighe will share that Ashford was chosen for
audit due to the tremendous growth in the amount of Federal student aid
it disbursed to its students, its rapid expansion into distance
education, and the significant increase in the number of enrollment
advisors it employed over a short period of time. She will present the
findings of the audit, which identified the following deficiencies in
Ashford's administration of the Federal student aid programs:
Incentive Compensation--Ashford established a highly
incentivized compensation plan for its enrollment advisors but could
not demonstrate that its policies and business practices for
compensating its enrollment advisors qualified for the regulatory safe
harbors;
Student Eligibility for Federal Student Aid--Ashford's
processes for determining ``academically related activity'' in the
distance education environment did not meet Federal requirements.
Federal Student Aid Disbursements--Ashford disbursed
Federal student aid for students who were ineligible as they had not
completed coursework to qualify for additional aid disbursements;
Credit Balances--Ashford held credit balances for
institutional charges that had not been assessed and also did not
obtain required student authorizations; and
Return of Federal Student Aid Program Funds--Ashford did
not properly calculate the amounts it was to return, and often paid the
returns late.
Inspector General Tighe will also update the committee on OIG
investigative work in the distance education arena and will share with
them information on other work the OIG is presently conducting
involving distance education. This includes an audit to determine what
the Department has done and can do to help reduce the risks associated
with distance education at all institutions, and a report on the
vulnerabilities OIG investigative work has identified that will
recommend program enhancements to help mitigate these vulnerabilities.
______
Chairman Harkin, Ranking Member Enzi, and members of the committee,
thank you for inviting me here today to discuss the U.S. Department of
Education (Department) Office of Inspector General's (OIG) recent audit
report on Ashford University's administration of the Title IV, Higher
Education Act programs. This is my second appearance before this
committee since I became the Inspector General last year. It is an
honor to lead this organization and to have the opportunity to share
with you our efforts to ensure integrity and efficiency in Federal
education programs and operations.
As requested, I will testify today on the findings of our audit
that sought to determine whether, for its distance education programs,
Ashford University (Ashford) complied with selected provisions of the
Higher Education Act of 1965, as amended (HEA). I will also discuss
more broadly our concerns involving Federal student aid used for
distance education, an area vulnerable to risk and one in which OIG is
currently focused on combating fraud and abuse.
Our audit of Ashford University's distance education programs was
the fifth audit that my office has conducted involving distance
education over the last 3 years. The explosion of distance education in
recent years--at for-profit, non-profit, and public institutions--has
demanded our audit and investigative attention and the findings of our
work highlight the need for greater oversight and/or statutory or
regulatory change. The overarching challenge in this area is adapting
to distance education the regulatory and oversight environment that is
based on traditional, semester-based classroom instruction, and in
particular, determining whether students in distance education are
``regular students'' as required by the HEA and actually in attendance
for Federal student aid purposes. I will discuss this in more detail
throughout this testimony.
summary of oig audit of ashford university
The following is a summary of our findings at Ashford and the
recommendations we made to the Department to address the deficiencies
identified.
Background
The institution was established in 1918 as a non-profit,
residential junior college located in Clinton, IA, originally named
Mount St. Clare College. In 1979, the institution received approval to
award baccalaureate degrees, and in 2002, changed its name to The
Franciscan University. In 2004, the school conferred its first graduate
degrees and changed its name to The Franciscan University of the
Prairies. The institution struggled financially due to declining
enrollment. In 2005, Bridgepoint Education, Inc. (Bridgepoint), a
publicly traded for-profit corporation headquartered in San Diego, CA,
purchased the institution and changed its name to Ashford University.
Ashford experienced immediate, tremendous growth by offering distance
education programs. This growth coincided with the 2006 elimination of
the HEA's limitation on distance education. The limitation required
that 50 percent or more of any schools' students could not be enrolled
in distance education programs and that a school could not offer more
than 50 percent of its courses on-line or via distance education. From
the 2005-6 award year to the 2008-9 award year, recipients of Federal
student aid enrolled in distance education at Ashford increased from
about 1,800 to nearly 33,000. For award year 2004-5, Ashford received
just under $3 million in Federal student aid funds, increasing to $16
million for 2005-6, and exceeding $81 million for 2006-7. The
tremendous growth continued, with Ashford receiving approximately $613
million in Federal student aid funds for the 2009-10 award year.
We selected Ashford for audit due to the significant amount of
Federal student aid disbursed to its students and to Ashford's rapid
expansion into distance education. We consider both to be risk factors
that could impact an institution's ability to adequately administer the
Federal student aid programs. Our initial objectives at Ashford were to
focus on the types of problems we have identified at other institutions
that provide distance education: (1) student eligibility for Federal
student aid; (2) Federal student aid disbursements; and (3) return of
Federal student aid program funds. After we began our onsite audit work
and gained an understanding of Ashford's business model, we decided to
also review its compliance with incentive compensation safe harbor
regulations promulgated by the Department in 2002. We added this
objective because we identified a significant increase in the number of
Ashford's enrollment advisors, which in a 2-year period had increased
from about 100 to nearly 1,000.
Audit Findings
Our audit identified significant deficiencies in Ashford's
administration of the Federal student aid programs. Our primary finding
was that Ashford had established a highly incentivized compensation
plan for its enrollment advisors but could not demonstrate that its
policies and business practices for compensating its enrollment
advisors qualified for the regulatory safe harbors. Our other findings
identified deficiencies similar to those that we found at other
distance education institutions we have audited, such as deficiencies
related to disbursement of Federal student aid funds and return of
Federal student aid program funds. A summary of our findings at Ashford
follows.
Incentive Compensation
In 1992, Congress banned incentive payments to school enrollment
advisors based directly or indirectly upon success in securing student
enrollments or awarding financial aid. However, in 2002, the Department
issued regulations that provided 12 exceptions, known as safe harbors,
that an institution may practice without violating the statutory ban.
The first safe harbor allows for the payment of fixed compensation as
long as the compensation is not adjusted up or down more than twice
during any 12-month period and any adjustment is not based solely on
the number of students enrolled.
Our audit found that Ashford had designed a compensation plan using
a complex matrix to evaluate its enrollment advisors' performance and
related salary adjustments with the intention of qualifying for the
first safe harbor. The plan assigned points for eight quantitative
factors tied to enrollments and 10 qualitative factors based on other
professional performance measures. Every 6 months, enrollment advisors
were to be evaluated and assigned points. Initially, 35 out of 100
possible points were based on securing enrollments. In April 2007,
points assigned for securing enrollments rose to 74 out of 100. The
point totals correlated to five different salary ranges within which
salaries could vary between $9,000 and $34,000.
We found that Ashford did not adjust salaries based on its
compensation plan as the plan was explained to us during our audit. For
the 27 evaluations of enrollment advisors we tested, 92 percent of
actual salaries did not match the amount we calculated using the
formula that some Ashford officials stated was used to set salaries
under the plan (other Ashford officials could not provide an
explanation of how they determined salaries.) Four of the twenty-seven
evaluations resulted in salaries outside of the expected salary range.
In response to a draft of our audit report, Ashford explained that
it allowed discretion for its managers in adjusting salaries; however,
Ashford did not explain how the discretion was to be exercised and
ultimately could not demonstrate why its enrollment advisors received a
particular salary. As a result, we could not conclude that it qualified
for the safe harbor its compensation plan was designed to meet.
student eligibility for federal student aid
Institutions are required to ensure that students receiving Federal
student aid are engaged in academically related activities. Ashford
considered ``clicks'' into the ``Learning Block'' of its on-line
educational software to support academically related engagement to
demonstrate attendance. In our analysis, which we based on the
Department's guidance, we did not consider a mere ``click'' of a link
on Ashford's Web site or in the ``Learning Block'' to be evidence of
academic attendance as required by the regulations. For example, a
student's click on the announcement section of a ``Learning Block'' did
not reflect academic attendance by the student. We obtained and
reviewed electronic records for the courses that the students attended
and used the course records that showed students' academic postings to
document attendance. We considered a student to have attended if we
found evidence in the system that the student:
Responded to an academically related question asked by the
instructor;
Contributed to an academically related discussion;
Submitted a homework assignment; or
Participated in an on-line quiz.
Ashford's reliance on clicks rather than on actual academic
activity to determine student attendance was a contributing factor to
the findings we identified involving disbursing and returning Federal
student aid.
federal student aid disbursements
Ashford delivered distance education programs in non-term, credit-
hour programs. For undergraduate programs, the courses were, for the
most part, offered in three credit modules of 5 weeks in length. For
non-term, credit-hour programs, an institution must disburse Federal
student aid based on its payment period. Ashford's payment period
comprised four 5-week modules that began on the first day of the first
module and ended on the day that the student successfully completed the
fourth module or 12 credits.
Ashford allowed students to take breaks of up to 29 days between
modules, so payment periods varied by student. Based on our sample, we
found that Ashford disbursed Federal student aid for students who were
ineligible, because the students had not yet completed the prior
payment period. Seventy-five percent of the improper disbursements to
students in our sample were made to students who never became eligible.
For the 2006-7 award year, we identified over $89,000 disbursed to
students in our sample who were not eligible to receive Federal student
aid and estimated that the total amount of ineligible disbursements
Ashford made during the award year to be between $3.7 and $8.9 million.
Although in most cases Ashford identified and corrected improper
disbursements after they were made, Ashford had use of the funds and
may have earned interest it was not entitled to.
Ashford's procedures for charging tuition and fees and disbursing
Federal student aid resulted in credit balances on student accounts. A
credit balance occurs when funds disbursed exceed current allowable
charges. Schools may hold credit balances if they follow regulatory
requirements. We found that Ashford violated these requirements by
holding credit balances for which there were no currently assessed
institutional charges and by not properly obtaining a student's
authorization to hold a credit balance for funds that normally would be
promptly paid to the student. Ashford's authorization form did not
provide the option to have the credit balance paid to the student. If a
school does not obtain an authorization--or if the student revokes his
or her prior authorization--the school must pay the credit balance to
the student within 14 days. Ashford did not maintain a subsidiary
ledger account to identify credit balances it held for longer than 14
days, as required by regulation, so we could not readily identify the
total amount of credit balances Ashford was holding.
return of federal student aid program funds
When students cease attending, institutions are required to follow
specific regulations to determine if Federal student aid must be
returned to the Department or to the lender, as applicable. The Federal
Government is harmed when an institution does not return Federal Family
Education Loan funds to lenders timely because it must pay interest on
the average unpaid principal to lenders on subsidized student loans
during in-school status and the grace period prior to entering
repayment. Borrowers are harmed when an institution improperly retains
loan funds because borrowers are responsible for any interest that
accrues on their unsubsidized loan amounts that should have been
returned to the lenders.
Ashford did not properly calculate the amounts it was to return
because it did not (1) revise the payment period end date for students
who did not complete their credits according to schedule; (2) use the
correct last date of attendance at an academically related activity as
the withdrawal date; and (3) correctly project the tuition charges that
would have been charged to the students if they had completed the
credits for the payment period. For the 2006-7 award year, we
identified more than $29,000 in improperly retained funds for the
students in our sample and estimated that Ashford improperly retained
at least $1.1 million for all students in the award year.
Ashford also did not return funds in a timely manner. Institutions
are required to return unearned funds as soon as possible but no later
than 45 days after they determine that a student has withdrawn. Of the
47 returns for students in our sample, 21 (45 percent) were paid late.
The late payments ranged between 3 and 273 days.
A contributing factor to some of Ashford's incorrect calculations
of funds to be returned and late payments was that Ashford did not
always have documentation to support students' leaves of absence. If a
student was not attending and was not on an approved leave of absence,
Ashford was required to treat the student as having withdrawn and to
determine if funds needed to be returned. Unapproved leaves of absence
resulted in incorrect determinations of the last date of attendance for
students who did not return to school, and in many cases, the incorrect
determination of the last date of attendance resulted in incorrect
amounts to be returned and contributed to late returns being paid.
Audit Recommendations
Based on our incentive compensation finding, we recommended that
the Department require Ashford to provide records of all salary
adjustments made during our audit period, and take appropriate
administrative action for all salary adjustments that did not qualify
for the safe harbor.
For our other findings, we recommended that Ashford be required to:
Return Federal student aid funds which Ashford was not
entitled to retain; and
Cease drawing, disbursing, and holding credit balances for
which there are no currently assessed institutional charges.
We also recommended that the Department consider taking appropriate
administrative action based on Ashford's improper disbursement and
return of Federal student aid funds. Ashford officials disagreed with
all of our findings and recommendations.
We issued our final report on January 21, 2011. The Department must
now determine how to address our recommendations. Ashford officials
have the opportunity to provide additional comments and information
that they believe may have a bearing on the Department's resolution of
the audit. The Office of Management and Budget Circular A-50, Audit
Followup, requires the Department to resolve our audit within 6 months
after the final audit report was issued.
I would now like to take a moment to update you on our other work
involving distance education.
distance education
The findings we have identified through our distance education
audits and investigative work highlight the difficulty that all
institutions face in administering Federal student aid in the distance
education/on-line environment. These difficulties leave Federal student
aid funds at significant risk of being disbursed to ineligible students
and that inadequate refunds will be made for students who cease
attendance in these programs.
Our investigative work continues to affirm the vulnerability of
distance education to fraud. Since 2005, we have initiated 100
investigations of ``fraud rings'' targeting distance education programs
at public, non-profit, and for-profit schools. Since we first testified
about this issue in October 2009, our case load in this area has more
than doubled. We are currently investigating 66 fraud ring cases.
Our work in this area has revealed that large, loosely affiliated
groups of criminals seek to exploit distance education programs to
cause Federal student aid to be paid to them. These groups, which we
refer to as ``fraud rings,'' typically have one or more ring leaders
and associates who work to recruit friends, relatives, and other
acquaintances to enroll into distance education programs for the sole
purpose of improperly obtaining Federal student aid funds.
Once someone agrees to collaborate in the scheme, the ring leader
often completes and submits admission forms, Federal financial aid
applications, and supporting documentation, often including forgeries
and false statements of eligibility, such as having a high school
diploma or GED. The ring leaders sometimes assume the identity of
scheme participants to access a school's on-line classes in order to
generate records of the individuals' participation in the classes,
which causes school officials to authorize financial aid payments. By
targeting distance education programs, the participants avoid setting
foot on campus and can exploit institutions outside their geographic
area.
These fraud rings mainly target lower-cost institutions because the
Federal student aid awards are sufficient to satisfy institutional
charges (such as tuition) and result in disbursement of the balance of
an award to the student for other educational expenses (such as books,
room and board, and commuting expenses). Participants in these fraud
rings, however, have no intention of pursuing a degree or credential
and have no legitimate educational expenses. Once a disbursement is
received, a portion is typically kicked back to the ring leader or
recruiter, who often controls the address or bank account where
payments are sent.
Many of these fraud ring investigations have involved dozens of
participating individuals. In one recently completed case, we obtained
convictions of 64 participants who fraudulently obtained over $530,000
in Federal student aid funds. A number of institutions have been
aggressively engaged in trying to identify fraud in this area and have
been communicating with our office regarding their findings or
concerns.
To help address challenges facing the higher education community in
the area of distance education, my office recently initiated an audit
to determine what the Department has done and can do to help reduce the
risks associated with distance education at all institutions. The
objectives of this audit are to determine whether the Department: (1)
adapted Title IV, HEA program requirements and guidance to mitigate the
unique risks of fraud, waste, and abuse inherent in the distance
education environment; and (2) adequately revised its monitoring of
other entities (e.g., accrediting agencies, State agencies,
institutions of higher education) to provide reasonable assurance of
those entities' adherence to the requirements for distance education.
This audit work will look at 2-year and 4-year distance education
programs at public and non-profit schools, as well as for-profit
schools. Our audit is just underway and we look to release a final
report later this year.
We are also compiling a report for the Department on the
vulnerabilities that we have identified in our investigative work in
the distance education area that will recommend program enhancements to
help mitigate these vulnerabilities. We plan to release this report
within the next few months.
In addition, the Department's program integrity regulations that
will go into effect on July 1 of this year make changes to the
regulatory framework that we hope will help reduce waste, fraud, and
abuse in the area of distance education. The changes include a further
definition of academically related engagement, defining a credit hour,
calculating refunds in a non-term module system, and expanding the
definition of misrepresentation. The Department will need to be
vigilant to ensure the effectiveness of the new regulations and
determine whether further changes are needed. We will monitor the
implementation of the Department's new regulations, and will do
whatever we can to ensure that the new regulations assist in protecting
our Nation's students, parents, and taxpayers.
This concludes my remarks on our audit of Ashford University and
our concerns about Federal student aid funds used for distance
education. I want to thank you again for inviting me to testify today.
We look forward to working with this committee and the 112th Congress
to help improve Federal education programs and operations so they meet
the needs of America's students and families and ensure tax dollars for
education are protected from waste, fraud, and abuse. I am happy to
answer any of your questions.
The Chairman. Thank you very much. Thank you very much,
Inspector Tighe.
Let me first get into this whole issue of safe harbors.
When you have a regulation called a safe harbor, and as you
pointed out, the initial legislation in 1992 that was
instigated by former Senator Sam Nunn at that time, the
legislation passed the House and Senate that provided you could
not pay--in the for-profit sector, you couldn't pay recruiters
a capitation payment. In other words, based on how many
students they enrolled.
Ms. Tighe. That is right.
The Chairman. In 2002, regulations issued by the Department
of Education--not a law that we passed, but regulations--set up
12 different kinds of safe harbors, which could be used so that
if you didn't base all of your compensation on recruitment,
then you would be in a safe harbor.
When you have a regulation like a safe harbor, it implies
it should be pretty easy to comply with. Again, tell us what
you found in the Bridgepoint audit regarding their executive
incentive, their incentive compensation. You reviewed the
school. You said that it set a policy that 74 percent could be
based on points directly related to securing enrollments.
But documents produced, revealed later they based more on
that. So it seems to me 74 percent is a pretty generous policy.
How can you violate that kind of a policy?
Ms. Tighe. Well, it was a generous policy. The problem, and
if they had actually followed their policy, they would have met
the safe harbor. All they had to do was show that the
enrollment advisers' compensation was based on something other
than enrollments. It really isn't a very hard criteria to meet.
Most schools have met it very readily.
Ashford, in this case--I mean, it surprised us, I think, as
much as anyone that the matrix and the compensation plan on
their face looked like they met the safe harbor. But when we
went in and tested it, we found that, in fact, the salaries
didn't match up with the plan at all. So we could not actually
tell what factors the compensation was based on. So Ashford, in
the end, could not demonstrate that it met the safe harbor.
The Chairman. In the student complaints that we have
reviewed, there are innumerable student complaints about
mishandled financial aid, students being told to start before
financial aid came through, and students being unable to
resolve financial aid concerns as a result of frequent staff
changes or inability to reach the financial aid staff.
A number of students complained they had their financial
aid and/or billing mishandled, often resulting from withdrawals
that were also mishandled, and usually resulting in thousands
of dollars of charges. Again, we had over--as I pointed, it is
over 750 complaints.
And these are the complaints--these are not just all the
complaints that someone called in. These are 750 complaints
that went through the formal grievance process. Probably
thousands more that just called up and never got anybody.
One student said she sent,
``one email every other day to my financial aid
adviser, begging for a response, and didn't receive a
response at all. To date, I have not received a call
back or email response to any of my inquiries.''
Another said, ``During my time at Ashford, I have been
assigned over six different financial services
representatives.''
A third said,
``My major complaint is the fact that when I was
enrolling in classes, I had no problem with someone
from the school returning my phone call. Now that I am
an existing student, I cannot get anyone to return my
phone calls.''
Again, it has to do with the chart I showed in terms of
services or the lack of services to students. What consequences
does this have for the handling of title IV dollars?
Ms. Tighe. Well, I think it is significant. I think it is
reflective of what we have seen in schools that grow very
rapidly. When they grow very rapidly, particularly in the
distance education area, handling title IV funds becomes a
challenge.
And I think that what we have seen in schools, although we
did not specifically look at it at Ashford, what we have seen
at other similar institutions is that there is a high turnover.
They don't hire financial aid administrators who are up on all
the requirements, and it has implications, I think, for the
schools and for the students. And I think you end up having the
same kind of problems we found in this audit.
The Chairman. Last, I have a chart here. All of the alarm
bells that the growth at Ashford set off in my mind, when I saw
this huge growth--I think it set it off for your office. I
guess then I don't know if that is a reason, but your office
performed the audit.
And so, we looked at your audit, but that was conducted, if
I am not mistaken--you correct me if I am wrong. That audit was
conducted based on Ashford in 2006, when they had 4,471
students. And even with all of the findings that you found,
look where Ashford is now, at 78,000 students. Am I right in
that, that the audit was really based upon the 4,000?
Ms. Tighe. That is correct. We looked at the 2006-7 award
year, and I think there were roughly--so it would include the
whole time period, 2006 through July 2007. And I think at the
time we looked at Ashford, there were about 8,500 students, but
that is nowhere near the 77,000 students there.
The Chairman. I understand that. My question is, with all
those findings, what is it like now? We don't really have a
handle on that, and I guess is the audit process the best tool
we have to assess for-profit schools' handling of Federal
financial aid? Do we need a closer snapshot in time as to what
is going on?
Ms. Tighe. Yes. I mean, I know there is obviously a lag
time here between the period of time we looked at and our being
able to come out with a written audit product. I will say this,
I think that the issues we found--we are aware specifically
that Ashford, on a couple of areas, has taken action to fix the
problem.
For example, on the credit balances, it developed a new
form that gave voluntary authorization by the students to
Ashford to hold the credit balances. It worked with its service
provider on the timeliness of the returns of title IV funds.
But there are a lot of other issues that we point out that we
are not sure they have fixed. And I think that I would be
concerned that those issues are still ongoing. How are they
calculating payment periods? How are they calculating the
dates?
And I think that, you know, there are a couple of areas
where I think you can get maybe a more current snapshot. I
think in the process FSA is going through right now with
Ashford in the resolution of our audit, FSA could ask Ashford
to do a file review of the later years, the years past when we
looked at.
They themselves could go in and do a program review, based
on our audit findings, of its current processes and take a look
at it now. So I think there are a couple of things that can be
done.
I know you are aware that Ashford--all the for-profit
schools have compliance audits that are done every year. Now,
the compliance audit that will come out this year won't have
the benefit of our findings. So you will have to wait another
year for that to happen. But it is an imperfect process, but
right now, it is sort of what we have.
The Chairman. You said, ``We recommend''--in your
statement, you said,
``We recommend Ashford be required to return Federal
student aid funds which Ashford was not entitled to
retain and cease drawing, disbursing, and holding
credit balances for which there are no currently
assessed institutional charges.''
Do you have any knowledge of whether or not that has been
done?
Ms. Tighe. I do not.
The Chairman. You don't know that?
Ms. Tighe. I do not know, but I don't think they have.
The Chairman. OK. Thank you. Thank you very much, Ms.
Tighe.
Senator Isakson.
Senator Isakson. Ms. Tighe, would you consider your
position to be somewhat similar to that of a district attorney?
Ms. Tighe. I think in some cases maybe a little broader,
because we do more than do criminal investigations. We also do
audits, but----
Senator Isakson. Do you make a determination as to whether
or not there should be an ``indictment,'' I guess?
Ms. Tighe. I think that would be a little strong in this
case. I don't see criminal behavior here. I see not handling
title IV funds very well. But I don't think we give any
evidence that we would see--we have seen criminal behavior.
Senator Isakson. And you haven't completed your
investigation, have you?
Ms. Tighe. We have completed our audit process, yes.
Senator Isakson. Have you completed your report back to the
committee, or has the Department of Education FSA totally
responded?
Ms. Tighe. It is up to--our report process is done at this
point. FSA has the ball in their court.
Senator Isakson. So it is up to them. But they haven't made
a decision yet?
Ms. Tighe. Yes. They have not made a decision, no.
Senator Isakson. Well, I just want to say that I want to
associate myself with the remarks of the Ranking Member. I have
concerns about some of the accusations that are being made, but
I have deeper concerns about getting into a prosecutorial-type
environment before a final report has even come back from the
department.
I am not criticizing you, but I do think the committee
needs to have a pretty even balance in terms of these things.
And some of the presentations, although they may be accurate to
the extent information is considered, they illustrate things
that, in fact, don't take in all considerations. I will give
you one example.
Senator Kerrey, Bob Kerrey from Nebraska, and I were
charged in the Clinton administration with what was known as
the Web-based education commission to investigate the delivery
of college content over the Internet, which resulted in the
creation of the eArmyU.
If you went and looked at numbers today, you would find the
number of people in 1999 in the military getting distance
learning was probably zero, and now it is a substantial part of
the deployment because it became available.
So I think the growth in enrollment--and I am not--this is
not a defensive statement. But I think when you talk about Web-
based delivery, the reason the safe harbors were created, Mr.
Chairman, in terms of the 50/50 rule, the 90/10 rule, and the
incentive compensation rule was to address the uniqueness of
Web-based delivery of content for higher education and training
because all of the old rules were archaic to that type of
delivery of the system.
You could have a totally disproportionate number that looks
horrible, but when you study the facts, you understand this was
a new delivery system, when developed, that became very popular
with students. Because the growing number of students in
America are nontraditional students, not traditional students,
and that is what most of these type of institutions deliver.
Again, I am not defending them, but I am saying I do know a
little bit about those numbers. And you have got to put all of
the numbers out there if you want to make an appropriate
comparison.
The other thing, are you familiar with AES?
Ms. Tighe. AES? No, I am not.
Senator Isakson. OK. That stands for Advanced Education
Service--something like that. Anyway, are you familiar with the
email traffic that was solicited in a FOIA request from the
department?
Ms. Tighe. No, I am not. I am sorry.
Senator Isakson. Well, I would just suggest, Mr. Chairman,
without getting into those details, that we should make sure
before we proceed any further with this that we have a result
on the FOIA request and the analysis of the emails that were
received that were transferred between the department and those
who might financially benefit from the activities of this
investigation.
I think it is very important that we make sure that we
don't get used by somebody on the outside. I am talking about
``we,'' the committee, somebody on the outside to prosecute a
case that may or may not have all the evidence in.
And the last thing I will say is this. I want Bridgepoint
to come to the hearing, but I want them to come to the hearing
after everything is on the table. And I think they probably
made an intelligent decision based on the incomplete nature of
FSA's determination as to whether or not they should be here.
I think when that determination is made, that is the point
in time which they should come and defend themselves, if a
defense is necessary. And with that, I appreciate your hard
work, and thank you very much.
Ms. Tighe. Thank you.
The Chairman. First of all, I would just reply to my friend
from Georgia, and he is my friend. I don't think anyone on this
committee is objecting to Web-based content at all.
What we are reacting to is the growth in low-quality Web-
based content that is taking a lot of public moneys, having
huge default rates, and sticking a lot of low-income kids and
adults with a mountain of debt. That is what I am objecting to.
This cries out for regulation.
Ms. Tighe, you said that one of your recommendations was
cease holding credit balances?
Ms. Tighe. That is correct.
The Chairman. Again, our internal documents from Ashford
show that, as of December 31, 2009--that is the most recent we
could get--they were holding, are you ready for this, $94.9
million in credit balances.
Ms. Tighe. I think their most recent 10-K that was just
filed has increased that amount to about $130 million.
The Chairman. That they are sitting on?
Ms. Tighe. That they are sitting on.
The Chairman. So I guess you draw interest on that money,
don't you?
Ms. Tighe. Yes, you do.
The Chairman. I mean, this is unconscionable. That is my
own--just unconscionable, unconscionable.
Do you have anything else, Ms. Tighe?
Ms. Tighe. That is it.
The Chairman. Thank you very much for your testimony and
your audit.
Ms. Tighe. Thank you very much.
The Chairman. Thank you very much.
We will now move to our second panel.
On the second panel, as I said, we have Dr. Arlie Willems
from Anamosa, IA, recently retired from the Iowa Department of
Education, where she was responsible for State reviews of
teacher preparation programs. Prior to her work at the
department, she was a faculty member at two colleges in Iowa,
where she focused on the preparation of new teachers.
Earlier in her career, Dr. Willems spent 18 years as a
classroom teacher and a coordinator for her district's program
for gifted and talented students. After Dr. Willems, we will
hear from Dr. Sylvia Manning, president of the accrediting
agency known as the Higher Learning Commission, HLC, of the
North Central Association of Colleges and Schools. Dr. Manning
came to HLC after 8 years as chancellor at the University of
Illinois at Chicago and previously served for 19 years in
various capacities at the University of Southern California,
including chair of the English Department and executive vice
provost.
Next we have Dr. Jose Cruz, vice president for higher
education and policy and practice at the Education Trust, a
nonpartisan, nonprofit organization here in Washington, DC. Dr.
Cruz is a former vice president of the University of Puerto
Rico, where he was responsible for admissions, financial aid,
and student life programs. He previously served as professor
and chair of the Electrical and Computer Engineering Department
and dean of academic affairs at UPR-Mayaguez campus.
Thank you all for being here. We will start in the order in
which I presented our panelists.
We will start with Ms. Willems. Welcome.
All of your statements will be made a part of the record in
their entirety, and if you could sum it up in several minutes,
I would appreciate it.
Ms. Willems, thank you.
STATEMENT OF ARLIE WILLEMS, Ph.D., RETIRED, IOWA DEPARTMENT OF
EDUCATION, ANAMOSA, IA
Ms. Willems. Thank you, Senator Harkin. And thank you for
inviting me here today.
I recently retired from the Iowa Department of Education,
where, for 5 years, I was responsible for reviews of teacher
preparation programs for the purpose of State approval. My
reasons for testifying before this committee are twofold: my
concern for the future of our preK-12 teaching force in Iowa
and nationally and my concern for individuals who have been
misled by a for-profit university.
My testimony will give this committee a look into one
window of one for-profit institution, with an eye toward the
quality of programming offered by that institution. The
institution is Ashford University. The window is the teacher
preparation program.
The State of Iowa values education and continues to
implement high standards for the preparation of its teachers.
To that end, the Iowa review process, outlined on pages 3 and 4
of my written testimony, is a rigorous process, including a
self-study by the program, a preliminary review by two groups
of peers, and a 3-day site visit.
Although the work of teachers has become eminently more
complex in recent decades, attempts at streamlining teacher
preparation have mushroomed. One group of players in this new
system of teacher preparation, the for-profit institutions of
higher learning, presents a specific threat to the future of
our teaching force because of their priorities--bottom-line
profits over quality.
I chaired the State review of teacher preparation programs
at Ashford University in Clinton, IA, during the 2005-6 school
year. In my first encounter with the president of Ashford on
July 21, 2005, he explained to me that the university is run
according to a business model in which the focus is the bottom
line.
At the time of the review, Ashford offered a fully approved
undergraduate teacher education program on the Clinton campus.
This program earned continuing full approval.
The program under discussion, the Master of Arts in
Teaching, the MAT program, was a completely online graduate
program for initial teaching licensure, but it served students
across the Nation. This program had been given conditional
approval by the Iowa State Board of Education on August 12,
2004. Full approval required a full review, including a site
visit, which was conducted on April 3-5, 2006, by a seven-
member team.
The results of the full review, found on pages 5 to 7 of my
written testimony, indicated 55 items of concern. In
comparison, the undergraduate program received seven items of
concern.
In the MAT, five of the six standards were reported as not
met in the initial findings and remained not met once the
Ashford program had been given opportunity to come into
compliance and had filed its response to the State. The MAT
program accepted the option of a ``teach-out,'' whereby the
students in the program were allowed to finish. One hundred of
the 108 successfully completed and became eligible for Iowa
licensure.
In response to a requirement by the State Board of
Education, 2005 Iowa Teacher of the Year Vicki Goldsmith was
hired by Ashford to supervise the teach-out. The teach-out was
completed by July 1, 2007, at which time the program ceased.
Following the teach-out, Ashford University entered into a
partnership with Rio Salado College in Maricopa County, AZ.
Ashford currently offers a bachelor of arts in social science
with a concentration in education. Courses from this program
can apply to Rio Salado's online post baccalaureate teacher
education program.
Completion of the Rio Salado program can result in an
Arizona teaching license, which can be transported to other
States depending on each State's reciprocity or exchange
policies. An individual who has attained an Arizona license in
this way does not automatically receive an Iowa license.
The Iowa Board of Educational Examiners, the State
licensing board, is just beginning to receive applications from
Iowans who have taken this route. Such applicants have been
found lacking in requirements for an Iowa license.
Since the teach-out, the department and the licensure board
have received numerous complaints from individuals across the
country. Time and again, my heart has gone out to Ashford
students who contacted me, voicing frustration, anger,
helplessness, and stories of time and money wasted on shattered
dreams of an education.
Often, these stories were of mounting debt with nothing to
show for it, individuals and families who could easily be
devastated by such debt. Ashford recruiters, paid on a
commission basis, have led many prospective students to believe
that the completion of an Ashford online program or the
combination of the Ashford/Rio Salado programs will result in
an Iowa teaching license.
Students relying on this misinformation in good faith have
found themselves in great debt and have not attained their goal
of becoming teachers. The problem is that Ashford University,
unable to meet Iowa's requirements, reconfigured offerings
within a new partnership and then misrepresented their program
to prospective students, driven by a business model where the
bottom line is the bottom line.
If we believe that education of our children is the key to
the future of this country, we cannot afford the preparation of
our teachers to be shortchanged by an unbridled business model.
The example that Ashford University provides is instructive. I
respectfully submit that we need to pay attention.
This concludes my remarks. I am happy to answer questions.
[The prepared statement of Ms. Willems follows:]
Prepared Statement of Arlie Willems, Ph.D.
summary
I am Arlie Willems, recently retired from the Iowa Department of
Education where, for 5 years, I was responsible for State reviews of
teacher preparation programs for the purpose of State approval. My
reasons for testifying before this committee are twofold: my concern
for the future of our PreK-12 teaching force, in Iowa and nationally,
and my concern for individuals who have been misled by for-profit
university recruiters. My testimony will give this committee a look
into one window of one for-profit institution with an eye toward the
quality of programming offered by that institution. The institution is
Ashford University. The window is the teacher preparation program, one
of few programs at any university that is required to undergo thorough
scrutiny.
In 2005, Bridgepoint Education purchased a private college in
Clinton, IA, and developed a for-profit university, Ashford University.
In my first encounter with the president of Ashford on July 21, 2005,
he explained the university is run according to a business model in
which the focus is the ``bottom line.''
Ashford offers most of their programs completely online. The much
smaller on-ground portion of the university continues to offer
programming on the Clinton campus .
I chaired the State review of teacher preparation programs at
Ashford University in Clinton, IA, in the spring of 2006, following a
protocol that enforces rigorous standards. At the time of the visit,
Ashford offered a fully approved undergraduate teacher education
program on the Clinton campus; this program earned continuing approval.
The program under discussion is the Master of Arts in Teaching (MAT)
program, a completely online graduate program for initial teaching
licensure. This program had been given conditional approval by the Iowa
State Board of Education on August 12, 2004; full approval required a
full review, including a site visit which was conducted April 3-5,
2006.
The results of the full review indicated 55 items of concern among
six standards; five of the six standards were reported as ``not met''
in the initial findings and remained ``not met'' once the Ashford
program had filed its response to the State. The graduate program
accepted the option of a teach-out, whereby the 108 students in the
program were allowed to finish the program; most successfully completed
and earned an Iowa teaching license. In response to a requirement by
the State Board of Education, 2005 Iowa Teacher of the Year Vicki
Goldsmith was hired by Ashford to supervise the teach-out. The teach-
out was completed by July 1, 2007, at which time the program ceased.
Following the teach-out Ashford University entered into a
partnership with Rio Salado College in Arizona. Ashford currently
offers a Bachelor of Arts in Social Science with a Concentration in
Education. Courses from this program can apply to Rio Salado's post-
baccalaureate teacher education program. Completion of the Rio Salado
program can result in an Arizona teaching license which can be
transported to other States, depending on each State's reciprocity/
exchange policies.
Ashford recruiters, paid on a commission basis, have led many
prospective students to believe that completing an Ashford online
program or the combination of the Ashford/Rio Salado programs will
result in an Iowa teaching license. Students relying on this
misinformation in good faith have found themselves in great debt with
education degrees that have not allowed them to become teachers. The
problem is that Ashford University, unable to meet its home State's
requirements, reconfigured offerings within a new partnership, and then
misrepresented their program to countless prospective students, all in
the name of a business model focused on the ``bottom line.'' The
example that Ashford University provides is instructive. I respectfully
submit that we need to pay attention.
______
introduction
I am Arlie Willems and have recently retired from the Iowa
Department of Education (Department) where I served for 5 years as
Administrative Consultant for Practitioner Preparation. In that role I
was responsible for State reviews of teacher and administrator
preparation programs for the purpose of State approval. In my 5 years
at the Department I reviewed 25 of the 32 teacher preparation programs
in Iowa. I respectfully submit the following testimony to the Senate
HELP Committee at the request of Senator Harkin in hopes that my
comments may shed additional light on the issues of for-profit
institutions of higher education.
reasons for testifying
My primary reason for being here today is my concern for the future
of our PreK-12 teaching force, in Iowa and nationally. The State of
Iowa values education and continues to implement high standards and
rigorous requirements for the preparation of teachers. Iowa understands
the singular importance of the classroom teacher to student learning
and the clear research on the necessity of quality preparation in
providing quality teachers for our K-12 students. With the
proliferation of for-profit institutions of higher education, this
quality issue could certainly be extrapolated to the general education
of our future workforce and leaders.
Although the work of teachers has become eminently more complex in
recent decades, attempts at streamlining their preparation have
mushroomed. While ``traditional'' preparation of teachers faces and
welcomes increased scrutiny and growing requirements, alternative means
of moving individuals into the teaching force have been given what
appears to many educators as carte blanche treatment. One group of
players in the new system of teacher preparation, the for-profit
institutions of higher learning, presents a specific threat to the
future of our teaching force because of their priorities: bottom line
profits over quality education. My last 5 years have been dedicated to
ensuring quality teachers for the State of Iowa; my concern is how that
quality control will continue as an increasing number of teachers are
prepared by institutions for whom the bottom line and corporate profits
trump attention to the quality of education received by these future
teachers.
My second reason for appearing here today results from numerous
phone calls and emails that I received from individuals across the
country when I worked at the Iowa Department of Education. Time and
again my heart went out to individuals who, seeing my name on the
Department Web site, contacted me voicing frustration, anger,
helplessness, and stories of time and money wasted on shattered dreams
of an education--an education promised by a for-profit institution of
higher education and a promise unfulfilled by that for-profit
institution. Often these stories were of mounting debt with nothing to
show for it, individuals and families who could easily be devastated by
such debt. Interestingly, in my 5 years at the Department, I received
no such contacts regarding more traditional institutions of higher
education, whether public or private.
purpose
My purpose here today is to give you a look into a window of one
for-profit institution with an eye toward the quality of programming
offered by that institution. The institution is Ashford University. The
window is the teacher preparation program, one of few programs at any
university that is required to undergo thorough scrutiny. That scrutiny
is for the purpose of State approval in fulfillment of the State's
responsibility to ensure quality teachers for its K-12 schools.
iowa system of review of educator preparation program
In order to ensure quality preparation of teachers and other
educators, the Iowa Department of Education operates an approval
process based on continuous improvement. Rigorous requirements outlined
in ``Chapter 79'' of the Iowa Administrative Code focus on six
standards similar to those used for national accreditation by the
National Council for Accreditation of Teacher Education (NCATE). Those
standards include governance and resources, diversity, faculty,
assessment (program), curriculum (student assessment), and clinical
practice. Compliance to the standards is expected and required;
acknowledgement of excellence and suggestions for further improvement
are important aspects of the continuous improvement model. State
approval entitles graduates from these programs to receive Iowa
licensure upon recommendation of their programs without individual
review.
Each of the 32 teacher preparation programs is reviewed in a 7-year
cycle. Key components of the process include the following:
1. Dates for a program review are established. Technical assistance
is available from the Department as a program prepares for its review.
2. Several months prior to the site review a program submits to the
Department an Institutional Report, a self-study based on a template
provided by the Department. During the same time the program submits to
the Department and to the Board of Educational Examiners (BOEE)
documents that delineate requirements for each endorsement (area of
licensure) offered by the program.
3. The Institutional Report is read and then discussed in a day-
long preliminary review. Participating in the Preliminary Review are
the State Team and the State Panel; the review is led by the consultant
for preparation at the Department. The State Team consists of 7 to 15
trained volunteer practitioner preparation peers and at least one
current practitioner, usually the Iowa Teacher of the Year. This is the
team that conducts the site visit. The State Panel consists of nine
experienced State reviewers who serve as volunteers for a 3-year term;
each State Panel member attends all preliminary reviews in a given year
and participates on at least one State team. The use of the State Panel
and the preliminary review process has proven to be very successful in
assisting teams and programs as they prepare for a more in-depth site
visit and in providing consistency in reviews of programs that vary
greatly in size.
4. Following the Preliminary Review the program receives a report
specifying questions and requests for further information, if needed.
This report provides both the State Team and the program a framework of
focus for the site visit.
5. The site visit is conducted by the State Team and led by the
preparation consultant from the Department. A typical site visit begins
on a Sunday evening and concludes on the following Thursday morning
with an exit meeting between the State consultant and representatives
from the program. The team usually works a minimum of 12-hour days
(Monday and Tuesday) and concludes its work by mid-afternoon on the
Wednesday of the visit. All team members, excluding the Department
consultant, are volunteers who view this experience as both
professional development and professional dues. Amazingly, to a person,
these teams end their marathon work having enjoyed the time and the
professional stimulation.
Team members are assigned a specific standard; in large program
reviews more than one team member will review a given standard. Similar
to a national review, team members review documents provided by the
program and interview faculty, students, administrators, graduates,
employers of those graduates, advisory board members, and other
stakeholders. Team members reviewing the clinical practice standard
visit sample preK-12 schools where students in the program complete
their student teaching and pre-student teaching clinical experiences.
Team members then draft their segments of the Final Report to the
program. The team as a whole discusses findings and makes the
determination regarding an initial recommendation: whether or not each
standard has been met.
6. Results of the site visit reported for each of the six standards
fall into one of three categories: met or met with strength; met
pending conditions; and not met. Any standard receiving a rating of
``met pending conditions'' must be addressed by the program; the
conditions of concern must be corrected within a reasonable amount of
time in order for the program to be recommended to the State Board of
Education for approval. A rating of ``not met'' for any given standard
indicates that the conditions of concern are considerable; a program
may correct such concerns and be recommended for approval within a
reasonable amount of time. During that time period the Department is in
communication with the program and provides technical assistance as
appropriate. Once the Department has received the program's final
response and has determined that all six standards have been met, the
program is recommended to the State Board for approval. The State Board
makes the final decision.
If a program does not correct the concerns to an acceptable level,
the program is not recommended for continuous approval. In such an
instance a program may be given a 1-year conditional approval in order
to further address issues that the Board determines problematic, or the
Board may determine that the program will lose State approval. In such
cases programs are allowed to ``teach out'' those students currently in
the program with close attention to any serious concerns addressed in
the report. The use of a ``teach out'' reflects the policy of the
Department to cause ``no harm'' to students who have begun a program in
good faith.
ashford university
Ashford University, based in Clinton, IA, is a wholly owned
subsidiary of Bridgepoint Education, Inc., a holding company located in
Poway, CA. The school was founded in 1918 by the Sisters of St. Francis
as a junior college for women and was known as Mount Saint Clare
College. Baccalaureate degree programs were initiated in 1979; in 2002,
as the institution added graduate degrees, the name of the school was
changed to The Franciscan University, later the Franciscan University
of the Prairies.
When Bridgepoint purchased the Franciscan University of the
Prairies, the university included an established, State-approved
teacher preparation program. At a meeting with representatives from the
Department and the BOEE on July 21, 2005, the president of Ashford
University stated that, with the purchase of the university,
Bridgepoint purchased an approved teacher preparation program. At that
time he gave the impression to the State education officials that he
fully expected an automatic continuation of State approval. The
president also explained to those in attendance that Ashford University
is run according to a business model in which the focus is on the
``bottom line.''
The approval in place at the time was that of a traditional
undergraduate teacher education program, offered on the grounds of the
Clinton campus and staffed by a combination of Franciscan sisters and
experienced lay teacher preparation educators. This program was to be
continued. Totally separate from the original on-ground undergraduate
program were a completely online graduate program for initial
licensure, the Master of Arts in Teaching (MAT), and a teacher intern
program, the alternative preparation model approved in the State of
Iowa. These new programs had been conditionally approved on August 12,
2004, and would require a full review before being fully approved. On
November 8, 2005, the Department received notice from Ashford
University that the intern program had been discontinued and students
in that program would have the option of transferring to the MAT
program.
timeline for the ashford mat program
August 12, 2004: Conditional approval for three on-line
programs, including MAT:
Teacher Intern Program
Master of Arts in Teaching for Initial Secondary
Licensure
Master of Arts in Teaching for Initial Secondary
Licensure, combined with the Teacher Intern Program
Spring, 2005: Purchase of The Franciscan University (of
the Prairies) by Bridgepoint Education, Inc., a holding company housed
in Poway, CA. School renamed Ashford University.
July 21, 2005: Iowa Department of Education (Department)
one-day visit to Ashford.
August 11, 2005: Conditional approval for the above three
programs with full review to be completed in April 2006.
November 8, 2005: Notification to the Department of
Ashford's intention to discontinue the Teacher Intern Program.
December 7, 2005: Department/BOEE meeting with Ashford
representatives at Grimes Building.
February 2, 2006: Preliminary Review followed by report to
Ashford and submission by Ashford of revised Institutional Report.
April 3-5, 2006: On-site visit.
April 19, 2006: Letter to Department stating that Ashford
is discontinuing new enrollments in the MAT Program; the most recent
cohort to start the program began January 17, 2006.
May 24, 2006: Department meeting with Ashford
representatives at Grimes Building.
July 14, 2006: Letter from Ashford to Department stating a
commitment ``to meeting all the standards necessary for a successful
teach out of the MAT Program.''
July 27, 2006: State Board approves the Ashford University
undergraduate practitioner preparation program through the completion
of the next program approval process.
July 27, 2006: The State Board granted (1) an extension of
conditional approval of the MAT Program until April 1, 2007, to allow
program completion by the cohort of candidates student teaching in the
fall of 2006 and (2) an extension of conditional approval of the MAT
Program until the September Board meeting to allow a decision to be
made at that time regarding the remaining candidates in the MAT
Program.
August 29, 2006: Stipulations were specified for the
Ashford MAT in a letter from the Department to Ashford University
following the July State Board meeting.
September 14, 2006: State Board grants extension of
conditional approval of the MAT program for the limited purpose of
permitting program completion by the cohort of (approximately 66)
candidates who are scheduled to student teach in the spring of 2007.
Conditional approval extends to July 1, 2007, for these candidates to
accommodate completion of the portfolio course, EDU 698, following
student teaching.
July 1, 2007: Ashford MAT Program no longer approved in
the State of Iowa.
report of state review
The Preliminary Review of the Ashford Program was held on February
2, 2006. Following review of the Ashford Institutional Report and
discussion by the State Panel and State Team, a preliminary report was
sent to Ashford University. A revised Institutional Report was
subsequently submitted to the Department by the Ashford program.
The State Team for the Ashford site visit was comprised of the
following: four faculty members, including two program chairs, from
approved Iowa teacher preparation programs in private colleges; the
Administrative Consultant from the Iowa Board of Educational Examiners,
the teacher licensing entity in Iowa; and the 2005 Iowa Teacher of the
Year. All team members were trained and experienced reviewers. The team
was led by the Administrative Consultant for Practitioner Preparation
at the Iowa Department of Education.
The Ashford University site visit took place on April 3-5, 2006.
Per standard practice, the team reviewed documents provided by the
program and interviewed faculty, students, administrators, and, as
possible, graduates, employers of graduates, and stakeholders of both
the undergraduate and graduate programs. At least 10 individuals in
administrative positions from California were in attendance or were
interviewed via phone. One key individual was not available for
interviews: the chair of the teacher preparation program at Ashford
until a few months following the Bridgepoint acquisition was under a
confidentiality agreement. The State's request to speak with this
individual was denied by Ashford University.
A summary of the final report for the review of the Ashford
programs is charted below. Both the graduate online program (MAT) and
the undergraduate on-ground program are represented. The programs were
reviewed separately, a decision made by the State Team and State Panel
following the Preliminary Review because it was the judgment of the
Team and Panel that these were two discrete, uncoordinated and very
different programs. Later interviews with faculty members of both
programs confirmed this fact and reinforced the total lack of
communication, collaboration, and coordination between the two
programs.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Undergraduate Program MAT Online Program
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Number of
Standard Initial Finding Item to be Final Finding Initial Finding Item to be Final Finding
Addressed Addressed
--------------------------------------------------------------------------------------------------------------------------------------------------------
Governance and Resources.......... Met.................. 0 Met.................. Not Met.............. 13 Not Met
Diversity......................... Met Pending 1 Met.................. Met Pending 1 Met
Conditions. Conditions.
Faculty........................... Met.................. 0 Met.................. Not Met.............. 11 Not Met
Curriculum........................ Met Pending 3 Met.................. Not Met.............. 9 Not Met
Conditions.
Assessment (Program).............. Met Pending 3 Met.................. Not Met.............. 10 Not Met
Conditions.
Clinical Practice................. Met.................. 0 Met.................. Not Met.............. 11 Not Met
--------------------------------------------------------------------------------------------------------------------------------------------------------
In the standard process programs make needed changes, provide the
Department evidence of those changes, and then are recommended to the
State Board for approval. For the Ashford undergraduate program the
Department received evidence of appropriate changes that allowed the
designation for all standards to be ``Met.'' Regarding the MAT program,
the Department received responses to all of the items that required
attention. In some cases evidence indicated that appropriate changes
had been made. In most cases, however, the response denied the
existence of a problem or defended the current practice; in those cases
no evidence of change was seen.
The State Team found the Ashford MAT program to be more a
collection of discrete courses than a cohesive program. The program was
understaffed for appropriate interaction with students and supervision
of both courses and clinical experiences, including student teaching.
Many faculty members lacked appropriate academic background and/or
experiences for their assigned responsibilities. The team saw no
evidence of a comprehensive system for assessment of candidates or of
the program, two critical requirements of the State administrative
code. The most serious concern noted by the team was the lack of
responsibility on the part of the program in providing quality clinical
experiences, the aspect of teacher preparation considered the most
important by preparation programs in Iowa. Generally, students were
responsible for finding their own clinical placements; many of these
resulting placements conflicted with what is considered best practice
for Iowa preparation. Responsibility for supervision was basically
relinquished to individuals within those K-12 schools with little
consistency or quality control.
Discussions within the Department and with State Team members
determined that the MAT program did not meet the requirements for
approval and that a teach-out of the students in the program at that
time would be recommended to the State Board. This option had been
discussed with the director of the Department of Education following
the Preliminary Review. A teach-out was discussed with the Ashford
Chancellor at the conclusion of the site visit when the team had
synthesized their findings and determined the existence of significant
areas of concern. The Chancellor expressed appreciation for that
option; she, personally, wanted to cause as little harm as possible to
students in the program.
teach-out of ashford mat students
Following a meeting between Ashford representatives and the
Department on May 24, 2006, Ashford University requested a teach-out of
the MAT program, allowing all students in the program the opportunity
to complete the program and graduate.
Three stipulations were specified for the teach-out of Ashford MAT
in a letter from the Department to Ashford University following the
July State Board meeting. These requirements included the following:
1. Each candidate shall student teach in an environment with
appropriate support.
2. Each student teacher shall have no fewer than six classroom
observations during the 12 weeks of student teaching.
3. Ashford shall hire a qualified person to monitor the
finalization of coursework by candidates as well as student teaching.
Additionally, specific information required by the Department
addressed the following: candidate and student teaching information;
candidate transcript review; online courses; responsibilities and
training of clinical supervisors and cooperating teachers;
documentation provided to students; and plans to address problems in
student teaching.
A critical requirement was the hiring of an independent
professional educator to oversee the teach-out. Vicki Goldsmith was
hired by Ashford on August 9, 2006, as Director of Supervision to
monitor the final coursework and student teaching of Ashford MAT
candidates. Ms. Goldsmith, the 2005-6 Iowa Teacher of the Year, is a
retired English teacher and served as clinical expert on six
practitioner preparation visit teams during the 2005-6 school year. In
that capacity she monitored 11 online courses and oversaw the student
teaching supervision of 108 student teachers. Having monitored threaded
discussions within the online courses, Ms. Goldsmith reinforced concern
about the quality of coursework that was initially found by the State
Team during the onsite visit. Ms. Goldsmith observed student teachers
who were determined to be having significant problems; at Ashford's
expense, Ms. Goldsmith traveled to North Carolina, South Carolina,
Kentucky, Michigan, Colorado, and Georgia as well as several schools in
Iowa. Ms. Goldsmith recollects that, of the 108 student teachers, eight
had serious enough problems to discontinue the student teaching
experience, thus disallowing completion of the program.
Regarding the student teachers, Ms. Goldsmith stated,
``The students in the MAT program were almost all middle-aged
people changing careers, people with maturity and life
experience, so several of them were competent and could use
past experience in their new work. One problem, however, was
that since we (the Ashford faculty) had not met any of the
students, it was easy for ones with significant problems to get
through the program without being noticed. Had we not called
attention to the poor quality of some of the courses and the
poor performances of some of the student teachers, I am
convinced that the ones we pulled from the program would now be
licensed. . . . I was relieved that the people we pulled were
not licensed from Iowa or in our classrooms.''
In a recent interview Ms. Goldsmith shared this conclusion,
``In the past 5 years I have made 14 State approval visits. I
am concerned that the quality of the programs at for-profit
schools is inconsistent and not on a level with the other
teacher preparation programs.''
As a personal point of privilege, I must note that my colleagues at
the BOEE, the Department, and those on the site visit State team agree
with me on an interesting dichotomy. As we have interacted with a
number of individuals from Ashford over the years, we have encountered
a lack of understanding of teaching and teacher preparation, arrogance
and even blatant rudeness. We have, however, worked effectively with
several individuals from Ashford who, personally, seem to understand
teaching and preparation well and exhibit high degrees of
professionalism.
partnership with rio salado college
Some months after the completion of the Ashford teach-out I
contacted an Ashford official regarding a student complaint. At that
time I was told about a partnership that Ashford University had forged
with Rio Salado College, 1 of 10 colleges in the Maricopa County
Community College District in Arizona. Education courses from the
Ashford BA in Social Science with a Concentration in Education apply to
Rio Salado's post-baccalaureate teacher education program. Once
students have completed the online Ashford BA and the online Rio Salado
teacher education program, they are eligible for an Arizona teaching
license. Such a license can then be transported to another State
according to each State's reciprocity/exchange policies. This
partnership could be seen as a creative way to solve a problem in order
to continue drawing students, or it could be seen as a way to
circumvent the accountability system for quality in order to continue
collecting tuition from students.
An individual who has attained an Arizona license in this way does
not automatically receive an Iowa license. The BOEE is just beginning
to receive applications from Iowans who have taken this route. The two
following examples demonstrate the difference between an Iowa license
and one attained through the Rio Salado program:
1. An elementary education applicant for an initial Iowa teaching
license had completed most of her coursework in an Iowa preparation
program and then completed the Rio Salado program for an Arizona
license. When she applied for an Iowa license she still had
deficiencies; according to a consultant at the BOEE, had she not
completed the coursework that she did at an Iowa college, the
deficiencies would have been considerable.
2. A current applicant for an Iowa license, having completed the
Rio Salado program and holding an Arizona license, meets the
requirements in Iowa for only one of the three teaching areas accepted
in Arizona.
From these examples one could conclude that an individual
completing the Ashford BA and the Rio Salado program would still have
considerable coursework to complete in order to attain an Iowa license.
contacts with the department with ashford students
At the time of the teach-out my colleague at the Department Dr.
Carole Richardson and I received calls and emails from several Ashford
students who were unhappy with the way they were being treated by the
Ashford program. Some appeared to have legitimate complaints; some were
angry that they had not been allowed to complete the program because
Ashford had determined that they did not demonstrate the skills and
knowledge necessary to complete student teaching and be licensed. In
all cases we contacted the Ashford program in order for them to address
the students' concerns.
Following the teach-out in 2006-7 Dr. Richardson and I received
numerous emails and phone calls regarding the Ashford MAT Program.
Phone logs indicate that, as late as the spring of 2010, my last months
at the Department, I was still receiving as many as three to six calls
a month. My colleagues in the BOEE, the State's teacher licensing arm,
received similar numbers of calls.
Some calls were simply information-seeking; many were calls of
frustration by students with stories of incurring loans and no
resulting job that would enable them to make payments. Contacts with
the Department have fallen into one of four categories: officials from
States other than Iowa; potential education students; current non-
education students; and current or recent education students. Licensure
officials in several States have called to ask whether the Ashford MAT
is an approved program in Iowa in order for them to determine whether
or not they will issue a license to an Ashford graduate in their State.
Potential Ashford students usually have the same question as those
State officials; some potential students immediately determine to look
elsewhere and some decide to follow the option of contacting the
Ashford program to discuss the partnership with Rio Salado College.
These are the fortunate individuals; they are able to prevent an ill-
fated situation for themselves. At times Ashford non-education students
call the Department with complaints for lack of anyone else to call,
voicing complaints that I could only refer to the Iowa College Student
Aid Commission.
Common complaints have included such issues as the following:
inaccurate information, lack of or tardy response from the university
when students attempt to ask questions or share concerns; financial
issues of many types; pressure to enroll or purchase text books in
short timeframes; rudeness; and general lack of helpfulness. One
student summed up her experience in the comment, ``That school has been
a nightmare.''
Calls from current or former Ashford education students may have
included any of the above complaints, but more often these complaints
addressed misinformation received from Ashford recruiters. As a result
of the 2006 State review of Ashford University, the only Ashford
program that results in qualification for an Iowa teaching license is
the on-ground undergraduate program. Recruiters for Ashford University
have provided misinformation to numerous individuals regarding the
ability to attain an Iowa teaching license through online course at
Ashford. Specifically, the following examples are representative:
1. Individuals from Iowa and many other States who had completed
Ashford's online Bachelor of Arts in Social Science with a
Concentration in Education. These individuals had been led to believe
that, upon completion of this program, they would be eligible for a
license in their home State because Ashford has a State-approved
teacher education program (the on-ground undergraduate program).
2. Individuals who were students or graduates of the Ashford online
baccalaureate program, but were not aware of the need to complete the
Rio Salado program as well in order to receive an Arizona license.
These individuals were not even aware of the Rio Salado partnership.
3. Ashford students who were intending to complete student teaching
through Rio Salado College and believed they would then automatically
be eligible for an Iowa teaching license.
4. Students who were completing an online degree through Ashford in
early childhood and believed that this degree would lead to an Iowa
teaching license. It does not.
The basic problem is the misinformation provided to potential
students by recruiters who, according to conversations with an Ashford
official, are paid on a commission basis. The height of ignorance and/
or arrogance was evident when the Department received a phone call from
one of the recruiters to chastise us for telling a potential student
that the Ashford program was not approved in the State of Iowa.
A concern that my colleagues and I have discussed repeatedly over
time is the question of how many other students have similar
complaints, but have not voiced them to us--or to anyone else. We are
concerned that we have heard from just the ``tip of the ice berg.''
This overriding concern regarding misinformation continues. As the
Department and the BOEE have shared student stories with Ashford and
have referred students to the Dean and Chancellor over the years,
Ashford has made changes in their Web site that reflect more accurate
information about licensure. One could argue, however, that the
advertising, both on the Web site and in the media, regarding the goal
of becoming a teacher via Ashford are much more visible than the single
statement within a paragraph in smaller print that explains the
limitations of licensing for graduates from this program. According to
Administrative Consultant Susan Fischer and other BOEE officials, the
BOEE currently receives up to a dozen calls a month regarding Ashford's
online program.
closing comments
When the bottom line dominates the decisionmaking process for
educational programming, businesses providing the ``service'' of
education will continue to circumvent a system that protects college
students and potential college students. More importantly--for those of
us focused on K-12 education--such shortcuts in preparing teachers, if
allowed to continue and grow, will result in inadequately prepared
teachers in our Nation's future classrooms.
Conscientious educators understand that changes need to be made in
many of our K-12 classroom as well as in the preparation of our
teachers. Conscientious educators understand that innovation and
technology must be part of these changes. But change for the sake of
change, change that fails to look to the future for unintended
consequences, is not true innovation.
If we believe that the education of our children is the key to the
future of this country, we cannot afford the preparation of our
teachers to be short-changed by businesses for whom the bottom line is
the ``bottom line.'' An unbridled business model in education will lead
to disaster for education in the United States.
The example that Ashford University provides is instructive. I
respectfully submit that we pay attention.
The Chairman. Thank you very much, Ms. Willems.
And now we will turn to Ms. Manning, Dr. Manning.
STATEMENT OF SYLVIA MANNING, PRESIDENT, THE HIGHER LEARNING
COMMISSION, CHICAGO, IL
Ms. Manning. Senator Harkin, thank you for the opportunity
to speak to you this morning on the issues that are before you.
I believe they are very important.
We accredit, of our 19 States, approximately 1,000
institutions, approximately 40 of which are for-profit. I have
two messages I would like to give you today. One is that
accreditation does add real value within our assigned role.
The second is that our agency got a bit behind the curve
when two things came together. One was the entry of large
private equity funds into higher education and the other, the
development of distance education into a modality that was
really user-friendly and would work.
We were behind the curve. We had catch-up to do. We have
done a lot of catch-up. That is my main message. There is still
work ahead of us.
Let me elaborate a little bit on both those points.
Accreditation, deep in its DNA, is about continuous
improvement. It is about taking institutions beyond minimum
requirements, and that, I believe, is the distinction between
accreditation and regulation. We don't believe that minimum is
good enough for America or America's higher education, and we
press institutions to go further.
We have been doing this for about 100 years. About 60 years
ago, Congress, looking to ensure that GI bill funds went to a
bona fide education, assigned to accreditation the role of
assuring the academic quality. But it assigned only academic
quality to accreditation. It quite explicitly left the
financial and administrative capacity of institutions, along
with the integrity of that process--fraud and abuse and those
issues--to the forerunners of the Secretary of Education.
That separation of roles made sense then, and I believe it
still does today. We have the expertise to look at academic
quality, but we do not have the authority or the tools, and
shouldn't, to look at cases of fraud or abuse or the
administration of Federal funds.
The story about Bridgepoint happened in 2005. I came to the
commission in July 2008. In all fairness to my predecessors, I
don't think they were able to foresee what would happen. When I
got there in 2008, it was quite possible to see what had
happened, and it was possible to see that because this thing
was a new phenomenon on the face of the Earth, we did not have
the policy framework and we did not have the procedures to deal
with it adequately.
And so, we set about changing those policies and changing
our procedures. We have done a fair amount. We have made five
major policy changes. What happened in 2005 and then culminated
in growth by 2009 simply could not happen today.
Just as a quick example of a couple of things, we have
immensely tightened our oversight of distance education. And we
have changed our process so that it is no longer a staff member
who can approve this sort of change of control. This sort of
change of ownership can only be approved by our board of
trustees. And two cases in point, in 2010, we had two such
institutional acquisitions come before us, and the board turned
down both of them.
In addition to the five policy changes, we have made a good
10 initiatives to improve and tighten our standards and
procedures. These include six additional standards that have
just been proposed on transparency. I deeply believe that a lot
of the problems you hear about come from a failure of
transparency on the part of institutions. We have become very
explicit about what we expect of them, and we will be able to
enforce those explicit regulations.
We have a new focus on student persistence and completion.
We have increased our oversight of institutions that are new to
us or that have undergone a change of ownership or that are
rapidly growing. And I think perhaps most important in some
extent, we are developing a capacity to survey students on the
Internet. We will not have to rely on the happenstance of
student complaints or the students a visiting team can manage
to round up on campus. We will be using the Internet to survey
them and to increase our awareness of the student experience
from the student's point of view.
I think, at the end of the day, everything we are about is
the students. When we want quality for the institutions, we
want quality for the students. It is our determined effort to
do what we can to do our role as best we can.
That concludes my testimony, and I am, of course, prepared
to answer questions.
[The prepared statement of Ms. Manning follows:]
Prepared Statement of Sylvia Manning
summary
Accreditation is based on the belief that institutions that serve
the public require rigorous review by professionals who know and care.
In the 1950s, when Congress assigned to accreditation--already in
existence by then for a half century--the role of ensuring that GI bill
funds went to bona fide higher education, it assigned that role and
only that role. Congress charged the forerunners of the Secretary of
Education with ensuring that the institutions' administrative and
financial capacity to manage Federal funds, including administrative
and financial integrity. Those separate roles remain. Accreditation
brings to the assessment of academic quality high levels of
professional experience and current knowledge from thousands of
volunteers in the field and members of the public.
Regional accreditation has been challenged by the emergence of
large, for-profit and mostly online universities. During most of the
past decade, as this emergence was happening big and fast, we did not
have the policies and procedures to deal with the changes as well as we
needed to. We have now put those policies and procedures in place.
These are five of these changes: (1) It is no longer possible to
purchase an accredited institution for the sole purpose of acquiring
its accreditation. Proposed purchases are scrutinized for continuity in
the institution (no transformations) and if approved may have many
restrictions applied. Decisions that once were made by staff can only
be made now by the full Board of Trustees. This has had a huge effect:
in 2010 we turned down two such proposals. (2) Institutions can no
longer locate in a region just because they think that accreditation
will be easier there--we have tightened our jurisdictional
requirements. (3) Initial accreditation, never easy, is tougher,
requiring a minimum of 2 years in candidate status. (4) We scrutinize
major changes at institutions much more thoroughly, including growth in
distance education. (5) We increased our capacity to consult legal and
financial experts, especially on purchases or initial accreditation
cases.
We are implementing other changes as well, including a number of
new standards just published last week as our proposed revised Criteria
for accreditation. Six are requirements for greater transparency: (1)
Institutions must disclose publicly full descriptions of their program
requirements; (2) Students must be told whether an institution as a
whole is accredited and whether its programs have professional
accreditation, especially in licensed fields; (3) Institutions must
make public not only their transfer policies but also how credit is
applied to degree requirements; (4) Institutions must make public full
and clear information on all costs and their refund policies; (5)
Institutions must publicly disclose the names and credentials of their
faculty; (6) Institutions must post telephone numbers through which
students can reach them directly. Four more in the works strengthen the
process: (1) Institutions are required to focus on keeping and
graduating students; (2) We will be doing Internet-based surveys of
students; (3) Institutions new to us, merged or purchased will be on a
tighter, 5-year review cycle; (4) We are looking to give the public
more information about schools in ways that people care about and can
use.
Higher education is changing rapidly. We are recognizing these
changes and acting on them. That is how we can help institutions serve
students well.
______
Chairman Harkin, Ranking Member Enzi, members of the committee,
thank you for this opportunity to address the important issues before
you today.
My name is Sylvia Manning, and I am president of the Higher
Learning Commission of the North Central Association of Colleges and
Schools. We are the regional accreditor for 19 States referred to as
North Central.
The administration, the Congress and the American people are
increasingly concerned about the oversight of our Nation's institutions
of higher education. Students, their parents and taxpayers all deserve
real value for their investment of time and money as they pursue the
American Dream of college education. At the Higher Learning Commission,
we strive to fulfill our responsibilities to all these stakeholders.
Before I go further, let me set forth three of the underlying
premises that inform our work.
We believe the higher education enterprise as a whole
faces significant challenges: problems of access, cost, consumer
information and students' completion of programs.
We believe that standards of quality must be met and
continuously improved. An organization is either improving its quality
or losing it.
We believe that accreditation is part of the solution, but
by no means the entire solution.
Let's start with the big picture. Accreditation is based on the
belief that institutions and occupations that serve the public require
rigorous review by professionals who know and care. More than 100 years
ago, colleges created associations to set a common standard for college
education. With time, more elaborate criteria evolved, all with the
purpose of improving colleges. In the 1950s, Congress sought to ensure
that GI bill funds went to a bona fide college education. Because
Congress did not want an all-powerful European-model ministry of
education dictating to every college, it instead entrusted the
determination of academic quality to the accreditation process. It
assigned to the forerunners of the Secretary of Education the role of
assuring institutions' administrative and financial capacity to manage
Federal funds, which of course includes administrative and financial
integrity. Meanwhile, States authorized higher education operations
within their borders.
As decades passed, at the behest of Congress, accreditation assumed
additional tasks, such as checking institutions' compliance with
certain Federal requirements. But the essential division of
responsibility remained. To assess capacity for administering Federal
funds and to protect against fraud and abuse, you need the authority of
government. But to assess academic quality at the level of higher
education, you need the authority of professional experience and
current knowledge.
Here is how it works: A small staff manages a large corps of
professionals from higher education--professors, college presidents and
other educators--who volunteer their services. The decisionmaking
bodies that act on these professionals' eventual recommendations--for
example, to grant or reaffirm accreditation--also include ``public''
members, who have no connection to higher education but do this work as
civic service.
To make their recommendations, the higher education experts review
voluminous written materials, conduct site visits and write reports. An
institution that applies for accreditation goes through an eligibility
review and then a review to achieve candidate status. Then after 2 to 5
years in candidacy, the institution may be granted initial
accreditation after another comprehensive review. After 5 years it will
be reviewed for reaffirmation of accreditation. Then it enters a 10-
year cycle of comprehensive reviews, but about two-thirds of our
institutions have various reporting requirements during that 10-year
period. We also collect data from them on an annual basis to watch for
indicators that might raise concern.
What is the value of accreditation to the institutions? For some,
it is access to title IV Federal funds. But getting access to funds was
not the basis of accreditation's historical covenant with institutions
of higher education, and it still is not. That covenant was for a
shared commitment to quality. When it comes to higher education, the
Nation needs more than minimum standards. ``Minimum'' is not how
America built the best higher education system in the world, and
``minimum'' is not how we will sustain it.
Regulation is good for enforcing minimum standards. But the mission
of accreditation is to go far beyond ``minimum'' to stay ahead in an
ever-more competitive world. That is why colleges accept the demands of
accreditation, agreeing to hold themselves accountable to the entire
group. It is in the interest of every college to make and keep American
higher education the best it can be. Like most enterprises,
accreditation has room for improvement. But I do believe that were this
role lost--the role of continuously pushing colleges and universities
to be better than they are currently--the overall quality of higher
education would decline, and the students would suffer.
In that spirit, I am here to discuss five major changes we have
already made in the accreditation process, 10 initiatives that we are
in the process of implementing, five ways in which public policies can
further these changes and the cautions we must keep in mind as we move
forward together.
Let me turn to the story that is on your minds. For many years, the
Higher Learning Commission accredited a small Catholic university in
Clinton, IA, called Mount St. Clare College and later Franciscan
University of the Prairies. Like many other institutions of higher
education, the University struggled with debt, declining enrollments
and the likelihood that, without help, it would close. To avoid that
fate, in 2005 the university sold its assets to Bridgepoint Education,
which bought the university with private equity and changed the name
from Franciscan to Ashford University. From 2007 onward, tens of
millions of dollars in private equity transformed that small university
in Iowa into a huge online entity, most of whose operations are
headquartered in California.
The Commission continued the accreditation of Franciscan University
of the Prairies through its acquisition by Bridgepoint and the change
of name, and the changeover was never subject to the normal rigors of
initial accreditation, as a new school would be. The purchase took
place 3 years before I became president of the Higher Learning
Commission. In fairness, my predecessors could not have foreseen in
2005 what would happen. Additionally, it is a virtual certainty that
had Franciscan University of the Prairies not been purchased when it
was, it would not exist today under any name. There would be no campus
in Clinton, IA. As it is, there is a campus, its facilities have been
improved and its enrollment has increased significantly.
That said, with a better understanding of today's transformations
in higher education, in 2008 we began to develop policies and
procedures to respond to them, allowing us to address such situations
thoroughly and effectively. Let me explain the changes that we have
made.
changes we have made
1. First and foremost, to prevent the purchase of an institution
for the sole purpose of acquiring its accreditation, a proposed
purchase is subject to intense scrutiny. After the purchase the
institution must remain essentially the same institution that the
Commission examined when it last reaffirmed accreditation. If the
purchase is approved, the approval can attach numerous stipulations as
to future development of the institution, including returning the
institution to candidacy status, effectively removing full
accreditation. These purchases used to be approved by the Commission's
staff. Now, in a major change of policy, they are subject to a fact-
finding examination beforehand and a final review by the entire Board
of Trustees of the Commission.
Two examples that this worked: In 2010 we had two situations
similar to Bridgepoint and Franciscan. When we refused to extend
accreditation under a proposed purchase of Dana College in Nebraska,
the refusal attracted attention because the school unfortunately closed
in consequence. There was less public attention to a similar denial a
few months earlier because the school slated for purchase, Rochester
College in Michigan, is still in business.
These decisions reflect our new, strengthened policy on
acquisition. I am happy to provide additional details of those changes
should you be interested.
2. Our second new policy was to put a halt to ``forum shopping.''
``Forum shopping'' was the practice of institutions choosing to locate
in a region in which accreditation is perceived to be easier and in a
State with favorable regulation and taxation. This was always
impossible for an institution such as the University of Michigan,
because it can only exist in Michigan. But it was fairly easy for an
institution operating in several States, especially for an online
institution. We made ``forum shopping'' in our region impossible for
all institutions by tightening our jurisdictional requirements. Under
new bylaws, institutions must both be incorporated in our region and
have substantial operating presence in our region.
3. Third, we made initial accreditation tougher. It used to be that
an institution could bypass the candidacy period and go directly to
full accreditation. We now require that an institution spend a minimum
of 2 years in candidacy before applying for initial accreditation. This
mandated candidacy lets us get to know the institution well, thus
strengthening the determination as to whether it deserves
accreditation. Accreditation has never been easy or automatic. In the
past 10 years, 120 institutions came to us seeking accreditation. Of
those 120, today 37 are accredited, 34 are still somewhere in the
application process (and may or may not get accredited) and 49--or 40
percent--have been denied or discouraged and are no longer at our
doorstep. We ensure that undeserving institutions do not receive
accreditation.
4. Fourth, we apply greater scrutiny to major institutional changes
such as development of programs at a new level (for instance, beginning
to offer master's degree programs), new sites of instruction, change of
mission or student body and initiation or growth in programs delivered
through distance education.
5. Fifth, we increased our capacity for consulting legal and
financial experts as we need them, particularly in cases of change of
control and initial applications for accreditation.
changes we are making
Now, for the changes that we are making. Last week we released a
proposed revision of our Criteria for Accreditation, the result of more
than a year's work in reviewing our standards. We are implementing 10
new requirements. The first six advance transparency:
1. First, institutions need to disclose full descriptions of their
program requirements to the public.
2. Second, students must be made aware not only of whether an
institution as a whole is accredited but also whether its programs have
professional accreditation, especially when licensure requires
completion of a professionally accredited program.
3. Third, institutions must make public not just their transfer
policies, which Federal regulations now require, but how credit is
applied to degree requirements. And they must make no promises to any
individual student regarding credit for prior work unless and until an
evaluation has been completed.
4. Fourth, institutions must make publicly available full and clear
information on all costs and their refund policies.
5. Fifth, institutions must publicly disclose the names and
credentials of their faculty.
6. Sixth, institutions are required to post telephone numbers
through which students can reach them directly.
In addition:
7. Seventh, the new criteria bring new focus on keeping and
graduating students. We will require institutions to pay greater
attention and report on what they are doing. We will also analyze the
data we collect annually from institutions to determine when it is time
to look more closely at their persistence and graduation rates.
8. Eighth, we are developing the capacity to survey students
extensively. Hitherto, accreditation has relied on the happenstance of
student complaints and on interviews with students during campus visits
by accrediting teams. The ease of Internet surveying will allow us to
reach large numbers of students.
9. Ninth, we are strengthening our oversight of institutions that
are newly accredited, that have recently undergone a change of control
(e.g., a merger, acquisition or change of structure), or that are
rapidly changing. They will undergo a comprehensive review every 5
years, not 10, and will be subject to midpoint review.
10. Tenth and finally, we, the accreditors, need to be public about
more of our findings. Many will point out that families are already
inundated with more information on colleges than anyone can deal with.
We need to figure out and provide the information that will be
meaningful to a general public, and we intend to do so.
how public policies can help
I'd like to spend a few minutes on how Congress, the administration
and other policymakers can help us do better.
1. First, the Department of Education collects data from
institutions through its Integrated Postsecondary Education Data System
(IPEDS). While it is in everyone's interest that we all use the same
data, there are some things that are inadequate. For example, we need
student retention and graduation rates based on contemporary student
attendance patterns to improve our oversight.
2. Second, the 2008 Higher Education Opportunity Act made it more
difficult for accreditors to withdraw accreditation from an
institution. While we accept the importance of due process, future
legislation need go no further in that direction. Instead, I
respectfully suggest that accreditors be afforded some safe harbors
from ruinous litigation that may now be initiated when we take tough,
but necessary, adverse action.
3. Third, just as we are building stronger ties to the State higher
education authorities in our region, it would be helpful for us to be
better informed when the Department of Education or the Inspector
General has concerns about the behavior of an institution that would
bear upon our standards for institutional integrity, enabling more of a
partnership toward common goals.
4. Fourth, we are hampered in our efforts when institutions can
settle charges of non-compliance with Federal regulations simply by
paying fines. When an administrative agency or court declares no
findings as part of a negotiated settlement with no admission of
liability by the institution being investigated, the institution is
effectively absolved, leaving the accreditor no record upon which to
build a case for non-compliance with, for example, standards for
integrity. It would be helpful if fines were large enough to be
effective deterrents, and settlements stuck by the findings in the
case.
5. Fifth, Peter McPherson, president of the Association of Public
and Land-Grant Universities, has suggested another type of action
against institutions that have violated Federal requirements with
regard to financial aid. The idea is to penalize institutions by
limiting for some period of time the number of students on Federal
financial aid that the institution is allowed to enroll. In some ways
similar to the NCAA penalties of limiting athletic scholarships, this
is a proposal well worth consideration.
Finally, as we work with Congress and the administration to promote
quality and accountability, I would ask that we keep the following
cautions in mind:
The vast majority of institutions of all types today offer
courses and whole programs on the Internet. The larger for-profits have
attracted attention for their scale, but there are very large programs
at traditional institutions as well. Distance education is the most
powerful invention for increasing access to higher education since the
light bulb. Skillfully and ethically used, it has the potential to
exceed the access created by the Morrill Act, the establishment of
community colleges and the GI bill, especially for rural areas. If
there are problems with distance education, it is not with the modality
itself but in how the modality is used or exploited.
Both accreditors and regulators need to be cognizant of
the ever-present potential for collateral damage. Laws or regulations
designed with bad actors in mind often can create more damage for good
actors than impediments for bad actors. I have pleaded before, and do
so again, that whatever laws or regulations are devised be tested
especially for their effects on small colleges. Hundreds of these
colleges do wonderful work with small budgets and create great value
for their students and the often-limited regions in which they are
known, and they can be enormously impacted by regulation designed with
other types of institutions in mind.
If our economy is to become more competitive, our middle class to
thrive and grow and our democracy to become even more inclusive and
vibrant, our Nation has no higher priorities than expanding access to
our institutions of higher education and enhancing their quality. That
is why we must continue to improve the oversight of our colleges and
universities and to spur their improvement. Higher education has
changed rapidly and will continue to change. We recognize these
changes, and we are acting on them, enabling us to help institutions
serve their students well.
Thank you again for the opportunity to be with you today. I would
be happy to answer any questions you might have.
The Chairman. Thank you very much, Dr. Manning.
And now, Dr. Cruz, welcome and please proceed.
STATEMENT OF JOSE CRUZ, VICE PRESIDENT FOR HIGHER EDUCATION
POLICY AND PRACTICE, THE HIGHER EDUCATION TRUST, WASHINGTON, DC
Mr. Cruz. Good morning, Chairman Harkin, and thank you for
the opportunity to testify before you on the impact of the for-
profit college sector on low-income and minority students. The
Education Trust, as you know, is a research and advocacy
organization that promotes high academic achievement for all
students at all levels, pre-kindergarten through college.
While many organizations speak up for the adults who, as
employees or, increasingly, as shareholders, have financial
interests in schools and colleges, we at the Ed Trust speak up
for the most vulnerable, the low-income students and the
students of color, regardless of age, whose academic interests
are so often ignored.
Our November 2010 report, ``Subprime Opportunity,''
examined the troubling graduation rates and debt burdens
incurred by students who entrust their futures to for-profit
college companies. While I will not delve into all of the
details, I do want to share some of our key findings.
The for-profit sector, beyond what we have seen today here
for Bridgepoint, has experienced massive growth. Between the
1998 and 2008 academic years, enrollments at for-profit college
companies grew by 236 percent. These college companies target
the underserved. More than one in four black, Hispanic, and
low-income students now begin their college careers at for-
profit colleges.
At for-profits, success rates are low, and the costs are
high. The median debt of the one in five who manages to earn a
bachelor's degree from these colleges is over $31,000. That is
four times the average debt of those that graduate from public
colleges and twice that of those graduate from nonprofit
colleges.
The for-profit college sector takes a disproportionate
share of our Federal financial aid dollars. For-profits
represent only 12 percent of enrollments but receive 24 percent
of Pell grants and Federal student loan dollars and are
responsible for 43 percent of Federal student loan defaults.
The full report is submitted as part of my written testimony.
It is important to note that the Education Trust is not the
only organization to have examined the practices and student
outcomes in the for-profit sector and to have come away deeply
concerned for students and for the Nation. More than 50
groups--civil rights, education, consumer, and student groups--
are resisting the for-profits' aggressive campaign to obtain
immunity from accountability in exchange for what at best can
be described as the illusion of choice and opportunity.
But rather than recite the concerns of this broad
coalition, let me instead offer an explanation of the
underlying problem. The problem, Mr. Chairman, is not one of
``lax regulation,'' as this wording implies that the problem
can somehow be fixed by enforcing existing regulation. The
problem is, as engineers like to say, structural.
Our higher ed regulatory structure is built upon the three
pillars represented here today by my fellow panelists--Federal
regulation, State regulation, and accreditation. These pillars
are expected to distribute the load of the many forces that put
undesirable pressure on higher ed institutions. But as has been
said before, during the past 20 years, the rapid growth of the
for-profit college sector has placed undue pressure on the
regulatory structure supported by these pillars, overwhelming
their capacity to fulfill their mission.
The case of Bridgepoint, Inc., subject of today's hearing,
is a good example of why for-profit college companies demand a
new attention and a new approach to regulation. Inaction is not
an option.
At a time when the world is demanding more of students, we
cannot expect less of the institutions that seek to educate
them. At a minimum, the Education Department must be allowed to
define standards by which to enforce longstanding regulations
that require all career colleges interested in Federal
subsidies to prepare their students for gainful employment.
We must also take a hard look at the apparent willingness
of accrediting agencies to accept as proof of academic quality
an institution's ability to manage and navigate and even game
the bureaucratic intricacies of the accreditation process.
Finally, we need to identify and eliminate the perverse
funding incentives that encourage for-profit colleges to invest
more on marketing, recruitment, and shareholders than on
instruction and student support services. After all, Mr.
Chairman, choice and opportunity as concepts, as values, as
concrete manifestations of the American dream deserve more
respect.
Thank you.
[The prepared statement of Mr. Cruz follows:]
Prepared Statement of Jose Cruz
Chairman Harkin, Ranking Member Enzi, and members of the committee,
thank you for the opportunity to testify before you on the impact of
the for-profit college sector on low-income and minority students.
The Education Trust is a research and advocacy organization that
promotes high academic achievement for all students at all levels--pre
kindergarten through college. While many organizations speak up for the
adults who, as employees or shareholders, have financial interests in
schools and colleges, we at the Ed Trust speak up for those that are
most vulnerable--low-income students and students of color--whose
academic interests in those schools and colleges are so often ignored.
Indeed, we evaluate every policy, every practice, and every dollar
spent through a single lens: will it benefit students by raising
achievement and closing gaps?
In recent years, this lens has earned us a reputation--rightly or
wrongly--as an organization that is very critical of public and non-
profit colleges that do not do well by students. Many of our
publications have focused attention on flaws in institutional policies
and practices. For example, our report ``Engines of Inequality''
examined how financial aid policies in public universities have limited
student access and success, making it harder for low-income and
minority students to obtain a postsecondary credential. We have also,
however, identified and praised institutions that intentionally pursued
a culture of success for all their students. And we have worked with
institutions committed to diagnosing their problems and improving their
level of service to the underserved.
Given this history, it was only natural that eventually we would
examine the for-profit college sector.
Our November 2010 report, ``Subprime Opportunity,'' examined the
graduation rates and debt burdens incurred by students who entrust
their futures to for-profit college companies. While I will not delve
into all of the details, here are a few of our key findings:
The for-profit sector has grown substantially. Enrollments
at for-profit colleges grew by 236 percent between the 1998 and 2008
academic years.
The for-profit sector targets the underserved. More than
one in four black, Hispanic, and low-income students now begin their
college careers at for-profit colleges;
The success rates are low and the costs are high. The
median debt of the few students who do manage to earn bachelor's
degrees at for-profit colleges--only about one in five first-time,
full-time freshmen--is over $31,000--four times that of graduates from
public colleges.
The for-profit sector takes an overwhelmingly large slice
of our Federal financial aid programs. For-profit colleges represent 12
percent of enrollments, but they receive 24 percent of Pell grants and
Federal student loan dollars, and are responsible for 43 percent of
Federal student loan defaults.
The full report is submitted as part of my written testimony.
It is important to note that the Education Trust is not the only
organization to have examined the practices and student outcomes in the
for-profit sector and to have come away deeply concerned for students
and for the Nation. More than 50 civil rights, education, consumer, and
student groups have joined together to resist the for-profits'
aggressive campaign for immunity from public oversight accountability.
But rather than recite the concerns of this broad coalition, let me
instead offer an explanation of the underlying problem.
The problem, Mr. Chairman, is not one of ``lax regulation''--as
this wording implies that the problem can be fixed simply by enforcing
existing regulation. The problem is, as engineers like to say,
structural.
Our higher ed regulatory structure is built upon three pillars:
Federal regulation, State regulation, and accreditation. These pillars
were designed to distribute the load of the many forces that put
undesirable pressure on higher ed institutions, to mitigate any long-
term damage to the structure itself.
Federal regulation assumes the fiduciary load. The Department of
Education's role is to be a good steward of the Federal dollars that
flow to colleges and universities, primarily through title IV. State
regulation assumes the consumer protection load. Most State higher
education agencies focus primarily on ensuring that students receive
accurate information about each institution and its programs. And
accreditation assumes the threats to academic quality load. Through the
peer review process accreditors purport to ensure that institutions
offer high quality programs.
But during the past 20 years, the rapid growth of the for-profit
college sector has placed undue pressure on this regulatory structure--
overwhelming its capacity to fulfill its mission. Federal regulation
has lacked a strong enforcement arm, State regulation has not
traditionally focused on outputs such as student achievement, and
accrediting agencies have been overwhelmed with the rapid growth of
non-traditional educational organizations, whose size and methods of
educating are unfamiliar and demand protocols of assessment that
accrediting agencies have historically lacked.
Who could have foreseen, 20 years ago, that a group of investors
would purchase small, well-established, fully-accredited, but
financially troubled postsecondary institutions, intending to exploit
their history and physical presence to build billion-dollar, publicly
traded, for-profit college companies? Yet that is precisely what has
happened in the case of Bridgepoint, Inc.--owner of Ashford University
and the University of the Rockies. In just 6 years, Bridgepoint, Inc.
has grown the enrollment of Ashford University by 17,000 percent.
Bridgepoint has achieved operating profit margins that exceed those
of Apple and Hewlett Packard. But, according to the investigations of
this committee, it has done so at the expense of many of its students--
churning through 84 percent of their 2-year and 63 percent of its 4-
year students within these students' first year of enrollment.
Who could have foreseen, 20 years ago, that one of only six
regional accrediting agencies recognized by the Education Department
would be so elastic in its definition of academic quality in this new
profit-driven environment? The Higher Learning Commission of the North
Central Association of Colleges and Schools is an accrediting agency
responsible for over 1,000 institutions that, in 2008 alone, held the
keys to over $27 billion of the $75 billion in Federal title IV
financial aid. But, when faced with evidence of the rapid growth, low
graduation rates, and high withdrawal rates at Ashford, HLC's
evaluators--over the course of multiple reviews--found no problems and
the school has remained accredited. It must make us wonder about the
quality of those reviews--and the ability of the entity leading them to
understand all of the complexities presented by a for-profit
institution.
But it doesn't much matter today if these corrosive forces, these
stresses and strains, could have been predicted. The fact that they are
present should be enough for us to recognize that it is time to
reinforce the structure in those areas where it is most vulnerable, so
that we can be capable of redesigning and rebuilding it for the longer
term. Doing otherwise exposes our higher education system to the danger
of total collapse.
Clearly, for-profit college companies demand new attention and a
new approach to regulation.
At a minimum, the Education Department must be allowed to define
standards by which to enforce long-standing regulations that require
all career colleges interested in Federal subsidies to prepare their
students for gainful employment--this will help ensure that Federal aid
dollars are used to pay for programs that actually lead to gainful
employment and not just to heavy debt burdens.
We must also take a hard look at the apparent willingness of
accrediting agencies to accept an institution's ability to manage the
bureaucratic intricacies of the accreditation process as proof of
academic quality. For instance, you might consider prohibiting the
transfer of accreditation with a transfer of ownership from a non-
profit entity to a for-profit entity. New owners would have to reapply
for accreditation as if the institution had not been accredited before.
You might also consider requiring accreditors to consider student
outcomes data such as completion rates, placement rates, and cohort
default rates before they grant or renew institutions' accreditation.
Finally, we need to identify and eliminate the perverse funding
incentives that encourage for-profit colleges to invest more on
marketing, recruitment and shareholders than on instruction and student
support services. In doing so, we must strengthen consumer protections
for our most vulnerable students.
Preserving our higher education structure also requires that all of
the players within that structure get serious about student success.
For proprietary colleges, that means delivering on the promises of
opportunity they are making to students and taxpayers alike. The
promise is clear and unambiguous, seen in the recruitment ads depicting
happy graduates working in state-of-the-art jobs they acquired thanks
to their newly earned for-profit college degrees. The ads of course do
not include the ``results not typical'' or ``individual results may
vary'' disclaimers we are accustomed to seeing when the exception,
rather than the rule, is showcased. But, unfortunately, they do present
the exception. The data show that rather than getting a relevant
credential and a job that pays a living wage, too many students walk
away from these institutions with nothing but excessive debt and,
ultimately, blame for their institutions' low graduation and high loan
default rates.
Our country's long-term economic competitiveness depends upon the
shoring up of our higher education structure. At a time when the world
is demanding more of students--higher degrees, more sophisticated
knowledge--we cannot expect less of the institutions that seek to
educate them. Choice and opportunity--as concepts, as values, as
concrete manifestations of the American Dream--deserve more respect.
Thank you.
The Chairman. Dr. Cruz, thank you very, very much. Thank
you all for your excellent testimonies.
Let's begin a round of questions. Let us see if we can
elicit some more information here.
Dr. Willems, it sounds like Ashford University was able to,
in your words, creatively get around the problem of not having
their online MAT program--that is your Master of Arts in
Teacher program--approved. If these for-profits can just shop
around States to find the most lax regulatory environment, what
does that mean for the students?
Ms. Willems. Well, it means that college students cannot be
assured of a quality education. And when applied to our teacher
preparation, it also means that our preK-12 schools cannot be
assured of quality teachers.
This proliferation of online preparation and the resulting
increase in teacher preparation, transporting licenses across
States is really increasing the issue of quality control. And
what it comes down to is, eventually, we will be looking at the
lowest common denominator.
The Chairman. Ashford University is accredited by the
Higher Learning Commission, Dr. Manning's outfit. Ms. Willems,
what do you make of the fact that Ashford University is
accredited, that you found serious concerns with the online
Master's of Arts in Teaching program? And why aren't you
concerned about the quality of teachers that Ashford University
is preparing through its online MAT program?
And again, for my own State, what does it mean for the
future of our teaching workforce in Iowa and across the
country? In other words, what do you make of the fact that AU
is accredited, but you found serious problems with their online
MAT program?
Ms. Willems. We did.
The Chairman. How do you square that?
Ms. Willems. Well, I can't speak for the Higher Learning
Commission, of course, but I certainly can understand that it
is impossible for a regional accrediting body to conduct the
same type of review that we conduct on a program. They are
looking at an entire university. We are looking at a specific
program. But perhaps increased cooperation, communication
between the accrediting entities could be valuable to that.
As far as your question about the quality of teachers,
research tells us that the singular most-critical factor in
preK-12 education is the classroom teacher. The Ashford/Rio
Salado partnership does not meet the Iowa standards for
preparation of those teachers, and these standards and rules
exist only for quality control. And when that quality control
is missing or decreased, a State and the Nation cannot be
assured of high-quality teachers.
The Chairman. Do you have any idea why Ashford University
entered into a partnership with Rio Salado College? In other
words, they had an existing program. You talked about urging
them to improve their existing program.
Ms. Willems. Yes.
The Chairman. But instead of doing that, they then went to
Rio Salado.
Ms. Willems. Right.
The Chairman. Any thoughts on that?
Ms. Willems. My guess is that improving the program, and
basically, the issue was the clinical. That is very expensive.
It would have been probably financially prohibitive because our
issue was that they were not supervising the student teaching,
the clinical experiences appropriately. And that would be very
expensive to do across the country. So I would think that that
was their issue.
The partnership for them was probably a very creative
solution. The problem was that they did not consider or perhaps
they didn't care about the ramifications of licensure for
students who are prepared across the country.
The Chairman. We will come back. I have some more
questions, but I want to shift to Dr. Manning here on this
accreditation.
I looked at the accreditation, the peer review that you had
done from HLC on Ashford University. Correct me if I am wrong,
but there were three inspectors or reviewers--I don't know what
you call them. Two of the three were from for-profit colleges.
Is that correct?
Ms. Manning. You are talking about the post-IPO review? Is
that correct?
The Chairman. I think so.
Ms. Manning. Yes.
The Chairman. This was 2009, a 2009 HLC visit, report of a
visit for institutional change of control, Ashford University.
Visiting team members, there were three, and two were from for-
profit schools. Is that right?
Ms. Manning. That is correct.
The Chairman. Do you think that is good peer review?
Ms. Manning. No.
The Chairman. Well, this was done in 2009.
Ms. Manning. That was done in 2009, and we have always
had--in any peer review, we have always made sure that there
was one or two representatives on the team, depending on how
large the team was, that was from a like institution. And I
have always had a lot of sympathy with that, not being happy
when I was running an institution with a medical school, I got
a team that had no one on it who had a clue what it was like to
run a medical school.
In this particular case, frankly, as I look back on it, we
had a disproportion. We only had three people. I would have
preferred to have the balance not one-to-two, but two-to-one.
This question of assigning peer reviewers is something that we
are in the process of reviewing and revising.
The Chairman. I appreciate that. Let me read also from this
document, the analysis. It said, ``The team also reviewed the
impact''--I am just reading from this.
``The team also reviewed the impact of rapid and
significant growth at Ashford University, given the
recent surge in Ashford's online student population.
The team finds that the quality of instruction,
instructional and support services''--I want to
emphasize that--``instructional and support services
are growing as Ashford enrollment expands. Quality is
maintained. Sufficient faculty and support resources
are provided to deliver a quality learning experience
for the students.
``Growth is being experienced in both online and on-
campus. Online faculty, students, and staff articulated
no impact from growth. Campus students''--campus
students--``campus students articulated familiar
concerns regarding growth--limited parking and
challenges finding parking, overcrowding in the
cafeteria, limited computer access in libraries and
designated resource centers.''
Essentially, what this states is that educational quality
at Ashford is fine, except for the parking and the cafeteria.
Yet according to the data provided by Ashford, which I pointed
out here, 84 percent of bachelor students and 63 percent of 4-
year students dropped out within a year. How do you reconcile
those facts and that data with the statement I just read from
the analysis?
Ms. Manning. Senator, I have not seen the last data that
you quoted, and so it is very difficult for me to respond
directly to that.
The Chairman. Put that chart up there.
Ms. Manning. I have--somebody has handed me something on
paper that I can read, but----
The Chairman. What is it that we need to provide for you?
Because we have all of the documents from Ashford, from
Bridgepoint.
Ms. Manning. And we----
The Chairman. This is their own documentation, not mine.
That is theirs. I guess what I am asking, let me just see if I
am making myself clear.
Ms. Manning. Mm-hmm.
The Chairman. The statement that I read from the analysis
says, basically, everything is fine, except parking and the
cafeteria and computer access. Yet the data that we have from
Ashford shows that in the bachelor's program 63.4 percent, in
the associate's program 84 percent dropped out within a year.
How can you reconcile that data with the fact that the
quality of instruction and instructional support services are
growing and sufficient faculty and support resources are
provided to deliver a quality learning experience?
Ms. Manning. And if, indeed, it turns out that those were
students who dropped out because of dissatisfaction with the
program or inability to complete. And in other words, there is
always a big question about what is in the denominator when you
come out with one of those numbers.
But that if, indeed, it turns out that those are the data
and that students didn't complete their programs and so forth,
then I think those numbers are irreconcilable with what we
have. And these are not numbers that we had, and I would very
much like to have them.
I would also say that under our new criteria, the revision
that we are in the process of putting in place----
The Chairman. I am sorry go ahead.
Ms. Manning. Oh, that is OK. There will be much greater
emphasis on student persistence and completion. Frankly, that
was one of the things that, from the traditional context that
we came from, we had assumed. We need to place much more
emphasis on that and to require our institutions, above all, to
place much more emphasis on that. We will be doing that.
Also, of course, the comments about parking and the
cafeteria are the on-ground campus. Students on the Internet
don't worry about parking, and that is why it is becoming very
important for us to be able to survey students and get those
kinds of responses directly from them to get a better
understanding of what they are thinking and what they are
finding.
The Chairman. Now, Dr. Manning, I have here again a
document from Ashford, which we requested. They gave us the
documentation. And they claimed this is data that was provided
to HLC. Is that it right there? Yes.
Yes, data provided to HLC, and you will see that full-time
entering undergraduates, up on top, the retention rate. If I am
not mistaken--full-time entering undergraduates, on the bottom.
First-time entering undergraduates, retention rate--white, 46
percent; black/nonHispanic, 35 percent; Hispanic, 39 percent;
Asian or Pacific Islander, etc, etc.
All these retention rates are below 50 percent. They tell
me that they provided this document to HLC. So your reviewers
would have had this document. So, again, I am wondering how you
can reconcile accreditation based upon quality and support
services when you have less than 50 percent retention rates for
first-time entering undergraduates?
Ms. Manning. That is a huge problem, and it is a problem
across higher education. It is a problem that is more acute in
the online environment. It is a problem that is more acute with
nontraditional students. But it is, I think, the greatest
problem that is facing us.
As a country, we have made a commitment, a democratic
commitment to opportunity for students, all kinds of students--
students who come out of lousy high school systems, students
who are adults and have basically long forgotten what they did
in algebra--for good reason, because it didn't really do them
much good. And the consequence of that is that you are going to
have a lot of students who aren't able to handle it.
Now I will tell you one problem that I think, again, we are
turning to fix. In our previous standards, we had assumed that
the first thing that would happen when a student, particularly
with a nontraditional background of any sort, came to college
is that the students would be tested. And if they weren't able
to do the work, if they didn't have the skills, then they would
be placed in appropriate remedial courses.
That has not happened, as it turns out, adequately in the
distance environment. Those things are a turn-off to students.
If they don't--if they are going to have to take a remedial
course, unfortunately, being unenlightened, they go somewhere
else where they don't have to take the course. What we are
going to do is we are going to require that there be that sort
of testing and placement and remediation because that is one of
the large reasons they drop out.
Other reasons, of course, have to do with finances and the
fact that nontraditional students always find--not always find,
more often find that life interferes with being a student, and
you see large dropout rates. I saw that at the University of
Illinois-Chicago, too. A very traditional institution, we
served students in the greater Chicago area, but they had very
special challenges.
The Chairman. A difference here between the University of
Chicago or University of Puerto Rico or University of Iowa or
wherever, grant you, there are problems with dropouts,
especially with people who aren't prepared. And people who are
online with some of our community colleges and others, I
understand that, not in this realm.
I guess one of the differences is the University of
Chicago's bottom line is not a profit. This bottom line is
profit. As Ms. Willems said--am I correct, Ms. Willems--that
the president told you that their business--what did he say?
The business model was the bottom line?
Ms. Willems. That is what he told me my first meeting with
him.
The Chairman. See? And so, when you have a Wall Street
investment firm, Warburg Pincus, who owns 63 percent of
Ashford, I mean, they want to make their investors happy. They
went public and got their shareholders. They want to meet those
shareholders' quarterly marks. That is their first and most
important thing, and that is the difference and a lot of the
difference here that we see.
Now here, now that is not--the other thing I wanted to
point out, Dr. Manning, is this. And again, in this analysis,
what caught my eye was when it said support services are
growing. Support resources are provided.
Yet we know from internal documents that while Ashford has
1,700-some recruiters, they have one placement officer. How
could HLC possibly say--how could they say they have adequate
support services when they have one placement officer for
78,000 students? I am baffled by this.
Ms. Manning. Let me respond also to your earlier remark at
the beginning of this, which has to do with the profit
incentive and the fact that the incentive can work in the wrong
direction relative to quality of education.
I thoroughly agree with you. Our job, I believe, is to pull
in the other direction, just as it is the job of the Federal
authorities to assure that there aren't any consequent abuses
of Federal financial aid. I simply want to restate that and to
say that what we are doing by making increasingly explicit
requirements, in a sense, minimum requirements for what is
offered to students and how students are handled, that is
exactly what we are attempting to do.
We traditionally have not had that much emphasis on the
placement service. Our focus has much more been on the
educational services that get students through the program.
It is obviously appropriate to have placement officers.
Although frankly, even traditional institutions--my own
institution, for example, my past institution, we attempted to
go into distance education in a big way because we thought, as
a land grant university, that this was the way finally to
really fulfill our land grant mission, to reach out to people
who couldn't come to Urbana-Champaign or Chicago, where we had
campuses.
But when we did that, we did not expect to be having
placement services in Quincy, IL. We were trying to make our
educational services available to them, but not the kind of
things like placement services. And I think that when you think
of an institution drawing on a national population--and again,
at the University of Illinois, we drew on a national population
in our distance education--that placement becomes a little less
clearly understood.
I could place students in Chicago. I could not really do
much to place a student from name any other State who would
choose to enroll in the program at distance.
The Chairman. Well, at other universities--I just have Iowa
here--the number of career service employees are more than one.
Ms. Manning. Yes.
The Chairman. Much more than one for much less number of
students. One of the reasons I am concerned about the
accreditation process is that in an earlier hearing that we
had, Dr. Manning, the GAO had done this investigation,
undercover investigation, which, by the way, they have stood
by, regardless of what has been said. They stand by their
findings. The tapes are available.
There was one school--Westwood? Westwood, out in Denver, if
I am not mistaken, in which the accrediting agency--it wasn't
yours, it was another accrediting agency--had gone in there and
found that everything was fine. Just about the same time, the
GAO was there and found all of these problems and
misrepresentations and everything.
I asked the individual--I am sorry, I can't remember his
name now--who was from that accrediting agency how that could
possibly be? So you can understand why we are somewhat
concerned about what is happening with accreditation and what
accrediting agencies are looking at and whether or not they are
really fulfilling their responsibility in this new regime that
we have, in this new regime of online schools out there.
So, I think that is another area where this committee is
going to have to take a look and see, and I am just--I am also
curious as to why out of 24 publicly traded companies, 18 of
them sought accreditation with HLC, 18 out of 24. That sort of
raises some red flags in my mind.
Dr. Cruz, could you just respond to the exchanges we had
here and in terms of support services and whether or not
accrediting agencies are doing their job? Could you just talk
to us about that?
You said one thing that really struck me because I hear
this all the time. People say, ``Oh, Senator Harkin, there are
just a few bad actors out there. Just one or two, you get rid
of them, and you are fine.''
Yet you said that the abuses are structural, not just a
result of lax enforcement. Could you expand on that, please?
Mr. Cruz. Sure. I think, basically, that what we have, as
we have seen here today, those entrusted with enforcing
regulation through the current structure are doing the best
they can.
The situation that we are looking at is one where there is
a fundamental problem, and that is that this structure has been
built under different premises, on the premises of having
academic institutions that are particularly focused on student
success, academic institutions that operate in a timescale that
is very leisurely--it is an academic year--for institutions
that include the concept of shared governance, where the
faculty and the students and the administrators have some
levers that they can pull in order to ensure that quality is
maintained.
When you look at the for-profit college sector, however,
the premises are no longer there. There is not a concept of
shared governance, per se. There is not a focus on long-term
quality. There is more a focus on short-term profit.
And when you try to regulate or do some quality control on
the institutions whose profile is not consistent with the
premise upon which you built these regulatory agencies, you are
going to come away with problems. Just an example, when
successful institutions--and they could be public, nonprofit,
or profit--look at the data, look at data such as that you have
shown here today, probably their first reaction would be to try
to identify where the problems are and what they can do, how
much more they can invest in programs and support services for
students so that they can retain those students.
They do not interpret the data through a different lens
that takes them to the conclusion that maybe what we need to do
is recruit five more students for every one we drop so that we
can meet our quarterly projection earnings.
So I think that, ultimately, it is about the fact that, for
some reason, we have something that doesn't look like a duck,
doesn't swim like a duck, doesn't quack like a duck, but we
feel compelled to treat it as one. For-profit entities are very
different. It doesn't mean that they are worse or better. And
they should be treated differently, and that doesn't mean that
they need to be treated unfairly.
The Chairman. Mr. Cruz, as I pointed out on the floor of
the Senate one time, and I used the documents that we had from
some of the for-profit schools. For example, Bridgepoint spends
an enormous sum on staffing call centers to contact leads, sign
them up for class.
One document is a training presentation that instructs
these recruiter employees, ``If you do not discover what pain
they are avoiding or what pleasure they are seeking, you do not
know why the students really wants their degree.'' Now I have
seen this kind of language at other schools about finding the
``pain points'' as well.
How do you view this kind of approach in getting a student
to sign up for a school? I mean, I never thought--I guess I
never thought of pushing a student's pain points.
Mr. Cruz. Well, I think that, in general, anybody--the only
thing they could say is that it is inappropriate. I personally
find it particularly inappropriate coming from those that claim
to be the sole purveyors of choice and opportunity for the
underserved. I would have nothing more to say on that.
The Chairman. Well, I have some more questions I want to
follow up on. We have been joined by colleagues, and I will
call them in order of appearance. It would be Senator Hagan and
Senator Blumenthal and Senator Merkley.
Senator Hagan, did you have some questions?
Statement of Senator Hagan
Senator Hagan. Yes. First of all, Mr. Chairman, I really do
appreciate you calling this hearing. And I appreciate the
testimony of the witnesses here.
I did want to ask Ms. Manning a question. As an accreditor
of for-profit institutions, in your testimony, you state three
underlying premises that inform your work, and that higher
education, as a whole, faces significant challenges including,
problems of access, cost, consumer information, and students'
completion of programs.
I want to look at cost for just a minute. Do you factor in
the compensation made to the executives of the institutions?
Andrew Clark, it appears, in 2009 received $20.5 million. Four
other executives received a total of, counting his
compensation, close to $37 million for this institution, at I
believe it was Bridgepoint.
As an accreditor, how much weight do you give to executive
salaries, versus the compensation for faculty?
Ms. Manning. Let me say first that when I listed those four
areas as particular challenges for higher education, cost is
not one of the issues that the accreditation has looked at
particularly. That is to say we accredit very expensive, high-
end private and highly respected institutions like Northwestern
University, which are very expensive. And we accredit community
colleges, which, hopefully, will remain quite reasonably
costed. And we don't factor in that into the accreditation
consideration, rightly or wrongly.
My comment, there really was more in recognition that the
issue of the price of higher education has become one of the
very difficult issues for the American public, and we do
believe that higher education as a whole needs to address it.
Senator Hagan. Do you know what the president of
Northwestern makes?
Ms. Manning. No, I don't. I am sure it is less than $20
million.
Senator Hagan. Do you look at the faculty salaries when you
are determining accreditation?
Ms. Manning. No. We look at faculty qualifications, not at
the salaries.
Senator Hagan. Why not?
Ms. Manning. In part because the salaries are determined by
very different factors. If you can get good faculty and you are
not paying them that much, we don't see that as a problem.
I can tell you that when I was the chancellor of a public
institution that was steadily losing State support, I found
myself in a position where the private institution in my
hometown was recruiting faculty away from us at will because
the differential in salaries had gotten up to 30 percent. And
yet I don't think that that was any circumstance that was
leading us to lower our quality. It was simply making life
tough and difficult.
Senator Hagan. I know that times are especially tough in
States, especially those with so many excellent community
colleges and State universities. I think that the cost of
education is something that students are obviously concerned
about. I think when you factor the cost of education in, you
also have to factor in faculty salary. And we obviously all
want to pay our faculty more.
But I have to admit, I am absolutely flabbergasted that
when I look at an institution that receives 90 percent of their
funding from public dollars, and have the salaries and
executive compensation demonstrated here. When I see what is
going on around the country, talking around public employees, I
think most people would be aghast to hear the unbelievable
compensation figures that I have read today.
Ms. Manning. I do not disagree with you.
Senator Hagan. Well, it seems to me, from an accreditation
standpoint, this is an issue you should be looking at.
Particularly, when the student's cost is paramount of
competition, whether it is community colleges, State
universities, private universities, and for-profit
universities, competition should come into play when you are
looking at accreditation.
I know that the accreditation agencies are private,
independent entities linked to the Federal student financial
aid program and that institutions eligible for title IV funds
have got to be accredited by an accreditation agency recognized
by the U.S. Secretary of Education. And in my opinion, when
Federal dollars are involved, there needs to be oversight.
There needs to be oversight on how all of this money is spent
and by whom.
And that said, could you please describe the process by
which the U.S. Secretary of Education ensures that as an
accrediting body, that you are providing an impartial and
responsible review of an institution's practices, as well as
academic and financial standards?
Ms. Manning. Yes, in brief, I can. We undergo a review
every 5 years by the Department of Education. A review that
culminates in a recommendation from the National Advisory
Committee on Institutional Quality and Integrity, otherwise
known as NACIQI, to the Secretary as to the renewal of a
recognition, which is good for 5 years. There are also often
findings of noncompliance, and an accrediting agency will be
given approximately 12 months normally to come into compliance.
On the financial side, however, a great deal of the
authority and the responsibility for investigation of
institutions falls to the department itself. And so, they do
not review us on those responsibilities that are held by the
Financial Services Administration.
Senator Hagan. You have also mentioned that the Higher
Learning Commission is working to build stronger ties to the
State higher education authorities in your region, and I think
that that is important. In fact, I am told that in the 2 years
that the executive director of the State approving agency in
North Carolina, through you all, has been in this position, he
has never directly spoken to anyone from the regional
accreditation agency that has jurisdiction over North Carolina
schools. And I think this is troubling, especially since
communication needs to be a two-way street.
Can you describe the traditional relationships and
interactions that accreditation agencies have with higher
education authorities in the States that they represent?
Ms. Manning. Yes. Of course, we do not accredit in North
Carolina. You are aware of that?
Senator Hagan. But you do have students in North Carolina?
Ms. Manning. Our institutions may have students in North
Carolina. The communications that we have tried to build more
strongly are with the higher education officers, the State
higher education executive officers in our 19 States.
What we have done in the last 2 years is create a
communication network, create the opportunity to meet at least
twice a year to share problems, common problems, and therefore,
in a sense, to create a communication pathway so that when we
see problems or they see problems that we think should come to
the attention of the other party, we have a good communication
line set up and are able to do that.
Senator Hagan. How is your accreditation agency funded?
Ms. Manning. Our accreditation agency is funded primarily
through member dues and fees.
Senator Hagan. So the schools that you accredit actually
pay you for their accreditation?
Ms. Manning. Yes.
Senator Hagan. Thank you.
Thank you Mr. Chairman.
The Chairman. I think, Senator Hagan, you just hit on
another point that I had not brought up, but one that concerns
us, is that accreditors are paid by the schools they are
accrediting. That kind of doesn't sound right. So I am glad you
brought that up.
Senator Blumenthal.
Statement of Senator Blumenthal
Senator Blumenthal. Thank you, Mr. Chairman.
And thank you for pursuing this topic and holding this
hearing and giving us a chance to explore a subject that all of
us believe is vital to the future of American education and the
future of our economy because these kinds of opportunities for
students who otherwise wouldn't have access to college
education is critically important.
And so are the scarce Federal dollars that enable these
students to have access, and obviously, preserving and
enhancing the use of those Federal dollars is one of the main
reasons we are here today. And I think the chairman has pursued
this topic very responsibly and vigorously, and I thank him on
behalf of the people of Connecticut.
And I must say that a number of students in Connecticut
have approached me with these kinds of complaints about
misrepresented degree programs, the transferability or
nontransferability of credits, the recruiting tactics that have
been used with respect to them. And I recognize that they may
be the exception, rather than the rule. That there may be just
a few bad actors or bad apples, as the saying goes. But the
extent of the harm and of the wrongdoing and abuse is the
reason that we are here today.
And that leads to my first question, which is if you were
to adopt metrics or criteria for knowing and measuring the
results in a particular institution--for example, the number of
dropouts, the numbers of defaults on loans, the numbers of
failure to gain employment afterward--what combination of
factors, Ms. Manning, would you use?
Ms. Manning. I would use the combination that you
mentioned, and those are things that we look at. The other
thing that we place enormous emphasis on, though, is what a
student learned.
In many of these institutions, the job placement is going
to look fine because people already have jobs. That is, there
are people in jobs who are taking these courses or these
programs in order to improve their prospects, get a better job,
get a promotion, or whatever. And so, once you get out of the
traditional world of the 18- to 22-year-old, job placement
becomes difficult in a sense because sometimes the numbers can
be inflated rather than deflated.
We have put tremendous emphasis in the last 20 years on
forcing institutions--and they have come a long way--to
actually measure what the students learn, to create specific
explicit student learning outcomes that are at college level to
measure what the students do learn and then to act on what they
discover about what the students aren't learning.
The other thing I would put, and we are putting, very high
has to do with persistence and completion rates, what we have
been talking about. They are a tremendous problem. We need to
always understand them within the context of an institution. An
institution that is focused on certain sectors--students,
again, who come from inner-city schools, students who have
various disadvantages--are not going to have the same
persistence and completion rates as an elite school because
they filter out all those students.
But we can, for any individual school, say this is what you
have got, and it is or is not good enough. And frankly, it is
never good enough to rest on your laurels, until it is 100
percent. And so, we can then work with institutions to say,
``OK, this is where you are. When are you going to get the next
step?'' And that is what we intend to do.
Senator Blumenthal. And how do you measure what students
learn in a way that is reliable and standardized? In other
words, one of the great challenges at every level of education
is testing and the comparability of scores, and how do you look
to measure the results if not by employment and repayment of
debt?
Ms. Manning. There is a lot that a school can do. Once you
get beyond the basic skills, the things that you are looking at
with freshman--basic math, basic writing, basic reading--you
are looking at skills and learning that are simply not well
measured by simple standardized tests. But if you have faculty
who know what they are doing, and I believe our institutions
do, there are other approaches to measuring what a student
learns.
One of the most promising developments in the last few
years has been something called the ``electronic portfolio.''
And what happens is you collect the products of the student's
work, and then you can, through the use of what are called
rubrics, determine sort of rank, grade, what the students do as
a whole. Not in one discrete course or another, but what the
student has learned through the course of a history major or a
chemistry major, you can see that. And faculty will see that,
and they can normalize their scores.
Now does that give you something that compares well from
one institution to another? No, it doesn't. But it does compare
well to known standards in the profession. There is a lot of
work going on in higher education now to normalize those
standards, and what is really interesting is that when you
bring people together in the disciplines from the different
institutions, it turns out they have pretty similar standards.
Senator Blumenthal. Well, let me ask you, you would agree
that those metrics or measures relating to debt repayment and
employment are not only relevant, but important?
Ms. Manning. Yes.
Senator Blumenthal. And assuming that you applied those to
Ashford, how could you have accredited it?
Ms. Manning. Well, you need to remember that the Ashford
that you are talking about now has only been around for a
couple of years. That is part of our problem.
What we had accredited was Franciscan University of the
Prairies, which was a small school with about 400 students,
declining enrollment, and, in fact, terrible persistence
problems. They were having retention problems. What they needed
was an infusion of cash to do things like spruce up their dorms
and improve their quality so that they could hold and attract
students.
Now what was wrong in our process and what we have changed
is that once we accredited that, when it was acquired by
Bridgepoint, suddenly, Bridgepoint was accredited, and it grew
this enormous superstructure of this enormous online
institution. And because we had pretty much not seen that kind
of thing before, we didn't have the tools that we now have
either to predict that or control that. And that is what we are
doing.
Senator Blumenthal. And what are those tools?
Ms. Manning. Those tools now have to do with written policy
that says that the institution must be able to demonstrate the
intention and the capacity to be after the acquisition the same
institution it was the last time we visited it before the
acquisition. That is primarily the tools.
Senator Blumenthal. But what do you measure to determine
whether those representations are correct?
Ms. Manning. Business plans, academic plans. If it is
publicly traded, SEC filings.
Senator Blumenthal. But what about results? What results?
Ms. Manning. Oh, well, the results, of course, will come
afterwards. What I am talking about is what we try to stop
before it happens. That is to say what we do to try to prevent
it, and the fact that we do that has paid off.
That is why, in 2010, we turned down two such acquisitions.
And in one case, very sadly, Dana College in Nebraska, the
institution went bankrupt. But we did it in another case, and
the institution is still there. So those are preventive
measures.
After the fact, the difference is now that when we approve
that sort of transfer of ownership, the board--and these
decisions are all made at the board of trustees level, not at
the staff level. But the board has the ability to hang
stipulations on the transfer or the continuation of
accreditation to control that sort of transformation of the
institution.
Senator Blumenthal. Well, my time is up, and I really do
apologize, Mr. Chairman.
The Chairman. That is OK. Go ahead, Senator. Go ahead.
I just wanted to point one thing out to my friend from
Connecticut, though. Dr. Manning, it is true that HLC gave that
accreditation to Ashford when they bought that small private
college. But it is also a fact that in 2009, HLC did visit
Ashford University with three peer reviewers, which I pointed
out earlier two of whom were from for-profit universities. So
HLC has, indeed, visited Ashford since 2005. Is that right, Dr.
Manning?
Ms. Manning. It hasn't done a comprehensive review. That is
the problem. We did the last comprehensive review in 2006. And
when I look at it now, it is very dated.
The Chairman. But what was 2009?
Ms. Manning. 2009 was a focused, limited visit that we now
require because they issued an IPO. We regard an IPO as a
significant transfer moment, and so it was a very narrowly
focused visit.
The Chairman. And your analysis gave it high praise.
Ms. Manning. And our analysis gave it high praise.
The Chairman. Thank you.
Senator Blumenthal. And I would just finish, Mr. Chairman,
and I appreciate those very, very helpful questions.
You know, my impression, from having read and studied this
area, is that there is a role for these institutions, for the
for-profit, for the distance learning. I think that you are
sensing a strong sense of disquiet, if not dissatisfaction,
maybe even stronger emotion of skepticism, about whether the
oversight and scrutiny here has been sufficient to eliminate
the bad actors and the bad practices in this industry.
And I would just say that whatever the accreditation and
scrutiny and oversight process is, I am not satisfied that it
is sufficiently strong so far to provide credibility and trust
on the part of policymakers and, equally important, the
awarders of funds, Federal funds, taxpayer moneys that are
very, very valuable in education these days.
Thank you.
The Chairman. Thank you. Thank you, Senator.
Senator Merkley.
Statement of Senator Merkley
Senator Merkley. Thank you very much, Mr. Chair.
Thank you all for your testimony.
It is my understanding, Ms. Manning, that you all did your
major accreditation in 2006 shortly after it was purchased and
became Ashford University. Is that correct?
Ms. Manning. That is correct.
Senator Merkley. And then were reviewed again when there
was an IPO in 2009, as you put it, a major transition?
Ms. Manning. Right.
Senator Merkley. OK. So, in between that time period, if we
look at what happened with this college on the amount of
instructional funds spent per student, it went from $5,000 in
2004 to $700 in 2009. Did that trigger any concerns on behalf
of the accreditation team?
Ms. Manning. The larger concerns that you would come to
were the concerns that we had about the growth. Now, on the one
hand, of course, higher education is under tremendous pressure
to become more cost-efficient. Because until higher education
can become more cost-efficient, we are going to have this
problem of cost that we have, where costs have become
prohibitive for too many families and are costing too much, I
believe, to the taxpayer in Federal funding that goes to assist
those families.
And so, there is pressure to reduce costs. The problem, of
course, is where the reduction of cost comes at the expense of
quality. I believe what we are challenged now is to find the
right path, to find out what is the right amount per student
and to figure that out in a way where we could have a standard,
where we would be able to say this amount is absolutely too
little.
On the other hand, throughout higher education--and I don't
mean here to be particularly defensive of the for-profits. I
will tell you that I share deeply the concerns about marketing
that Senator Harkin expressed. I think the marketing is a huge
problem. I think the description that Senator Harkin gave was
not merely inappropriate, it was appalling, and we have to get
a handle on that.
But on the accreditation side and on the cost side, I think
we have to find the space where we know that, yes, cost has
been cut, and that is good. And then below that, cost cutting
has gone too far.
Senator Merkley. OK. So you are talking about the cost to
the student, that it is important to have efficiency, reduce
the cost of education. Did you see a similar reduction from the
$5,000 per year per student in 2004 to $700, did you see a
similar reduction in the cost to the student over that time
period?
Ms. Manning. No.
Senator Merkley. I was thinking during that time period was
a huge, huge increase in enrollment from less than 1,000 to
53,000 in 2009, 77,000. Wouldn't that kind of massive increase
trigger some sort of fundamental review because it has got to
be a completely different institution when it has 50,000 to
70,000 than when it has 300 students? Wouldn't that trigger on
your part some kind of serious examination of an institution?
Ms. Manning. Unfortunately, it wouldn't have a couple of
years ago. With the new procedures that have just been put in
place in the past year, they will. We collect annual data from
institutions, and we collect annual data on distance education.
And so, we now have new standards, so to speak, where we
measure the growth of distance education.
In other words, up until now, when we looked at distance
education, we looked to see if the institution had the capacity
to offer it. Because in distance education, there are a number
of things you have to do differently than what you do on the
ground, and the services have to be provided in a very
different manner.
And so, we wanted to be sure that the institutions were
capable of doing that. We didn't take a growth factor in there.
Now we do. We actually have sort of mezzanines or levels which
institutions reach, which automatically will trigger a new
review.
We also have put in place a process that allows us to
trigger sheer growth and, by the way, sheer decline in
enrollment, too, which is in a very different world, but it
happens.
Senator Merkley. Do you have similar triggers for changes
in the number of students who are withdrawn, if you will?
Ms. Manning. No. That is part of--that tight following of
persistence rates is something that is coming in with the new
criteria.
Senator Merkley. OK. So it is something you expect to do.
If an institution goes from, say, 20 percent withdrawn to 80
percent, that would trigger a major review?
Ms. Manning. So would 20 to 25.
Senator Merkley. OK. But it didn't.
Ms. Manning. It didn't at the time.
Senator Merkley. At the time. OK. When you, in 2006,
accredited the institution, did you do programmatic
accreditation?
Ms. Manning. No. We do not do programmatic accreditation.
We rely on the specialized and professional accreditors to do
that so that----
Senator Merkley. Let's say a college has 20 programs, and 2
of them are of a real-high quality and they are doing their
job, but 18 are not. You wouldn't necessarily pick up that sort
of distinction that there are 18 programs that are basically
not doing their job fairly by the student?
Ms. Manning. Right. We would not certainly pick it up, for
example, in the liberal arts fields. Although if 18 are poor
and 2 are good, it would be more likely that the whole thing
would look poor. And so, we would see them as poor, as
opposed--do you know what I mean? But if they were 18 good and
2 poor, we wouldn't.
But in the specialized fields, particularly in fields where
there is professional accreditation, where there is licensure,
again, we would rely on those specialized accreditors. And
just, I keep saying this, I know. But in the new standards that
have just come out, one of the things that we are requiring is
that if an institution offers programs in fields where there is
licensure and where specialized accreditation is required, that
students be informed if they have or have not got the
specialized accreditation. And if they don't have it, students
need to be informed as to what the consequences of that will
be. And we are going to monitor that very tightly.
Senator Merkley. So that would really address a situation
we had presented to us previously where a young woman was
enrolled in an ultrasound program. And after she couldn't get a
job after an extended period of time, someone finally pulled
her aside and said, ``You realize that the program you went to
wasn't accredited, and no one will ever hire you, or anyone
from that program.''
And she was just absolutely shocked because she had spent
her money. She had spent her time. She was a single mother. She
was trying to survive after a divorce. So that would not happen
in the process you are describing now?
Ms. Manning. Yes. It is exactly those stories that moved us
to create those requirements.
Senator Merkley. Oregon encourages schools to obtain
programmatic accreditation, essentially approval of their
program by the appropriate State licensing board. I don't know
if you have ever looked at the Oregon model, but it is designed
to make sure that students don't get caught in that kind of a
trap. So there is not a big loophole, if you will, in the
accreditation system. Have you ever looked at the Oregon
system?
Ms. Manning. Oregon, I think, may have the best State
oversight system in the country. You have a superb State higher
education officer. Oregon is not in our district, but we are
aware of that. And that kind of strict State oversight is
something we are very happy to see, we hope, in every State in
the union.
Senator Merkley. Well, thank you. With that compliment,
maybe I should just stop?
[Laughter.]
But I just do want to point out to the chair that that
issue of programmatic accreditation may be a piece of the
puzzle to make sure students paying tuition and taking out
student loans are availing themselves of an opportunity that
merits their money and their time.
Would anybody else like to comment on the programmatic
accreditation issue?
Ms. Willems. As far as teacher preparation in Iowa, one of
our requirements is that the institution is regionally
accredited. And when we did the review of Ashford, we found out
that they were accredited, but we knew that there was such a
huge change coming.
So we contacted the Higher Learning Commission, and I spoke
with an individual who said they were going to be reviewing. We
were doing 2005-6, and I think the HLC review was going to
follow ours. But at the time, they expressed some concerns
about what was happening in Ashford.
Senator Merkley. Because a great number of the students in
the teacher preparation program will be unable to be certified
to teach in their State.
Ms. Willems. Right.
Senator Merkley. And they don't really know that when they
are investing their time and energy, and cramming for their
exams.
Ms. Willems. Many of them don't. Our experience in the
calls that we have received, we have no clue what percentage of
the students were misinformed.
Senator Merkley. Yes, yes.
Ms. Willems. But we do know that there were great numbers.
Senator Merkley. We have about 600 Oregonians who are part
of the online program for Ashford. And so, I don't think they
are covered by the programmatic accreditation standards that
our State has. I am wondering if you all have brainstormed over
that type of issue?
Ms. Willems. Well, that is an issue because once Ashford
lost its Iowa approval, that program was no longer in our
jurisdiction. And so, actually, it is in nobody's jurisdiction.
The people in Oregon who are taking that online program, there
is really no oversight.
Technically, if they complete the Ashford program, they
cannot get a license. They have to complete the Rio Salado
program and get an Arizona license. But most--a lot of the
people don't understand that. It has not been explained to
them. And it is very confusing for them, and that is the
problem.
But basically, what happened is we have lost any
jurisdiction. There is no jurisdiction for your people in
Oregon.
Senator Merkley. Has the concept been brainstormed as to
whether in an unaccredited program, the students should be able
to access Pell grants?
Ms. Willems. That is not something that we get into. We
really look at the quality of the teacher preparation programs.
And so, the people who, in Iowa, who would look at that are the
people at the College Student Aid Commission. And we have had
discussions with them. They are very much aware of the issues
and the concerns.
Senator Merkley. Wouldn't that kind of solve this
overnight? Because every institution would be like, ``OK, we
have got to get programmatic accreditation.''
Ms. Willems. It would. Part of the problem, quite honestly,
is--and this is a common growing problem. It is lack of
personnel because, for instance, we have a rule in Iowa that
requires that these institutions, if they have programs, those
programs must be approved by the State of Iowa in order for
them to be accepted.
The problem is that there are not personnel to do that, and
there are not personnel probably at the Iowa College Student
Aid Commission to address all of that. And so, the oversight is
not one--sometimes it is not even one of rule. Certainly, it is
not one of intention. But oftentimes, it is a matter of lack of
people.
And so, the work has to be prioritized, and at this point
in time, that has not been a priority.
Senator Merkley. Well, I want to thank you all very much
for coming before the committee to help us understand these
issues better because it is certainly important that students
have a clear understanding of what they are buying. They are
putting their money on the line. We are putting Federal money
on the line with grants and loans.
Student loans are not inextinguishable by bankruptcy. So
they travel with folks through their life. And of course, our
collective goal is to equip people to have a better future, and
we need to make sure that is happening when we are putting the
resources in. Thank you very much.
Thank you, Mr. Chair.
The Chairman. Thank you, Senator Merkley. Thank you very
much. Very pertinent questions and very pertinent, incisive
questions on this.
We have had so many complaints. I had a whole stack of them
here, several hundred from this one university. And a lot of
them have to do with--they were basically told that they could
take a course and they would be qualified to do something, and
then only later to find out that they weren't.
Just one here was a student who signed up to be a dental
assistant. He took classes for 1 year, and he became suspicious
because none of them had anything to do with being a dental
assistant. He inquired about it with his academic adviser, told
him that Ashford would not lead to a dental assistant license,
and she didn't really have anything to say. He was distraught.
He said, ``I felt I was completely, utterly lied to.'' He
left with $9,0000 in loans and $3,000 owed to the school.
Again, it seems to me that I think the Senator is onto
something. If, in fact, they are going to hold themselves out
that you can take this course and it leads to a job or a degree
in something that you would be qualified to do in your State,
that they have to show that before they can get Pell grants or
student loans.
It has to be something like I think a program approval,
something along that line is something we ought to look at. I
thank the Senator for bringing that up.
And I just might state that--I have some more questions.
But I might just state before the Senator leaves that all the
hearings and investigations we have had for that last year,
they are not just going to simply lead to nothing. This is
crying out for something that we have to do legislatively and
regulatory, and I will be discussing it with members of the
committee and the Senator as we move ahead on that.
Thank you, Senator.
And I think when we get into the accreditation, and maybe
if, Senator Merkley, just for this one little thing, if I could
just ask your indulgence to stay? We think of accreditation
agencies as accrediting colleges and universities that are
basically campus based. That is how they grew up 100 years ago.
That has been the evolution of accrediting agencies.
With this whole new thing of these for-profit schools that
have just burgeoned in the last 10 years and the amount of
money they are making--as I said, what was it? How many billion
dollars now, Federal money? Twenty-six billion dollars, Pell
grants. That really, these are really multi-State corporations.
That is really what they are. They are multi-State
corporations.
Their main focus is the bottom line, how much profit they
make. And the question that I would say is for any accreditor,
not just HLC, but for any accrediting agency, are they really
equipped to oversee the quality of a billion-dollar, multi-
State corporation?
I don't think so. And that is what you are dealing with.
You are not dealing with a school. You are dealing with a
multi-State, billion-dollar corporation whose bottom line is
making more profit for their investors. And so, I don't think
the accreditation agencies have the wherewithal to do that.
I don't know, Ms. Manning, if you wanted to respond to
that? I just think this is a whole different horse of a
different color, and we either have to change the accrediting
agencies, and what they do and how they do it, or set up some
new kind of a regulatory framework to deal with these multi-
State corporations. Because they come under the radar screen of
education, but that is not their primary business.
When we talk about dropout rates and things, I understand
that a lot of schools have dropout rates. I understand that.
But their bottom line is not making a profit. It is education.
You know, University of Oregon or your private schools are out
there, Lewis and Clark and all the great schools you have out
there, their bottom line is not making a profit. It is
educating kids.
So I just throw that out. I don't know, Dr. Manning, if you
had any response to that or not?
Ms. Manning. I would just like to take up the distinction
you made between a multi-State, billion-dollar corporation and
a school and to urge you, as you seek solutions, perhaps to
think about distinguishing so that insofar as this is a multi-
State, billion-dollar corporation, you may well need to have a
different regulatory scheme at the Federal level.
The Chairman. Maybe.
Ms. Manning. Insofar as it is a school, when you are
talking about the quality of the education the students
receive, the actual learning that takes place, I would urge you
still to leave that to us.
The Chairman. Well, I have my questions----
Ms. Manning. I know.
The Chairman [continuing]. About that, as I pointed out
earlier. The Federal Government, as far as I know, has never
really gotten into the accreditation. This is something that is
private. They are nonprofit. You are out there.
But to the extent that accreditation provides for
accessibility to Pell grants and to guaranteed student loans,
yes, now we have an interest in how accrediting agencies are
structured and what they look at and how they provide this
accreditation.
So it may not just be a separate regulatory agency. It may
be something that we need to say that if you are going to be an
accrediting agency, you have to do these things, if you are
going to be held out as an accrediting agency based upon which
school has access to Federal student loans and grants. So I
don't know.
Ms. Manning. And the structure to do that is built into the
requirement for recognition by the Department of Education.
The Chairman. Well, obviously, it is not happening. It is
just not happening. We know that from all the documents and
everything. It is just not happening. So something has got to
change.
And again, I would say this not as any kind of a poke at
the accrediting agencies. I think there is a role for
accrediting agencies, but this whole new regime out there has
thrown a monkey wrench into it.
But it just seems to me to say that all we are going to do
is rely upon the accrediting agencies to give us sort of the
perimeter of the stamp of approval when the accrediting
agencies are basically part and parcel of the higher education
system, it has some of the echoes of the last 10 years and
where we relied upon bond rating agencies to tell us that these
subprime mortgages were just fine. And they said they were, and
we found out, no, they weren't.
Yes, Senator.
Senator Merkley. Mr. Chair, I am thinking about several
for-profit schools that I have visited that had done tremendous
work in terms of innovation, utilizing building online
textbooks that could be continuously upgraded and were very
inexpensive, class scheduling designed to be very flexible for
mothers and fathers and others getting after-work degrees and
so forth. So I think that there is a powerful force for good in
the for-profit education system.
I think that those institutions that are truly in the
education world to educate can help us figure out how we can
design a system so that students will benefit from their
experience in these programs while sorting out situations that
have been set up primarily to fleece the Federal Government.
And so, we have got to find a way to seize and promote the
potential while sorting out the abuse.
The Chairman. I appreciate that, and I have seen some for-
profits that have done a great job. But I think Mr. Cruz's
point is well taken. It is a structural problem.
When you have a business model that is set up so that you
make the most profit by getting the lowest-income students, you
have a problem right away.
And then what is happening with the growth of these, the
growth of the University of Phoenix and Bridgepoint and all the
others, and the huge dropout rates, the amount of debt they are
piling up, 10 percent of the students going to online for-
profit schools, but they are taking up 25 percent of the
Government money. And they are contributing--they have 10
percent of the students, and they are getting about 50 percent
of the defaults just in that segment.
I just think that there is a vortex that people are being
sucked into here. And what you also see is some of the larger
for-profits sucking up the smaller ones. They are buying them
up. They probably pay pretty good money for them, and they suck
those up.
I think many well-meaning for-profit schools, in order to
stay in the game, are looking at Bridgepoint and others and
saying, ``We have got to do that, too. If we are going to be in
this, we have got to get in this game, too.'' Or they are going
to get pushed out by some of these larger ones.
Now that, to me, is also a concern. How we have a decent
for-profit system, I think, can be done. I have seen it happen.
But I am afraid the business model and the structure that is
set up now is not going to permit that to happen without some
regulation from here, and maybe some new legislation and new
regulation that might help do this. But that is for discussions
later on.
I had some follow-up questions I wanted to ask, and it had
to do with something that was said about we have low-income
students and minority students, and they do worse than their
peers. That happens everywhere.
I am just wondering if the implication is that we should
have lower expectations for for-profit schools because they
have more low-income and minority students? Mr. Cruz, did you
hear that?
Mr. Cruz. I heard that.
The Chairman. What did you think about that?
Mr. Cruz. Well, I think that low expectations are a
problem, and the fact of the matter is that what institutions
do matters. So, for example, when Ms. Manning commented on the
situation regarding remedial coursework, that is one example of
what institutions can do to provide their students with the
tools they need to be able to be successful.
So when you see for-profit college companies talk about
their students, the students that they work so hard to recruit
in the first place, and then say that the reason that they are
not successful is because of the demography, then that tells
you that really there is not a commitment to provide them the
tools that they need to succeed.
They know the background of those students. They know what
those students need to succeed. And if they don't, there is
plenty of literature that shows----
The Chairman. So you are saying they know the students they
are recruiting. They know what they need to be successful, but
they are not providing that support.
Mr. Cruz. And we have seen that they have sufficient
revenue to invest in student success vehicles.
The Chairman. In other words, yes, they have the sufficient
revenue, but it is going to profits.
Mr. Cruz. Right.
The Chairman. If they took that and put that into support
services, you might have a higher success rate.
Mr. Cruz. That is right.
The Chairman. Ms. Willems, I see you nodding your head.
Mr. Cruz. The only other thing I would say, if I may, is
that we have identified many institutions throughout the United
States that have student bodies that are similar to those in
the for-profit college sector but that do graduate their
students at a higher rate and leave those students with a much
lower debt burden. So demography is definitely not destiny.
The Chairman. Ms. Willems, did you have any thoughts on
that? I saw you nodding your head.
Ms. Willems. Definitely. I mean, the fact that the support
is not there and that they are intentionally recruiting
students. They know their capabilities to a point. And I agree
with Dr. Manning that, definitely, there should be something
more in place.
I mean, at a traditional school, you don't enter a college,
you are not accepted unless you meet certain criteria. And I
think that is an issue.
I think, if I could?
The Chairman. Sure.
Ms. Willems. Two things. One is this whole issue of online.
I think we have to be very careful to separate the idea of
online education with for-profit because there is growing
online education coming from non-for-profits. Probably it is
not growing fast enough, and that is why the for-profits can
get into this market.
And if I may, just to play an Iowan for just a minute? Your
comment about the horse of a different color, my concern is
that that horse is already out of the barn. And by the time
that we have developed some kind of oversight, when we look at
the way that Ashford grew. Now, certainly, if we can develop an
appropriate oversight, we could close a university, just like
we could close a program with proper oversight.
But it is more difficult once that university is in place
and is so large and is so ingrained in an economic system and
situation. So my concern is for the timeframe.
The Chairman. It is what?
Ms. Willems. Timeframe, of being able to develop an
accountability system for them.
The Chairman. Do you think it is too late?
Ms. Willems. No. I mean, we have to do it. We have to do
it. It is just that these corporations are much more nimble,
and they can grow so much more quickly than any kind of
Government entity or any kind of oversight entity. Those are
just the facts of life.
So I don't think it is--I mean, we have to continue the
work. I think we just have to keep in mind that this has grown
so quickly, and we just have not kept up. And so, perhaps that
means that the efforts need to be a little bit more intentional
or a little bit more fast-paced than we usually do things.
The Chairman. Well, you know, we are trying. The Secretary
of Education promulgated a proposed gainful employment rule.
The comment period was open. I think it is closed now, isn't
it? The comment period is closed now.
And I am sure it comes as no shock to you that the lobbying
effort in this city to water down that gainful employment rule
is one of the most intense I have seen in my 30-some years
here, which tells me there is a lot of money at stake. And they
are doing, I will tell you, the lobbying is just incredibly
intense on that.
This committee would like to know how much money these for-
profit schools are spending. Now we do know that about 30
percent of Federal money is being used for recruiting. I wonder
how much of the taxpayers' dollars are being used for lobbying?
Ms. Willems. Well, I can tell you that in the State of
Iowa, there is a lot of lobbying being done in the statehouse
by lobbyists for these folks. I know the lobbyists. I have met
with the lobbyist from Ashford. They are currently no longer
their lobbyist. They have hired different lobbyists since then.
But it is very--it is intense.
The Chairman. Do you mind me raising a point? It wasn't in
your testimony, but it is my understanding that Bridgepoint
offered you a job?
Ms. Willems. Yes, yes.
The Chairman. They did?
Ms. Willems. They did. I had lunch with the chancellor and
the chair after the morning meeting when we closed them
officially. And it was interesting. I wondered myself what that
was all about. And if she was serious, which, you know, is
debatable, I think that probably they thought maybe I could be
of assistance, especially if they decided to rebuild their
program and seek Iowa approval.
They made good market decisions as a business entity. Now
some of the decisions they made in the program level were not
wise decisions, and some of the hiring decisions were not wise.
But as a business, they certainly know what they are doing.
The Chairman. Well, that is what it is. It is a business.
There is one other thing I want to cover before we bring
this to a close. And there is just one more issue that I want
to bring out in this hearing. And this has to do with how fast
default rates are going up, 25 percent in the last year alone.
And what is happening there with the internal documents
that we have from the company shows that the company is
managing the default rate by paying a subsidiary of Sallie Mae,
called GRC, more than $1 million a year, $1.3 million a year.
Bridgepoint turned over the names and contact information for
37,000 students that could potentially default and, therefore,
add to the company's default rate that they report to the
Department of Education.
Now why is that important? Well, because under Federal law,
any institution that has a--is it 2 years or 3? Yes, 2 out of 3
years, if they have a default rate of over 30 percent, they
will be ineligible for Government programs.
So if you are a school and you see your default rate going
up and maybe getting near that 30 percent, what do you do? You
don't want to be kicked out of the program. So you manage it.
This chart, which I can hardly see myself here, this chart
shows that most of the students that GRC has cured are actually
in forbearance. Oh, here. Thank you. I can look at it now. What
it shows is that they are either in forbearance or deferment.
In 2009, it was 82.9 percent in 1 year, and then on 2010,
84.7 percent. So they are either in forbearance or deferment.
So what happens when deferment or forbearance runs out?
What happens? Mr. Cruz, are you aware of what forbearance and
deferment means?
Mr. Cruz. Yes, sir.
The Chairman. What does it mean when you are in
forbearance?
Mr. Cruz. Well, when you are in forbearance, you are
allowed to stop making payments to your student loans for some
life condition. The problem with forbearance is that interest
keeps accumulating.
The Chairman. So you don't have to make payments, but the
interest accumulates?
Mr. Cruz. Right.
The Chairman. And how long can you be in forbearance?
Mr. Cruz. I believe it is for a year.
The Chairman. For a year? For 1 year?
Mr. Cruz. I believe so.
The Chairman. OK. Tell me about deferment then.
Mr. Cruz. In deferment, you can also stop making payments.
But in that case, I believe that interest does not accrue, and
that is for cases where, for example, the student goes back to
school and can then reinstate that deferment.
The Chairman. And I am told that deferment can be for up to
3 years.
Mr. Cruz. For 3 years.
The Chairman. So if you were approaching, if a school were
approaching a 30 percent default rate over that 2 out of 3
years and they hired this company, GRC, a subsidiary of Sallie
Mae, and gave them all these students' names that were
potentially going to be in default. And GRC called them up and
said, ``Look, are you having trouble making your payments?''
Yes. ``Well, there is something called forbearance that you can
go into, or we can put you in deferment.''
And guess what, you don't have to make any payments, and
you can be in deferment for up to 3 years. And you can go back
to school when you are in deferment, and then you can come back
out of school. Then you can go back into school and come back
out. But you can be in deferment, if I am not mistaken. And
therefore, it does not add up to that 30 percent.
So what happens, it is a scheme. What a school can do,
obviously, has a snowball effect. But they keep pushing the
snowball into the fourth year. As long as it is in the fourth
year, they are never over that 30 percent default rate. Does
this comport with anything that you have known, Mr. Cruz?
Mr. Cruz. Well, I have known that institutions try to
manage their default rates. The way that you have presented
Bridgepoint doing it in this case would worry me from the
standpoint of whether or not the students are getting the best
financial advice for them, right, because once the window of
responsibility for Bridgepoint closes, the student still has
that financial obligation.
The Chairman. That is right.
Mr. Cruz. The other thing that sort of pops out at me is
this notion of the student as a cost unit. First, we provide
bounties to recruit them. Then we provide bounties to third
parties. We outsource the management of the default rates. And
at no point there seems to be that same sort of investment or
focus on the student success to begin with.
The Chairman. In fact, our figures show that with
Bridgepoint alone, just on this managing of the default and
what they are paying GRC and the number of students, comes down
to about $495 a student, if I am not mistaken. Yes, $495.
So, recruiting, they spend $2,714 per student. For
instruction, as we saw earlier, $700 per student. They make--
again, I can't see that chart over there. How much for profit
is--$1,500 for profit, and then $495 for delinquent cure, as it
is called.
So that is $495 they are putting into that. But they are
putting $2,714 to recruiting. Does that kind of, again, tell
you something?
Mr. Cruz. Well, I guess that is the cost of doing business
in order to get access to the Federal revenue sources.
The Chairman. Anybody else have any thoughts on this?
Ms. Manning. I just want to comment that there are
loopholes in this whole default rate that shouldn't be. And the
consequence of the loopholes is that the institutions get away
with it because the students after 3 years fall out of the
picture. They are never counted.
The Chairman. Gone.
Ms. Manning. And yet the penalty for the student for
default, as you, yourself, alluded to, is a lifetime penalty. I
think that needs to be fixed, and I hope that you will find a
way to fix that.
The Chairman. Well, that is what this is all leading to. We
have got to try to find some way to fix it, and you said it is
a lifetime. It is around their neck in terms of their debt.
I have often said at least in the subprime, you can walk
away from a house. You can walk away from a car loan. You can
give them your car back. But you can't walk away from this one.
The other disturbing thing that we have brought up in past
hearings is what is happening now with the military. And
Bridgepoint, I didn't talk about that, but we have a lot of
their documentation about how they are aggressively now going
after the military. Again, for one reason, which the CEO of
Bridgepoint quite openly said, it keeps them below their 90
percent threshold because the military money doesn't count for
the 90 percent.
Well, while that may not be a debt on those service people,
you only get it one time. The benefits that we give for
military active duty and post military active duty, GI bill, is
one time. If they use that money and go to one of these online
schools like Bridgepoint and they don't get a good education,
they don't get anything for it. They can't get it again. It is
gone. It is one time.
Bridgepoint, I will just say, has in the last year and a
half, seen an enormous increase in the number of military
students. Bridgepoint CEO Andrew Clark made clear at an
investor conference in early 2010 that the school was going
aggressively after military students.
He said, ``We believe that when we are able to report our
90/10 for 2009, that it should decrease due to our penetration
in particular into the military market.'' He went on to rave
that Ashford has been recognized by GI Times as ``military
friendly.'' Again, this might come as a surprise to a number of
the military students filing complaints.
But Mr. Clark was clearly correct in his assessment. The
school doubled its enrollment of military undergraduate
students from 4,438 to nearly 9,000 in the course of 9 months.
In 2010, Bridgepoint collected $60 million in military
benefits, $60 million. 2009, it was $4 million. So they are
going after the military, too.
So we have a very deep problem here, and I know that some
are trying to perhaps take our eye off the ball by claiming
that GAO did something here and nothing there and all this kind
of talk. Fine. As I said, GAO stands by its findings, and we
have the tapes and everything. So we can't take our eye off of
what the problem is here.
I would like to thank each of our witnesses for being with
us today. We will leave the record open for 10 days. The
witnesses may submit statements for the record or supplemental
statements.
I would ask unanimous consent to include a statement by
Senator Durbin in the record.
[The prepared statement of Senator Durbin follows:]
Statement of Senator Durbin
I would like to thank Senator Harkin for holding this
hearing. The Chairman has held a series of hearings on for-
profit colleges, and I commend him for his continued commitment
to tackling this important issue. The Chairman and I share many
concerns about practices in the for-profit higher education
sector, as well as a lack of proper oversight of these
institutions. I commend this committee for its continued work
in the area proprietary schools.
As I have said before, there are many good for-profit
colleges that provide a valuable education to students. There
is much that traditional colleges could learn from the
flexibility and innovations of for-profit colleges, but we know
that some for-profit colleges are failing students.
We know that 25 percent of for-profit college students will
default on their Federal loans within 3 years of leaving
school. We know that for-profit colleges account for nearly
half of all total defaults on student loans. I have spoken with
these students--young people whose lives may be ruined by
student loan debt they will never pay off.
There are bad actors in this industry, despite the claims
of every lobbyist that their client is one of the good ones.
Today, Chairman Harkin is profiling Bridgepoint Education. He
will highlight practices taking place at this school that
should make everyone question the investment of Federal dollars
there, as well as the efficacy of the current regulatory
system.
Bridgepoint Education was founded in 1999. It purchased a
small school in Iowa in 2005 and changed its name to Ashford
University. The small campus quickly became a large online
operation, still carrying the original school's valuable
regional accreditation with the Higher Learning Commission.
Enrollment jumped from 332 students in 2005 to over 77,000 in
2010.
Profits have also skyrocketed. In 2010, Bridgepoint earned
$216 million in profits while taking in over 85 percent of
revenues from Federal taxpayers. Very little of that money is
being invested in student success. Bridgepoint only spends 40
percent of revenues on instruction, faculty, and student
services. The rest goes to profits and marketing. Only one
career counselor is on hand to assist students with career
placement: one counselor for 77,000 students.
Congress needs to take a serious look at whether Federal
financial aid dollars that are meant to provide students a
chance at a higher education should be spent on billboards,
television commercials, advertisements on the sides of buses,
heavy-handed recruiting, and lining the pockets of investors.
Colleges that focus more on shareholders than students do
not produce good outcomes. Ashford University, owned by
Bridgepoint, has a 3-year student loan default rate of nearly
20 percent. When the promises made to students are not
fulfilled, they find themselves left with tens of thousands of
dollars in student loan debt and a worthless degree. If that
student defaults on that loan, the taxpayers are left holding
the bag.
Despite all the evident problems at Bridgepoint, Ashford
University retains its regional accreditation, awarded before
the school was purchased and transformed.
Accreditation agencies serve as the gateway to Federal
funding. The Federal Government, taxpayers, and students depend
on their judgment and deserve assurances that accreditors are
weeding out low performing institutions. Looking at the current
state of higher education, it is reasonable to question whether
accreditation agencies have been living up to their
responsibility. Examples such as the one highlighted today
raise serious questions about the rigor of the accreditation
process.
As Congress works to reduce the Federal deficit, we are
appropriately scrutinizing Federal spending. We must do more to
provide assurance to taxpayers about the value of their
investment in higher education. Accrediting agencies also must
provide assurance to taxpayers and students that Federal
financial aid funding is only going to institutions of quality
and rigor that produce good outcomes for students. Students
deserve more than what some of these colleges are currently
providing
Again, I thank the Chairman for holding this hearing and I
look forward to continuing to work with him to address this
important issue.
The Chairman. I believe that today's case study of
Bridgepoint has revealed compelling evidence about how this one
company has put profits over students. Students and taxpayers
rely on the States, accreditors, and the Federal Government to
ensure that the college or university, online or campus-based,
that they are providing a quality education.
And I don't believe these institutions, all of them--I am
not just singling out the accreditors. I don't think the
Federal Government has done its job. I don't think the State
governments have done their job either, when it comes to
Bridgepoint especially and others that are in the same mold.
There are very serious gaps in our rules and regulations.
These institutions that get most of their money, 85 to 90
percent of their money, from the taxpayers of this country and
use as a recruiting model to go after the most vulnerable,
lowest-income people in our country.
As Mr. Cruz correctly stated, the problem is structural. It
is not just one or two bad actors. Does that mean that
everybody is bad? No, that is not what I am saying. I am just
saying the structure is such that even if you are a good actor,
you are pretty soon probably going to be a bad actor if you are
still trying to meet the bottom line.
So it is a structural problem, and it is something that if
we don't--what did you say, Ms. Willems--close the barn door?
If we don't close that barn door pretty soon, it is just going
to get worse and worse and worse. And you are going to have a
whole generation almost of people in this country who have
tremendous debts, tremendous debts, and haven't gotten an
adequate education.
They have been held out, this is the dream, the American
dream. Get a good education. And they are up to their eyeballs
in debt, and they will never get out of it. And yet a number of
people will walk away with millions, hundreds of millions of
dollars in profit.
I don't even like to use the word ``profit.'' It is not a
profit. When you are taking that much money from the taxpayers,
that is not a profit. That is not a profit. That is something
else. And so, they are walking away with all of this taxpayer
money in their pockets, mega millions of dollars. They are set
for life. They are set for life. Mr. Clark is set for life.
How many millions is he worth? Twenty million. Now they
went public. I don't know how much stock he has. He is probably
worth, I don't know, hundreds of millions of dollars, just in 5
years.
But what about some of these students who signed up and
went into debt? What about them? What about their lives? Well,
they are counting on us. They are counting on us to protect
them and to make sure that we have a structure in which they
can rely upon the assurances that they were given by whatever
college they go to that they are going to get a quality
education.
With that, the HELP Committee is adjourned.
[Additional material follows.]
ADDITIONAL MATERIAL
Prepared Statement of Gregory D. Kutz, Managing Director Forensics
Audits and Special Investigations*
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.
---------------------------------------------------------------------------
* On November 30, 2010. GAO reissued this testimony to clarify and
add more precise wording to the original testimony.
---------------------------------------------------------------------------
To conduct this investigation, GAO investigators posing as
prospective students applied for admissions at 15 for-profit colleges
in six 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 4 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 voicemail
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.
---------------------------------------------------------------------------
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).
---------------------------------------------------------------------------
\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' out-sourced 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. Sec. 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\ 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
Four of the 15 colleges we visited encouraged our undercover
applicants to falsify their FAFSA in order to qualify for financial
aid. 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-- 2-year, privately owned Admissions
Radiologic Technology. 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.
----------------------------------------------------------------------------------------------------------------
Source: GAO.
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 out-sourced
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 in business administration degree,
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 five phone calls within the hour. Another
prospective student received two phone calls separated only by seconds
within the first 5 minutes of registering and another three 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
--------------------------------------------------------------------------------------------------------------------------------------------------------
No. of
Calls Most Total
Received Calls Number of
Student Student's Location Web Site Student Used Degree Within 24 Received Calls
Hours of in One Received
Registering Day\1\ in a Month
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.................................... GA...................... A....................... Business Administration. 21 19 179
2.................. CA...................... B....................... Business Administration. 24 18 182
3.................................... MD...................... A....................... Culinary Arts........... 5 8 72
4.................................... NV...................... B....................... Culinary Arts........... 2 1 3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: GAO
\1\ 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 Private Nonprofit
Degree Location College College College Tuition
Tuition Tuition
----------------------------------------------------------------------------------------------------------------
Certificate--Computer-aided drafting.. CA...................... $13,945 $520 College would not
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 Administration.. TX...................... $32,665 $2,870 $28,830
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).
----------------------------------------------------------------------------------------------------------------
Encouragement of
fraud, and
Students receiving Students receiving Graduation rate engagement in
College Information and degree Pell Grants \1\ Federal loans \1\ \1\ [In percent] deceptive, or
sought [In percent] [In percent] otherwise
questionable
behavior
----------------------------------------------------------------------------------------------------------------
1............................... 27................ 39................ 15................ Scenario 1
AZ--4-year, owned by publicly ................ ................ ................ Admission
traded company. s representative
compares the
college to the
University of
Arizona and
Arizona State
University.
Admission
s 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.
Bachelor's--Education......... ................ ................ ................ Admission
s representative
says that he does
not know the job
placement rate
because a lot of
students moved
out of the area.
Admission
s 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
Admission
s 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.
Admission
s representative
told the
undercover
applicant that
the graduation
rate is 20
percent.
Education reports
that it is 15
percent.
2............................... 57................ 83................ Not reported...... Scenario 2
AZ--4-year, owned by publicly ................ ................ ................ Upon
traded company. request by
applicant, the
financial aid
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.
Associate's Degree--Paralegal. ................ ................ ................ Admission
s 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, ................ ................ ................ College
privately owned. 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 know, 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.
Undercove
r 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.
Certificate--Computer Aided ................ ................ ................ Scenario
Drafting. 2
Undercove
r 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 ................ ................ ................ The
traded company. financial aid
representative
would not discuss
the under cover
applicant's
eligibility for
grants and loans
and required the
applicant to
return on another
day.
Certificate--Massage Therapy.. ................ ................ ................ 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.... ................ ................ ................ Admission
s representative
explains to 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.
Admission
s 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.
Admission
s 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?''
Bachelor's Degree--Business ................ ................ ................ Scenario 2
Information Systems. Admission
s 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.
Admission
s representative
required the
undercover
applicant to
apply to the
college before he
could talk to
someone in
financial aid.
Admission
s 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 reported.... Scenario 1
DC--less than 2-year, ................ ................ ................ Admission
Privately owned. s 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.
Admission
s 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.
Certificate--Cosmetology, ................ ................ ................ Scenario 2
Barber. Admission
s 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
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
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.
Associate's Degree--Radiologic ................ ................ ................ Admission
Therapy. s 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
Admission
s 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 Reported...... Not Reported...... Not Reported...... Scenario 1
FL--2-year, owned by publicly ................ ................ ................ Admission
traded company. s representative
falsely 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.
Associate's Degree--Criminal ................ ................ ................ Applicant
Justice. 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 got
to 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 ten-
fold, no matter
what.''
Admission
s 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 2
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... ................ ................ ................
Admission
s 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.
Certificate--Medical Assistant ................ ................ ................
10.............................. Not reported...... Not reported...... Not reported...... Scenario 1
IL--4-year, owned by publicly ................ ................ ................ Admission
traded company. s representative
said the
bachelor's degree
would take 3.5-4
years to
complete, but
only provided an
annual cost
estimate for \1/
5\ of the
program.
Bachelor's Degree--Psychology. ................ ................ ................ Scenario 2
Admission
s 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 ................ ................ ................ Admissions
traded company. representative
told the
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.
Bachelor's Degree--Business ................ ................ ................ Scenario 2
Administration. Admission
s 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.
Admission
s 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.
Admission
s 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, ................ ................ ................ Admissions
privately owned. 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 enroll
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.
Certificate--Web Page Design.. ................ ................ ................ 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
voicemail 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... ................ ................ ................ Admission
s representative
said the 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.
Bachelor's Degree-- ................ ................ ................ Scenario 2
Construction Management; Admission
Visual Communications. s representative
did not disclose
the graduation
rate after being
directly asked.
The college's Web
site also did not
provide the
graduation rate.
Admission
s 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 ................ ................ ................ Admission
traded company. s representative
said the program
takes 18 to 24
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.
Associate's Degree--Business ................ ................ ................ Scenario 2
Administration. Undercove
r applicant would
be required to
make a monthly
payment to the
college towards
student loans
while enrolled.
Admission
s 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
applicant was not
allowed to speak
to a financial
aid
representative
until he enrolled
in the college.
Associate's Degree-- ................ ................ ................ Scenario 2
Respiratory Therapy. Admission
s 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.
Admission
s representative
told undercover
applicant that
monthly loan
repayment would
be lower than it
actually would.
----------------------------------------------------------------------------------------------------------------
Source: GAO undercover visits and Department of Education.
\1\ This information was obtained from the Department of Education National Center for Education Statistics.
GAO Redlined Summary of Revisions
Memorandum
Date: March 1, 2011
To: GAO Employees
From: Comptroller General--Gene L. Dodaro
Subject: Executive Announcements
Since the Forensic Audits and Special Investigations team was
formed in 2005 the team's body of work has resulted in numerous
accomplishments and benefits to the Congress and the public. To ensure
good work continues and to bring greater management attention to the
group and more seamlessly integrate its work with GAO's program teams
as well as the audit and investigative sides of the unit, today I am
announcing several changes. These enhancements will also ensure greater
attention to the issues that led to the need to produce the errata to
the for-profit schools report and by the subsequent inspection.
The team will be restructured and renamed the Forensic Audits and
Investigative Service (FAIS) team and I am pleased to announce that
Rick Hillman, the current Managing Director of the Financial Markets
and Community Investments team, has agreed to serve as the Managing
Director of the new FAIS team. I am also pleased to announce that as
part of this new FAIS team structure, Greg Kutz will serve as Director
of Audit Services. Another executive will be brought in as Director of
Investigative Services and a search is underway for that individual.
This new structure will provide greater emphasis on both forensic
audits and investigations. We also will enhance the matrixed efforts
the team conducts working with other teams across the agency to focus
on investigative results that demonstrate the impact of identified
management control and other problems. We will also increase the focus
on some of our high-risk work such as the detection, correction and
prevention of improper payments. The new FAIS team will be subject to
GAO's rigorous regular internal inspections and external peer reviews.
The inspection report on the for-profit school work identified areas to
improve quality control and we will also move expeditiously to
implement each of those recommendations and any new recommendations
that come from the ongoing inspections of FAIS' portfolio of work. We
are looking at FAIS staffing, workload and enhanced training to ensure
we are well-positioned to support the important work the team does both
individually and with the support of other mission teams.
These changes are effective immediately. I hope you will join me in
wishing Rick and Greg much success in their new positions.
Richard J. Hillman
Rick Hillman will bring strong leadership to manage this
restructuring. As a career-long GAO employee, Mr. Hillman has served
GAO in many capacities. Mr. Hillman is currently Managing Director in
the Financial Markets and Community Investment team and has led that
team since 2005. In 1997, Mr. Hillman was promoted into GAO's Senior
Executive Service as an Associate Director in the General Government
Division working in the financial institutions and markets issues area.
Prior to that, he was a Band III analyst in the Office of Program
Planning and the Office of the Assistant Comptroller General for
Planning and Reporting. Mr. Hillman also served for over 6 years in
senior and supervisory information systems analyst positions in GAO's
Information Management and Technology Division.
Mr. Hillman joined GAO's headquarters office entry-level program in
1976. He subsequently worked in GAO's Washington Regional Office until
his reassignment to work in the accounting and financial auditing group
in the Accounting and Financial Management Division.
Mr. Hillman graduated with honors with a B.S. degree in accounting
from the University of Scranton. He also has completed additional
course work in government management and in computer technology and
information systems issues. He has earned numerous GAO honors
throughout his career including GAO's Comptroller General's Award in
2009, Distinguished Service Award in 2003, and Meritorious Service
Awards in 1986 and 1996 and other individual performance and teamwork
awards.
Greg Kutz
These changes will allow us to take better advantage of Greg Kutz's
wealth of experience in forensic and other audit services. Mr. Kutz has
been Managing Director of the Forensic Audits and Special
Investigations Unit (FSI) and has served in that capacity since 2005.
In 1991, Mr. Kutz joined the Government 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, improper sales of
sensitive military and dual use technology, tax fraud and abuse, wage
theft, Hurricane Katrina and Rita fraud, and a variety of other high
profile investigations. Mr. Kutz is a Certified Public Accountant
(CPA), Certified Fraud Examiner (CFE), and Member of the Association of
Certified Fraud Examiners Professional Standards and Practices
Committee. He was also a 2010 Service to America Medals Finalist for
Law Enforcement and Justice.
Response to Questions of Senator Enzi by Kathleen Tighe
Question 1. Oversight of institutions of higher education relies on
the so-called ``triad,'' which consists of the U.S. Department of
Education (Department), State regulation, and accreditation. Please
explain your understanding of the responsibilities held by each in
providing oversight of higher education. What weaknesses, if any, do
you see in this system?
Answer 1. The Higher Education Act of 1965, as amended (HEA),
provides eligibility criteria that an institution must meet in order to
participate in the Federal student aid programs. States, accrediting
agencies, and the Department all have responsibility for program
integrity to ensure that institutions meet, and continue to meet,
requirements for participation in the Federal student aid programs. For
example:
States provide licensing or other authorization necessary
for an institution of higher education to operate within a State;
Accrediting agencies, recognized by the Secretary of
Education (Secretary) as reliable authorities on the quality of
education or training offered, must establish, consistently apply, and
enforce standards for accrediting institutions; and
The Department assesses and certifies that an institution
meets the HEA's eligibility criteria for administrative and financial
responsibility. It must also conduct program reviews, on a systematic
basis, designed to include all institutions of higher education
participating in the Federal student aid programs.
The Department has the primary oversight responsibility for the HEA
Title IV programs. The Department accomplishes this through program
reviews of institutions and reviews of the annual financial statement
and compliance audits. In the past, the Office of Inspector General
(OIG) has identified weaknesses in the Department's program review
function. We periodically evaluate the program review function and will
be doing so this year. Our quality assurance reviews of non-Federal
auditors hired by institutions to perform required annual, independent
audits have shown significant weaknesses in the quality of compliance
work performed by the auditors.
Accrediting agencies recognized by the Secretary are supposed to
ensure the quality of postsecondary education at the institutions they
accredit through sufficiently rigorous standards. The Department cannot
direct accrediting agencies to improve or raise its standards. Our
recent work on accrediting agencies and the definition of a credit hour
has shown that accrediting agencies may not be reliable authorities on
the quality of education. None of the regional accrediting agencies we
reviewed had a definition of credit hour or provided guidance to
institutions or peer reviewers on the appropriate assignment of credit
hours to the courses provided by the institutions. The meaning of a
credit hour is of critical importance to the title IV programs because
it is the primary basis of student funding by the Federal Government.
One of the primary roles of the States is to provide assurance to
the Department that the institutions participating in the Federal
student aid programs are authorized to provide education beyond the
secondary level within the State. Of the three members of the triad,
States are the weakest link. Each State is different in its treatment
of postsecondary schools, ranging from States with strong regulation
and enforcement of high standards for postsecondary education to States
that just provide a business license. States' oversight may also vary
by type of school. For example, some States may scrutinize State
schools more closely, because State tax funds and State grants support
the school. States have less incentive to oversee proprietary schools,
because generally no State funding is provided.
Question 2. The inside cover of the Office of Inspector General
Audit Reports contains the disclaimer that ``conclusions and
recommendations in this report, represent the opinions of the Office of
Inspector General. Determinations of corrective action to be taken will
be made by the appropriate Department of Education officials.'' Does
this mean it would be improper to conclude that the subject of a
particular audit violated the law simply based on a report from your
office? If not, why?
Answer 2. No, it would not be improper to conclude the subject of
an audit violated laws or regulations based simply on an OIG audit
report. As an independent organization within the Department, our
office makes its own assessment of violations of laws and or
regulations, supported by facts, and we make our recommendations to
Department management. Prior to the issuance of a final audit report,
we have already provided a copy of the draft audit report to the
Department and the auditee and received feedback on whether it believes
we have correctly applied laws and regulations. OIG may make changes to
the final audit report based on this feedback. OIG also has a vigorous
internal quality control process to assure each report accurately
reflects laws and regulations and that the findings are supported by
appropriate evidence.
We include this disclaimer in our final audit reports for the
public to understand that it is Department management's responsibility
for a final determination in the audit resolution process in accordance
with Office of Management and Budget Circular A-50. As part of that
process, management allows the subject of the audit an opportunity to
provide any additional information they believe could have a bearing on
the final determination that a violation occurred and the appropriate
administrative actions are warranted.
Question 3. In your testimony, you discussed fraud rings that sign
up fake students to obtain Federal funds and noted that your office has
66 currently open investigations. Of the 66, please break down the
number of non-profit, for-profit and public schools where
investigations are ongoing? What are the characteristics of the public
schools that have been found to have fraud rings operating?
Answer 3. Of the 66 fraud rings we were investigating at the time
of the hearing, 40 of them involved non-profit or public schools and 26
involved for-profit schools. These fraud rings mainly target on-line
programs at lower-cost institutions. Fraud rings operate in on-line
environments because it allows criminals to avoid setting foot on
campus which makes exploiting schools easier. They mainly target lower-
cost institutions because the Federal student aid awards are sufficient
to satisfy institutional charges (such as tuition) and result in
disbursement of the balance of an award to the student for other
educational expenses (such as books, room and board, and commuting
expenses).
Question 4. The Office of Inspector General released a report
finding similar title IV funds management problems with distance
learning at Baker College, a non-profit school in August 2010. To what
extent and in what ways do these problems involving title IV funds
management identified in your report on Ashford also occur in public
and non-profit schools?
Answer 4. Over the last several years we have completed and issued
five audit reports on distance education schools and identified similar
findings in the awarding, disbursing and returning of title IV funds.
We have issued four audit reports on proprietary schools, and one on a
non-profit school, Baker College. We have two ongoing audits of other
distance education schools, one proprietary school and one non-profit
school. We also recently initiated another audit on the oversight of
distance education by the Department, accrediting agencies and States.
As part of this audit we will be visiting a variety of schools
including 2-year and 4-year distance education programs at public and
non-profit, as well as for-profit. This audit should give us a better
picture of distance education programs in a variety of schools.
Question 5. As you noted in your testimony, much of the existing
regulatory and oversight framework is ``based on traditional, semester-
based classroom instruction, and in particular, determining whether
students in distance education are `regular students' as required by
the HEA and actually in attendance for Federal student aid purposes.''
What are some of the more acute challenges that the Department faces in
adapting its regulatory and oversight framework to distance education?
Answer 5. A difficult problem facing the distance education schools
and the Department is assuring the identity of the persons enrolling
and verifying accuracy of applications for financial aid. For example,
many proprietary distance education schools and community colleges do
not require high school transcripts or other credentials, and schools
can rely on the applicant's self assertion that they have a high school
diploma or GED. As long as an applicant uses the identity of a real
person (i.e., name, social security number and date of birth), the
application for financial aid will likely pass the data matches the
Department uses to screen applications for basic eligibility. Also, an
applicant can claim little or no income to qualify for the maximum
amount of title IV funds, and the Department does not have authority to
verify income with the Internal Revenue Service. The next problem for
schools and the Department is determining if the student is actually
attending the distance education program. Tracking students' attendance
in the on-line environment is a problem we have consistently found and
is a contributing factor to problems with the awarding, disbursing and
returning title IV funds.
The Department also faces problems in ensuring that students are
provided with the right amount of title IV aid for their postsecondary
work. While this is not unique to distance education schools, we
believe it is a significant challenge for distance education.
Accrediting agencies vary in their attention to the value of a credit
hour, providing little assurance that full-time postsecondary work is
actually required at all institutions. Since the regional accrediting
agencies we reviewed either could not or did not provide guidance on
the assignment of credit hours for even traditional semester-based
programs, the issue is magnified when dealing with distance education.
Question 6. A Daily Caller article released the same day as your
testimony describes a short seller's attempts to obtain insider
information from your office on the Ashford audit. What are your
office's policies on releasing information or discussing an audit
before it is issued? How were those policies observed in this case to
the best of your knowledge?
Answer 6. OIG has a longstanding policy and our staff are trained
to operate within that policy that an ongoing audit is not discussed
within anyone but the auditee and the pertinent department management.
As such, we do not release draft reports to anyone other than the
auditee and pertinent departmental management until the final report is
issued. This is done so as the auditee has an opportunity to review the
findings and provide OIG with information that may not have been
provided previously to address those findings.
If asked by a congressional committee for information on an audit
not yet final, we offer to brief the staff; however, we do not provide
a copy of the report until it is final, and in such briefings, we make
clear that the information may change based on our receipt of any new
information from the auditee, and thus cannot be publicly disclosed. If
asked by the press or general public for information on an audit not
yet issued in final, our policy is to confirm that we have an audit
underway and state that we cannot discuss the details of our ongoing
work. The individual mentioned in the Daily Caller article contacted
OIG on several occasions. To the best of our knowledge, in keeping with
our policy, OIG staff did not provide him with a copy of our draft
report, nor did OIG staff discuss our findings with him.
Response to Questions of Senator Enzi by Sylvia Manning
Question 1. During the hearing, Senator Hagen asked if faculty and
administrative salaries are a factor considered by HLC in its
accreditation reviews. Why does HLC not review salaries of faculty and
administrators? If appropriate, how would you propose that salaries be
considered as a factor in the accreditation process? If it is not
appropriate, why not?
Answer 1. The HLC does review salaries of faculty and
administrators, but not in the way that appeared to be intended by
Senator Hagen's question. The question before the HLC reviewers is not
the sufficiency or excess of any particular salaries, but the possible
relationship of salary structure to the quality of education.
The role of the HLC is to review the quality of the education
offered by institutions that seek accreditation by the Commission and
to make a judgment to recognize that quality by awarding accreditation.
In making that judgment the Commission considers a multitude of
factors: one significant factor is the quality of the faculty. The
Commission reviews a number of items in making a determination
regarding the quality of the faculty. These items include the
credentials and experience of the faculty, their role in the teaching
and learning process, and their broader role in sharing governance of
the institution with the administration and the governing board. The
Commission also looks carefully at the experience and qualifications of
the institution's senior administrators as well as their role in
leading the institution. The quality of the faculty and their role in
the institution, as well as the leadership of the senior
administrators, contribute greatly to the quality of the instructional
program.
As a part of a comprehensive review of an institution the
Commission receives detailed financial information about that
institution's assets and expenditures. This information includes recent
audited financial statements and budgets for recent and forthcoming
years. In conjunction with this financial information the Commission
has aggregate and individual salary information for faculty positions
as well as for administrative positions. The Commission considers this
information in determining whether the institution is contributing
sufficient financial resources to support an instructional program of
appropriate quality. In addition, the Commission considers whether
compensation practices support appropriate student-faculty ratios and
otherwise contribute to an environment in which there is appropriate
attention to academic quality.
The Commission must consider what limitations the law places on its
activities. In the case of the faculty and administrative salaries,
antitrust considerations prohibit the Commission from directly
regulating compensation. A Federal district court has previously agreed
with the Department of Justice that an accreditor's practices
attempting to regulate compensation at its accredited schools were an
unnecessary restraint of trade and that considerations related to
compensation were not directly relevant to the quality of the
institution's academic program, which was the principal focus of the
accreditor (United States v. American Bar Association Final Judgment
and Consent Decree 1995). Therefore the Commission's focus related to
compensation remains determining whether those expenditures are part of
an overall pattern of institutional expenditures indicating appropriate
attention to instructional and institutional quality. I believe that
this focus related to compensation is indeed the right role for an
accreditor.
In so far as the Congress has concerns about the use of Federal
funds in what it views as excessive compensation for administrators or
executives, I would respectfully suggest that such use be regulated
directly through requirements for the use of Federal student aid funds
rather than through accreditation.
Reponse to Question of Senator Enzi by Jose Cruz
Question. Since January 20, 2008, have you been employed by the
Department of Education or the Obama administration in any capacity?
Have you worked for the Administration on a contractual basis during
this time? If so, please explain the nature and scope of the work
performed--as well as any compensation provided. Please also provide
the committee with copies of any consulting contracts.
Answer. Since January 20, 2008 I have not been employed by the
Department of Education or the Obama administration in any capacity. I
have not worked for the Administration on a contractual basis during
this time, but in April 2009 I did serve on a review panel for the
National Science Foundation's Centers for Research Excellence in
Science and Technology (CREST). In accordance with standard NSF
procedures, the Foundation covered the cost of my round-trip airfare
(coach class) and provided me with a travel reimbursement of $280 and a
meeting reimbursement of $480 a day. The review panel lasted 2 days.
These reinforcements covered the cost of my hotel, ground travel in DC,
and meals for the duration of the review panel.
______
Letters
U.S. Senate,
Washington, DC 20510-6300,
October 26, 2010.
Mr. Michael D. Bopp,
Gibson Dunn,
1050 Connecticut Avenue, NW,
Washington, DC 20036.
Dear Mr. Bopp: As you know, on August 5, 2010 your clients,
Corinthian Colleges, Inc., received a document request from the Senate
HELP Committee. The request asked your client to provide two sets of
documents with production deadlines of August 26 and September 16,
2010. We note that a number of items from the production requested for
September 16 remain outstanding.
We recognize that the request sought a significant amount of
information that took time to compile and review, and for that reason
the committee has been generous in allowing extensions of time to
comply with the September 16 deadline. In fact, no recipient of the
document request was asked to complete production prior to October 5,
almost 3 weeks after the deadline. We also acknowledge that your client
has provided responses or partial responses to a number of the
requested items, and that you have assured the committee that efforts
to complete the production are ongoing.
However, given the elapsed time and the need for the committee to
complete its review in a timely fashion, the committee hereby requests
that all remaining responsive documents, not including email
communications, be provided no later than November 5, 2010. To the
extent that documents have been withheld for any reason for any item in
the second production, a log listing all withheld documents along with
the reason for withholding each document, as set forth in Section M of
the instructions accompanying the August 5 request, should also be
provided no later than November 5. Moreover, as stated in paragraph 1
of the Data Delivery Standards, please ensure that your cover letter
includes, for each item, the Bates range and a general description of
responsive documents.
With regard to items that call for email communications, given the
time required to search and review potentially responsive emails,
additional time is being provided to allow for the completion of these
items. However, we wish to reaffirm that work on reviewing these
materials should be moving towards conclusion, and the committee
expects production of all responsive emails no later than November 16,
2010.
Thank you for your prompt attention to this matter, and please feel
free to contact Chief Investigative Counsel Elizabeth Stein at 202-224-
2931 with any questions.
Sincerely,
Daniel E. Smith,
Staff Director, Committee on Health,
Education, Labor, and Pensions.
______
U.S. Senate,
Washington, DC 20510-6300,
January 21, 2011.
Mr. William O'Reilly,
Jones Day,
Louisiana Avenue, NW,
Washington, DC 20001.
Dear Mr. O'Reilly: I am writing in response to your letter, dated
December 14, 2010, regarding the undercover visits by representatives
of the Government Accountability Office (GAO) to Argosy University in
Chicago, owned by your client Education Management Corporation. Your
letter asks that findings made by the GAO about recruiting practices at
Argosy be removed from the record on the grounds that they are
inaccurate. I respectfully disagree and believe that the GAO findings
with regard to Argosy are clear.
I would also note that while Argosy was included in the overall
findings of misleading and deceptive practices at all colleges visited
by GAO, at the insistence of HELP Committee staff Argosy was also
singled out in the report and in the testimony at the August 4, 2010
hearing for certain ``good practices'' the recruiter demonstrated
during one of the visits.
You correctly note that revisions made to the GAO findings in the
November 30, 2010 errata include the deletion of a reference to the
qualifications of the professors at Argosy. I believe that this finding
required more context as it related to the counseling experience of the
psychology faculty, but should have remained in the report. Documents
received by the committee suggest that this is a common response
provided to questions about faculty qualifications, and in fact is
often used to obscure the fact that the faculty often have limited
academic qualifications. For that reason, I believe the excerpt
provided useful and important information.
You specifically raise concerns with the following additional
findings of the GAO:
1. Admission representative said the bachelor's degree would take
3.5 to 4 years to complete, but provided an annual cost estimate for
\1/5\ of the program.
You correctly state that, in the audio, the admissions
representative says that the program requires 120 credits, and
separately states the program can be completed in 3.5 years if the
student goes full-time including summer. The representative also
explains that the program costs $510 per credit hour, plus a $10 fee.
However, she then says that most students take 12 credits per semester
which costs $6,240, or $12,480 a year.
While a prospective student with a calculator in hand and fast
typing skills could have come up with a correct cost estimate of
$61,200 for the program, the information conveyed to the undercover
representative implied that the cost was 3\1/2\ years at $12,480 a year
(or $43,680), significantly lower than it actually was. Moreover, while
this was the only instance of this type of tactic employed by Argosy,
it was not the only instance of underestimating total cost encountered
by undercover GAO representatives. The fact that this type of
underestimation occurred at multiple schools likely and correctly
played a role in the determination to include this exchange in the
findings.
2. Admissions representative did not provide the graduation rate
when directly asked. Instead she indicated that not everyone graduates.
As you note, the actual exchange goes ``Does everyone graduate who
starts?'' and the response given is, ``I don't know what our graduation
rate is. I know, it's not 100 percent.'' There simply is no question of
fact in this instance. Moreover, it strains credibility that the
representative did not actually know the graduation rate.
I would like to also take this opportunity to point out some
additional questionable conduct documented by GAO but not included in
the report.
In Argosy Scenario 2, the school representative tells the applicant
that he may be eligible for interest-free loans, telling the applicant
that ``the unsubsidized loan has interest, the subsidized loan does
not.'' As you know, while interest on subsidized loans does not accrue
while a student is enrolled in school, the Federal Government does not
offer interest-free loans to higher education students.
Thank you for taking the time to raise your concerns with me, and
for providing me with the opportunity to share with you and your client
additional questionable behavior documented by the GAO. While I believe
that the practices demonstrated by Argosy representatives in the GAO
undercover visits are at the less egregious end of the spectrum of
practices documented, they nonetheless demonstrate the misleading and
deceptive tactics that seem to pervade for-profit recruiting at this
time. The GAO report and the underlying investigative work have
provided a valuable window into the practices of companies like those
operated by your client, and I commend the GAO for the time and
professionalism they have brought to this project.
Sincerely,
Tom Harkin,
Chairman, Committee on Health,
Education, Labor, and Pensions.
______
U.S. Senate,
Washington, DC 20510-6300,
February 1, 2011.
Mr. Duncan Anderson,
President and Chief Executive Officer,
5026 Campbell Blvd., Suite D,
Baltimore, MD 21236.
Dear Mr. Anderson: I am writing in response to your letter of
December 17, 2010, regarding the undercover visits by representatives
of the Government Accountability Office (GAO) to MedVance Institute in
Miami, owned by your company, Education Affiliates. Your letter asks
that findings made by the GAO about recruiting practices at MedVance be
removed from the record on the grounds that they are inaccurate. I
respectfully disagree and believe that the GAO findings with regard to
MedVance are clear.
You specifically raise concerns with the following findings of the
GAO:
1. When asked by the 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.
Your letter is correct that the errata issued by the GAO on
November 30, 2010, both clarified that the question regarding
graduation rate was asked for two programs, and provided additional
detail regarding the MedVance representative's incorrect and misleading
answers to the questions. Avoiding the question by stating how many
students started and providing an answer that does not match actual
statistics is misleading conduct. I am also confident that if you
listen to the tapes again you will note that the graduation rates
estimate is for a program in medical coding and billing while the
statement regarding how many students finished recently pertains to a
radiology program. The report also notes that the MedVance Web site did
not provide the graduation rate. As you note, this is not a violation
of law but it is also not a practice that promotes informed student
enrollments. Together the three failures to provide adequate
information on graduation rates sheds light on practices that your
company might presumably be focused on improving rather than defending.
2. 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.
The GAO errata properly provides the new context that the MedVance
representative's statement that the student loan was not like a car
loan where ``if you don't pay they are going to come after you'' was
made in the context of explaining that student loans may be placed in
forbearance or deferred. While this is a true statement, the
representative made it sound as this was a simple transaction with no
negative consequences, when, in fact, there are criteria that must be
met for deferment, both forbearance and deferment are time limited, and
interest accrues throughout the both deferment and forbearance, thus
potentially vastly increasing the cost of the loan. Additionally,
unlike any other consumer loan, student loans can almost never be
discharged in bankruptcy, and as you know, the Federal Government will,
in fact, come after delinquent borrowers rather relentlessly, going so
far as to attach tax refunds and Social Security payments. While
deferment and forbearance provide important flexibility to students in
repayment, neither is the equivalent of a ``get out of jail free
card.'' Given the increasing numbers of for-profit students being
counseled into immediate forbearance as evidenced by the committee's
document requests, this exchange is of interest to the committee.
3. 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.
You state that the audiotapes do not support the allegation that
either the financial aid or the admissions representative suggested
that he not report his inheritance. I have included the exchange below
to clarify that both representatives, but particularly the admissions
representative, encouraged the undercover GAO representative to
resubmit the FAFSA without the $250,000 inheritance. While the
conversation is somewhat lengthy it occurred as follows:
GAO 1: ``Now, I put in, uhm, you know, that I had some money
from inheritance, uhm, which is a big chunk, you know. Does
that need to go in there, that's not money that I worked for,
or anything like that.''
Financial Aid Representative: ``It's up to you. I cannot tell
you what to but there, but if you already reported it, I mean--
GAO 1: ``I can't make changes to it anymore?''
Financial Aid Representative: ``It's up to you. You can go in
there and make any changes you want.''
GAO 1: ``And then they will recalculate it?''
Financial Aid Representative: ``Mmmhmm--So, if you want to do
that--So, I'm going to have this, let me give you that
paperwork.''
GAO 1: ``OK. We're good?''
Admissions Representative: ``No, you're not good yet, don't
you want to try to do some stuff today?''
GAO 1: ``Well, she was going to give me some--''
Admissions Representative: ``OK. There's a change that you
want to make in your financial aid, right?''
GAO 1: ``Well, I put a big chunk in there, I don't know if it
should be in there.''
Admissions Representative: ``So, what happens is if you make
that change, it's going to take like three days for her to get
a new form and be able to give you accurate figures. OK?''
GAO 1: ``OK, yeah.''
Admissions Representative: ``So what are your options?
Changing and waiting the three days, but it might help you out
some. Or not changing it and basing it on the figures that you
have right now. What do you want? A or B?''
GAO 2: ``It'd be good to see what, you know, what could
happen.''
GAO 1: ``Yeah. I'd like A. To change, right?''
Admissions Representative: ``To make the change. OK.''
Financial Aid Representative: ``OK.''
Admissions Representative: ``Because that means that you're
going to have to hold tight a little bit. But your patience in
the long run may reward you. It's probably going to give you a
more accurate figure. Because right now we base it on that, you
may only qualify for a certain amount and we're going to have a
clearer picture once we make that change. Does that make
sense?''
GAO 1: ``Yeah, yeah.''
GAO 2: ``What do you think is the biggest problem? You think
its like his income or things like that amount he put down?''
Financial Aid Representative: ``That amount.''
GAO 2: ``That amount. yeah, I mean, you wouldn't have to put
that on your tax return. Because it wasn't--like an
inheritance.''
GAO 1: ``Yeah, I didn't work for that I just--''
GAO 2: ``Yeah. So maybe you shouldn't put it down. They
wouldn't know.''
Admissions Representative: ``No . . . that happens. There's a
lot of things that I didn't know unless someone like--helped me
out.''
GAO 1: ``So, I'll make the changes and then I'll--''
Admissions Representative: ``Yeah, make the changes. She'll
show you how to do that. And hold tight then for about three
days and then we'll set you up for an appointment to come back
and then you'll have an accurate--(conversation proceeds to
where to find a Starbucks).
While it is clear that the interest of both the admissions
representative and the financial aid representative is to get the
undercover GAO representative enrolled that day, when they accept that
it is not going to happen both acknowledge that removing the FAFSA
reportable inheritance might affect the amount of financial aid he
receives. The financial aid representative in particular never states
that the Department of Education requires applicants to report cash,
savings and investments on the FAFSA. This is made clear in several
Department of Education publications. A properly trained representative
should not have even tacitly endorsed changing a FAFSA to exclude
reportable amounts.
Finally, I would like to also take this opportunity to point out
some additional questionable conduct documented by GAO but not included
in the report.
In the course of the first visit to MedVance, the representative
leads the undercover prospective student to believe that she will
receive student loan forgiveness from any hospital employer stating:
``You can step into a hospital tomorrow and say to HR, `I
have 23,000 in student loans, can you pay it off? ' And they'll
say, `OK Terri, you have to work with us for a year and a half
and we're going to pay it off.' ''
This is an astounding misrepresentation of the availability of loan
repayment programs, and one that I hope Education Affiliates will
repudiate and take steps to ensure that no such practices are ongoing.
Thank you for taking the time to raise your concerns with me, and
for providing me with the opportunity to share with you and your
company additional questionable behavior documented by the GAO. The GAO
report and the underlying investigative work have provided a valuable
window into the practices of companies like yours, and I commend the
GAO for the time and professionalism they have brought to this project.
Sincerely,
Tom Harkin,
Chairman, Committee on Health,
Education, Labor, and Pensions.
______
Senator Lamar Alexander,
U.S. Senate,
455 Dirksen Senate Office Building,
Washington, DC 20510-0001.
Dear Senator Alexander: As part of the Ashford University family,
I'm asking you to support my university at the Senate HELP Committee
hearing on March 10. I would like to tell you about my experience. I am
a retired military veteran, full-time employee and student, and a
husband and father whose main goal is to complete his degree and be an
inspiration to his 5-year-old daughter. Leading by example has always
been a part of my military and personal life. So in order for me to
preach the importance of having an education to my daughter, I must
first practice what I preach. What better way than continuing my
education.
When I retired from the U.S. Navy after serving faithfully for 26
years, searching for a university that wouldn't be a hindrance to my
way of life was first and foremost. I searched numerous institutions
hoping I would find one that could work around my job and family while
giving me the necessary credit for my military experience. With that
being said, ``Ashford was the obvious choice.'' It's rich traditions,
curriculum, knowledgeable instructors, and commitment to excellence was
the key behind my decision to attend Ashford. Since enrolling, I have
been able to maintain my way of life and complete the courses at the
pace that's beneficial for me. Most full-time employees do not get that
opportunity to sit in a classroom setting in obtaining or reaching that
goal in earning a degree, so we must look for alternatives.
Ashford and other's like her are truly beneficial to our active
duty personnel, reservists, retirees (who has a full-time job), and the
working people; because our demand for service is so intense that we do
not get those same opportunities like some civilians to attend a
college of our choice without some type of drawback. So before making
any decisions, I ask that you all look at the statistics of what these
types of universities offer not only to our military, but to everyone.
Private sector colleges are just as challenging and have the same
opportunities as those so-called prestigious colleges/universities.
Their curriculum is just as challenging and rewarding, the instructors
are very knowledgeable of their specialty, and they are committed to
their faculty and student body. Please reconsider your decision and
walk in our shoes for a chance and you'll see how beneficial these
private sector universities are to people like me and our military.
Sincerely,
Louis Gladney,
Memphis, TN 38125-4417.
______
Senator Lamar Alexander,
U.S. Senate,
455 Dirksen Senate Office Building,
Washington, DC 20510-0001.
Dear Senator Alexander: As part of the Ashford University family,
I'm asking you to support my university at the Senate HELP Committee
hearing on March 10. I would like to tell you about my experience. I am
a military spouse and I began attending Ashford University in November.
We are currently stationed overseas and Ashford has been such a great
help at helping me achieve my goals and making my dreams possible. They
have helped me every step of the way and whenever I have any questions
they are always there to answer. I have not had one single problem with
this university and I have had many recruits due to the positive
feedback I have given. My husband has also chose to attend this college
while he is pursuing his active army career. I hope there is nothing
but positive things to be said about this university.
Sincerely,
Amanda Knochel,
Pigeon Forge, TN 37863-5704.
______
Senator Lamar Alexander,
U.S. Senate,
455 Dirksen Senate Office Building,
Washington, DC 20510-0001.
Dear Senator Alexander: As part of the Ashford University family,
I'm asking you to support my university at the Senate HELP Committee
hearing on March 10. I would like to tell you about my experience.
I am a 28-year-old single mother of three. I have just went through
a devastating divorce and child custody battle. I went to get my
associates and my bachelors from a traditional college campus. I was
miserable because I hated the degree I was in, hated how I was just a
number without a face and that no one seemed to care or understand that
I was needed more at home than I was doing something for myself. I
found Ashford University at an on-line research database for people who
could not go to a traditional college because of family, medical, or
military reasons. Doing this one small thing for myself has meant the
world to me. I am not just a number to them. Ashford took the time to
find what my real passion was and that going back to school and
switching majors so late in life and with so much to worry about (the
kids, the divorce, work) I could still do this one thing for me! If you
take away on-line education than you might as well take away at-home
schooling for grades K-12. It is unconstitutional to try to tell a
person how they can get an education, where they have to go to get that
education and not offer citizens other options based on non-traditional
classes. Everyone can not go to a traditional class room and sit there
for multiple hours while others work and toil around them, some have to
go any time they can get the extra hours in the day; I am one of those
people.
In closing I think that to attack these kinds of schools will lead
to a weakening of an already weak economy since most are trying to go
back to school to get a better job, and now they will be forced to
choose between a low paying job (that promotes poverty) or going to
school (which in this case could promote a market crash in a wobbling
system). I need Ashford just like so many others in my situation NEED
Ashford. And frankly, the society that I am living in needs me, the
educated, improved me, that can go to school and strive for and achieve
a better future. Not just for me but for my children and those that
come after us.
Thank you.
Sincerely,
Samantha Rhea,
Russellville, TN 37860-9333.
______
Senator Mike B. Enzi,
U.S. Senate,
379A Russell Senate Office Building,
Washington, DC 20510-0001.
Dear Senator Enzi: As part of the Ashford University family, I'm
asking you to support my university at the Senate HELP Committee
hearing on March 10. I would like to tell you about my experience.
I was really nervous to go back to school. I was scared that I
would mess everything up and not be able to get accepted into college.
Ashford made it extremely easy for me to start school. My academic
counselor walked me through everything. Within a few weeks I started
school. I have been attending Ashford for 7 months now. I love it. I
have a 3.8 GPA. I did not even do that well when I was in High School.
They have made me feel comfortable and happy. I love it there!
Sincerely,
Stephanie Vallejo,
Sheridan, WY 82801-4844.
______
Citizens for Responsibility
and Ethics in Washington (CREW),
March 1, 2011.
Arne Duncan,
Secretary of Education,
U.S. Department of Education,
Washington, DC 20202.
Dear Secretary Duncan: Citizens for Responsibility and Ethics in
Washington (``CREW'') writes to followup to our letter to you of
January 19, 2011, requesting that you examine the role hedge fund
managers and outside interest groups have played in the Department of
Education's (Education) formulation of regulations governing the for-
profit education industry. Additional agency records CREW obtained
recently in response to our Freedom of Information Act (FOIA) request
provide further evidence that high-level Education officials involved
in the agency rulemaking process not only knew of the efforts of
certain hedge fund managers to influence the regulatory outcome, but
may themselves have colluded with those individuals to protect the
short-sellers' financial interests. They also document a plan by high-
level Education officials to leak the contents of the gainful
employment regulations in advance of their public issuance.
The newly discovered documents show, among other things, that both
Deputy Undersecretary James Kvaal and Budget Development Staff Director
David Bergeron carried out a planned leak of the proposed gainful
employment regulations to a number of outside individuals and groups in
advance of the regulations' public release. This effort started with an
email from hedge fund short-seller Steven Eisman to Mr. Bergeron on
July 19, 2010, just days before Education released the regulations. The
subject line of Mr. Eisman's email reads ``I know you cannot respond''
with the following text: ``But just fyi. Education stocks are running
because people are hearing DOE is backing down on gainful employment.''
\1\
---------------------------------------------------------------------------
\1\ A copy of this email is attached as Exhibit A.
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The email thread of which this is a part shows this email was
forwarded to a number of Education officials, landing eventually in the
email box of your confidential assistant, Phil Martin, with the
statement ``Let's discuss.'' \2\
---------------------------------------------------------------------------
\2\ See id.
---------------------------------------------------------------------------
The following day Mr. Kvaal initiated a plan to call various
outside groups and individuals with the apparent purpose of giving them
a heads up on the upcoming regulations. The email thread shows that Mr.
Kvaal and Mr. Bergeron divided the calls between them, with some key
individuals and groups scheduled for contact as early as July 21, 2
days in advance of when Education issued the proposed gainful
employment regulations.\3\ None of the listed groups and individuals
included anyone representing or acting on behalf of the for-profit
education industry.
---------------------------------------------------------------------------
\3\ This email chain is attached as Exhibit B.
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The email chain references both Mr. Eisman and Diane Schulman of
The Indago Group as individuals who should receive advance notice.\4\
The Indago Group is a small research company used by Mr. Eisman and his
hedge fund, FrontPoint Services Fund to obtain information and entree
to Washington lawmakers for Mr. Eisman.\5\ Notice to either Mr. Eisman
or Ms. Schulman, either directly from Education officials or indirectly
from others in contact with Education officials, would have provided
Mr. Eisman with reassurance about the likely market impact of the
upcoming regulations. While neither is listed on the final call list
for Mr. Kvaal or Mr. Bergeron, other documents reveal that Mr. Eisman
likely received that notice from at least one non-profit group in
receipt of an advance copy of the regulations.\6\
---------------------------------------------------------------------------
\4\ Specifically, a followup email from Mr. Bergeron on July 21
(enclosed with Exhibit B) discussing who both he and Mr. Kvaal would
call, states: ``Also, there's the Eisman/Schluman/et al. [sic] but
Eisman is a short seller anyway you cut it and anything you tell
Schulman gets to Eisman.''
\5\ Their professional relationship is spelled out in our January
19, 2011 letter to you.
\6\ See Letter to Arne Duncan from Anne L. Weismann, January 19,
2011, at pp. 6-7.
---------------------------------------------------------------------------
The newly acquired documents also show that on the same day Mr.
Eisman initially contacted Mr. Bergeron with an update on how education
stocks were faring, Mr. Kvaal quickly located the analysis prepared by
the investment banking firm Signal Hill that apparently was fueling
market speculation that Education had made the proposed gainful
employment regulations ``more accommodating'' to the for-profit
education industry.\7\ Signal Hill questioned Mr. Eisman's analysis,
suggesting a need to ``discredit the widely-circulated Eisman negative-
earnings scenario,'' and disputing ``the assumption used by most
shorts, including apparently Mr. Eisman, that `active repayment' means
current within 30 days.'' \8\ Mr. Kvaal, with no explanation, promptly
characterized this assessment as ``not all accurate information.'' \9\
---------------------------------------------------------------------------
\7\ See email from Barmak Nassirian to James Kvaal, Re Write-up,
July 19, 2010 and enclosed Regulatory Update from Signal Hill, attached
as Exhibit C.
\8\ See Signal Hill Regulatory Update at p. 1.
\9\ See email from James Kvaal to Gomez Gabriella (Education's
Assistant Secretary for Legislative and Congressional Affairs), Re
Write-up, July 19, 2010 (attached as Exhibit D).
---------------------------------------------------------------------------
These documents also bear directly on issues that have been
referred to Education Inspector General Kathleen Tighe. Last November
Senators Richard Burr (R-NC) and Tom A. Coburn (R-OK), who at that time
were both on the Senate Committee on Health, Education, Labor, and
Pensions, requested that Ms. Tighe investigate the failure of key
Education negotiators for the gainful employment regulations to comply
with the organizational protocols governing Education's rulemaking
process. Among their concerns was evidence that ``the Department may
have leaked the proposed regulations to parties supporting the
Administration's position and investors who stand to benefit from the
failure of the proprietary school sector.'' \10\ As this latest batch
of documents reveals, Education officials at least had a coordinated
plan to leak information about the gainful employment regulations to
outside organizations in advance of the regulations' issuance.\11\
---------------------------------------------------------------------------
\10\ See letter from Senators Burr and Coburn to Kathleen Tighe,
November 17, 2010 (attached as Exhibit E).
\11\ One of the newly released documents shows that at least some
in the non-profit community understood the restrictions imposed on
Education officials. In a June 17, 2010 email to Education Press
Secretary Justin Hamilton, Edie Irons, Communications Director for
TICAS, notes: ``I know that you all haven't been allowed to talk
publicly about these rules yet.'' This email is enclosed as Exhibit F.
---------------------------------------------------------------------------
Together with the previously released documents discussed in our
letter of January 19, 2011, this new batch of documents raises
extremely troubling questions about the actions of Education officials
at the highest levels of this regulatory process. Those officials
knowingly allowed short-sellers to manipulate agency processes for
personal gain and ignored their own responsibilities to the agency they
serve. Unless these questions are answered, the public can have no
faith in any aspect of Education's rulemaking process.
Very truly yours,
Anne L. Weismann,
Chief Counsel.
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
EXHIBIT E
U.S. Senate,
Washington, DC 20510,
November 17, 2010.
Ms. Kathleen Tighe,
Inspector General,
U.S. Department of Education,
Office of Inspector General,
Washington, DC 20202-1500.
Dear Ms. Tighe: The work of your office is essential to protecting
the efficiency and effectiveness of programs administered by the U.S.
Department of Education. Independent analysis helps ensure the
integrity of the Department's mission and operations. To that end, we
request an investigation by your office of the events leading up to the
issuance of the Department's proposed regulations regarding ``gainful
employment.''
As you know, Section 492 of the Higher Education Act requires the
Department to convene negotiated rulemaking any time it promulgates
regulations affecting the Federal student aid programs. Negotiated
rulemaking ensures the Department works with individuals who are
experienced in implementing the Federal student aid programs and who
understand the consequences of the proposed regulations.
Information has become available that raises serious concerns about
whether some negotiators failed to comply with the organizational
protocols governing the rulemaking process and other laws governing
these proceedings. In addition, publicly available documents indicate
the Department may have leaked the proposed regulations to parties
supporting the Administration's position and investors who stand to
benefit from the failure of the proprietary school sector. We believe
an independent investigation will provide additional transparency
surrounding the actions taken by Department officials and those who
stand to benefit financially from the regulations.
Since November 2009, the Department of Education has been engaged
in negotiations to promulgate regulations designed to improve the
integrity of the Federal student aid programs. At the beginning of the
rulemaking sessions, the negotiators adopted. ``Organizational
Protocols'' that governed the proceedings. One of the agreed upon
principles states: ``All members and the organizations they represent
shall act in good faith in all aspects of these negotiations''--
(``Organizational Protocols,'' U.S. Department of Education. Section
VI.B.). Another states:
``Contact with the media, the investment community, and other
organizations outside the community of interest represented by
the member will generally be limited to discussion of the
overall objectives and progress of the negotiations''--
(``Organizational. Protocols,'' U.S. Department of Education.
Section VI.C.).
The panel met three times between November 2009 and January 2010
and did not reach consensus on the regulations package. On June 16,
2010, the Department released the first package of proposed regulations
on ``program integrity.'' A month later, on July 23, 2010, the
Department released the second package of proposed regulations on
``gainful employment.''
In a July 23 Freedom of Information Act (FOIA) request, Citizens
for Responsibility and Ethics in Washington (CREW) sought information
pertaining to the communications occurring between Department officials
and several individuals and organizations outside of the Department. In
its request, CREW stated:
Specifically the requested records will inform the public
about the role of Education in the controversy over the for-
profit education industry and the extent to which Education has
knowingly relied on, or has been manipulated by, the views of
individuals who seek to advance their financial interests in
the for-profit industry by publicly criticizing certain for-
profit education entities and companies.
It is our understanding that as of today, the Department has not
responded to this FOIA request.
Based on information that has come to light from records released
under a Florida public records request, it appears Department officials
may have leaked information to outside organizations, some of whom may
stand to financially benefit from the failure of the proprietary school
sector. For example, an email attached to this letter demonstrates that
Edie Irons, communications director for TICAS, emailed an embargoed
copy of the program integrity regulations to the ``Gainful Employment
Group'' on June 15 at 5:38 p.m. As previously noted, the regulations
were not made public until June 16. If one group received an embargoed
copy of these proposed regulations, other groups, including those who
stand to benefit financially from the failure of the proprietary
sector, may have as well.
To resolve these questions, we request an investigation by your
office into the events leading up to and surrounding the issuance of
the Department's proposed program integrity regulations for the period
of April 2009 to the present. In this investigation we respectfully
request your review of whether the organizational protocols adopted for
negotiated rulemaking were followed by both non-Federal negotiators and
Department staff. In addition, we ask that you review the propriety of
all communications between Department employees and outside individuals
and organizations to determine if the proposed regulations packages
were inappropriately provided to any individuals or organizations prior
to their public release.
Members of the public, including students and the institutions they
attend, have a right to expect the Department of Education to
promulgate regulations through a negotiated rulemaking process that is
undertaken in good faith and without bias.
Thank you for your attention to this request. If you have any
questions, please do not hesitate to contact our offices.
Sincerely,
Richard Burr,
U.S. Senator.
Tom A. Coburn, M.D.,
U.S. Senator.
EXHIBIT F
DicksteinShapiro llp,
Washington, DC 20006-5403,
December 17, 2010.
Hon. Tom Harkin, Chairman,
Committee on Health, Education, Labor, and Pensions,
SD-644 Dirksen Senate Office Building,
Washington, DC 20510.
Hon. Mike Enzi, Ranking Member,
Committee on Health, Education, Labor, and Pensions,
SH-833 Hart Senate Office Building,
Washington, DC 20510.
Dear Chairman Harkin and Ranking Member Enzi: I am writing on
behalf of my client, Alta Colleges, Inc. and its subsidiary Westwood
College, concerning several allegations that have been leveled against
Westwood during the course of the Senate HELP Committee's investigation
of career colleges. Career colleges play an important role in today's
educational landscape, and Alta is proud to provide educational options
to thousands of Americans. Alta understands the committee's interest in
ensuring that Federal student assistance funds are providing value to
students and taxpayers, and it has gone to great lengths to cooperate
and provide documents responsive to the committee's request, at a cost
of several hundred thousand dollars.
Westwood has been the subject of several false and damaging
accusations. While we do not wish to speculate on the motivations of
the accusers, we can demonstrate that their allegations are factually
baseless. Perhaps more troubling, the GAO recently amended its
testimony from the August 4, 2010 hearing before your committee; a
revision to one of the factual scenarios concerning Westwood shows that
there was at least one material omission in the original scenario that
has unfairly tarnished Westwood's reputation with the committee and
prospective students.
Allegations of Joshua Pruyn
On August 4, 2010, Joshua Pruyn, a former Westwood admissions
representative, testified before the committee in an investigatory
hearing entitled, ``For-Profit Schools: The Student Recruitment
Experience.'' In a portion of his testimony, Mr. Pruyn alleged that
representatives at Westwood attempted to pressure a student, who had
recently been called up from the Army Reserves to active duty, to stay
at Westwood in order to get the student past his fourteenth day of
attendance. This student contacted Mr. Pruyn in order to inform him
that he had been called to active duty status and that his duties as a
drill instructor would preclude him from continuing school while on
active duty. Mr. Pruyn further testified that his director and
assistant director both called the student and ``pushed him to stay
enrolled.'' According to Mr. Pruyn, he was ``disgusted by such a
flagrant disregard for the student. . . .''
Mr. Pruyn's assertion that the student was pressured to remain
enrolled is fatally undermined by the physical evidence, as well as the
student's own recollection of the events. Westwood was able to identify
the student at issue and examine the evidence related to this claim.\1\
Contrary to Mr. Pruyn's testimony, there is no evidence that Mr.
Pruyn's supervisors spoke to the student after the term began. Westwood
College Online uses a system called CosmoCom, which allows for the
recording and retrieval of inbound and outbound calls. Call records
reflect that Mr. Pruyn spoke with the student for approximately 55
minutes on March 31, 2008 concerning his request to withdraw. However,
records do not reflect that the admissions director or assistant
director spoke to the student after this point, which was confirmed in
a call on April 1, 2008, in which Mr. Pruyn asked the student if the
director had called him regarding his decision to withdraw, and the
student responded that she had not. When contacted recently, the
student remembered Mr. Pruyn asking a lot of questions about his
reasons for leaving Westwood, but that the questions did not seem
aggressive. He also did not remember speaking with anyone else
concerning his decision to withdraw from Westwood. The student
apparently felt that he was being treated fairly, because he told a
Westwood employee during a brief call on March 31, 2008, prior to
speaking with Mr. Pruyn, that Westwood would be the first college he
considered when he was able to enroll in school again.
---------------------------------------------------------------------------
\1\ Mr. Pruyn referred to the student as ``Jeffrey'' in his
testimony. We referenced the list of students enrolled by Mr. Pruyn
during his tenure and found only one student with the first name of
Jeffrey enrolled by Mr. Pruyn, and this individual cancelled his
enrollment after being called up to active duty. Only three students
enrolled by Mr. Pruyn had military experience; of the three, only the
one named Jeffrey withdrew after the term began, which is the factual
scenario described by Mr. Pruyn.
---------------------------------------------------------------------------
During the hearing, Mr. Pruyn testified that ``[f]ourteen was the
magic number,'' because once a student attended class for 14 days after
the start of a term, the school was allowed to keep any financial aid
it received as a result of enrolling that student. However, Mr. Pruyn
fundamentally misconstrues the significance of a student being enrolled
for 14 days. During a student's first 14 days of school, Westwood staff
will monitor a student's attendance and academic progress to determine
if a student is likely to succeed at the school. If Westwood determines
that a student is not committed or is not likely to succeed
academically, his/her enrollment is cancelled and no tuition is charged
to the student. Westwood starts charging tuition to a new student after
14 days. This internal Westwood practice does not impact access to
title IV funds: Westwood cannot draw down title IV loan funds for a
first-time student until the student has attended school for at least
30 days. In addition, the return of Federal funds requirement results
in the bulk of student aid funds being returned if a student withdraws
prior to the 60 percent point in time of the term, so even if student
aid is disbursed to a student after 14 days, there would be little
financial benefit to Westwood. In this case, Westwood charged the
student no tuition, nor were any Federal financial aid funds related to
this student's enrollment disbursed.
As detailed above, Mr. Pruyn's damaging allegations were factually
and materially incorrect, if not deliberately false, and his ignorance
concerning Westwood's 14-day conditional enrollment period created the
erroneous impression that Westwood had a financial incentive to prevent
this student from withdrawing prior to 14 days of attendance. We have
attempted to contact Mr. Pruyn to discuss some of these allegations,
but he has declined to be interviewed. In light of this evidence, we
respectfully request that you strike Mr. Pruyn's testimony from the
hearing record and send him a written request to clarify his remarks.
Allegations of Michelle L. Zuver
During a forum on August 31, 2010, Senator Durbin invited several
witnesses to speak, including Michelle L. Zuver, a 2008 criminal
justice graduate from Westwood College's DuPage campus in the Chicago,
IL area. Ms. Zuver stated that she (1) was not adequately informed of
Westwood's accreditation status; (2) was told the cost of the program
would be $53,000, yet upon graduation she had $86,000 in debt; (3) is
not able to obtain employment using her Westwood degree; and (4) had a
poor initial experience with Westwood. In an impromptu press conference
at the end of the forum, Senator Durbin gave a statement, with Ms.
Zuver at his side, in which he used Ms. Zuver's experience as a basis
to opine that taxpayer money is being wasted on private-sector
colleges. Ms. Zuver has also appeared on the CBS Evening News.
Documentary evidence clearly shows that Ms. Zuver's allegations are
baseless. Although she claimed that no one informed her until 2007 that
her program was not regionally accredited, Ms. Zuver initialed a
document when she re-enrolled in 2006 that specifically explained that
``Westwood College is nationally accredited, not regionally accredited,
which could have an impact on opportunities with some Chicago and
surrounding area employers, including the city of Chicago'' (emphasis
added). Because of the school's effort to ensure that students are
fully informed on this point, the particular sentence noted above must
specifically be initialed. Ms. Zuver did just that on July 31, 2006.
Westwood's course catalog reflected the same information, and faculty
and staff emphasized this point during the time she attended the
college. Based largely on this information, in January 2009 an
independent arbitrator, with the American Arbitration Association
dismissed a legal action brought by Ms. Zuver containing an identical
allegation, finding that ``the matters allegedly misrepresented or
omitted were in fact sufficiently disclosed'' to her.
When Ms. Zuver initially enrolled in 2004, her enrollment agreement
stated the cost of the program would be $56,000. Ms. Zuver quit college
and re-enrolled in 2006. When she re-enrolled the cost of the program
was indeed higher ($61,600) due to tuition increases that had occurred
during the ensuing period of time. The higher cost was reflected on the
enrollment agreement Ms. Zuver executed when she re-enrolled. The
actual total of tuition and fee charges paid to Westwood was $58,735,
reflecting the fact that Ms. Zuver finished her degree in 2008 one term
early (14 terms rather than 15). The reason her debt became so high is
that when she re-enrolled she took out private student loans, in excess
of the cost of attendance, for living expenses. Westwood does not
encourage this practice, but that decision is ultimately up to the
individual student. The loans Ms. Zuver incurred while attending
Westwood were significantly less than the $86,000 that she claimed.
Our records show that Westwood made numerous and substantial
attempts to provide employment assistance to Ms. Zuver. Career
counselors sent her job leads on 17 occasions; provided access to a
resume workshop, which Ms. Zuver attended; and provided information
about an upcoming job fair. However, on at least three occasions in
2008, Ms. Zuver stated that she did not intend to seek employment in
the field of criminal justice. In February 2009 she expressed interest
in finding employment in this field in Virginia, and the College
provided her numerous leads in Virginia.
Finally, by her own account, Ms. Zuver's initial experience at
Westwood was extremely positive. Despite indicating in Senator Durbin's
forum that her first semester with Westwood was a negative experience,
when she left school in 2004, Ms. Zuver sent a letter describing the
faculty as ``amazing,'' ``knowledgeable, experienced, and
understanding'' (see attachment). She stated that the facility was
``extraordinary,'' she had ``absolutely no complaints,'' and her
overall experience was ``immensely magnificent.'' It is also telling
that Ms. Zuver re-enrolled in Westwood to complete her education.
GAO Testimony
The August 4, 2010 written testimony of Gregory Kutz, Managing
Director, GAO Office of Forensic Audits and Special Investigations,
contains an appendix listing the detailed results of GAO's undercover
investigation. This testimony was subsequently reissued on November 30,
2010 in order to ``clarify and add more precise wording'' to, among
other things, some of the examples cited in the Appendix. With respect
to at least one of the examples pertaining to Westwood, however, the
``clarifications'' are not semantic or stylistic; rather, they are
extremely significant and cast doubt upon the credibility of the GAO,
supposedly an independent fact-finder. We have attempted to obtain
copies of the GAO tapes in order to confirm the content and context of
each of the allegations related to Westwood, but have so far been
unable to obtain access.
The initial version of the GAO testimony cited the following
``scenario,'' in relevant part, as evidence of deceptive/questionable
behavior:
Admissions representative said the program would cost
between $50,000 and $75,000 instead of providing a specific number.
By contrast, the revised scenario adds a critical piece of
information, as follows:
Admissions representative said the 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.
(emphasis added)
The fact that specific costs were provided to the prospective
student/undercover investigator prior to the conclusion of the initial
visit to the College is a material omission from the first version of
the testimony. The admissions representative was disciplined for this
incident based upon these allegations, including a formal reprimand in
his permanent HR file, which may have been unwarranted had the entire
set of facts been properly disclosed. It is difficult to understand how
such critical mitigating facts could have been left out of this
testimony and why it took nearly 4 months to correct, particularly
since we expressed concern over the factual basis of this particular
scenario during a meeting with your staff on August 27, 2010. Indeed,
rather than revising this scenario, it should rightfully be removed
from the GAO testimony entirely.
We request that you take the information in this letter into
account as the committee proceeds with its investigation. While the
committee's interest in career colleges is understandable in light of
the amount of Federal funds used by students who choose to attend
institutions in this sector of higher education, investigations should
be based on solid factual evidence and not influenced by baseless,
exaggerated, or biased allegations. The allegations described above
have unfairly smeared Westwood's reputation with the committee,
accrediting bodies, and the public, at significant financial and human
cost. In the event that the committee contemplates using any other
claims concerning student experiences, Westwood's practices, or the
conduct of its employees in its reports or hearings, we would
appreciate the opportunity to discuss such claims with you or your
staff before public disclosure to ensure that they are portrayed
accurately and in context.
Sincerely,
Mark R. Paoletta,
[email protected].
______
Attachment
Wednesday, December 8, 2004.
To Whom It May Concern: I would like to thank Westwood College for
the stay here in the Dupage campus. I am almost done successfully
completing two terms in this wholesome facility. I am now going to
cease my education here at the end of this term. I have many personal
reasons for my failure to continue my education here at Westwood. There
is nothing that this facility or its staff did that influenced my
decision. I am leaving for other personal reasons that will take my
life in a different direction then to continue my education. I am very
grateful for the experience I have had here for the last 20 weeks. The
staff here is amazing. They are very knowledgeable, experienced, and
understanding. I want to thank all of my instructors personally for the
immensely magnificent experience I encountered here. I would like to
thank all the support staff in student services, the bookstore, and the
program directors for steering my education in the right direction. I
will leave this facility with 30 credit hours and it will more than
likely be the best hours I will receive in my pursuit to continue my
education in the future. This extraordinary facility was very well
maintained and clean. There was absolutely no complaints about the
building or the staff that I had throughout my entire career here at
Westwood. I would like to say goodbye to all here at Westwood Dupage
and say I hope the best for all of you. Thank you once again for the
experience. It will last me a lifetime.
Sincerely,
Michelle Zuver.
______
WilmerHale,
Washington, DC 20006,
February 10, 2011.
Beth Stein, Esq.,
Chief Investigative Counsel,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20510-6300.
Re: Bridgepoint Education
Dear Beth: I am in receipt of Daniel Smith's letter dated February
7, 2011. Mr. Smith's letter does not accurately represent our ongoing
correspondence and conversations. This concerns us and we will take
this opportunity to respond.
As you know, the Department of Education Office of Inspector
General (``OIG'') has recently issued its audit report entitled
``Ashford University's Administration of the Title IV, Higher Education
Act Programs.'' Those programs are administered by the Office of
Federal Student Assistance (``FSA''). That Office now has jurisdiction
over the completion of the audit process, and is empowered to take
remedial action if it finds errors in the way those programs were
administered. The FSA must determine whether facts exist that would
justify any such actions, which may include further fact gathering,
assessment of repayment obligations, penalties, reformation of
processes, or conceivably, proceedings to fine, limit, suspend or
terminate Ashford University from participation in such programs.
Ashford University is scheduled to submit a response to the OIG report
by late February. The regulatory process then provides for negotiation
between FSA and the University, issuance of a Final Audit Determination
Letter, a formal administrative adjudication if necessary and then
Federal court proceedings if necessary. Ashford University has informed
FSA that it will reply to the OIG report and has already asked for a
meeting to discuss that report and the University's response.
As we have discussed, in order to avoid compromising the integrity
of the FSA proceedings, Bridgepoint Education (``Bridgepoint'') is
simply not in a position to make witnesses available or agree to
testify in a public hearing prior to submitting its response to FSA and
having a meaningful opportunity to discuss scope and resolution of this
matter with the FSA. Ashford University cannot make individuals
available or respond publicly to questions concerning a matter in which
it is engaged in non-public discussions and negotiations with FSA. To
do otherwise would interfere with Ashford University's due process and
its ability to protect itself and its students' interests in the
proceedings before the Department of Education. As to which individuals
you might interview before a hearing, after we have had a meaningful
opportunity to discuss the scope and resolution of this matter with FSA
we could discuss the details of a hearing, but are not in such a
position at this time.
While our ability to appear is predicated on the progress of FSA's
inquiry, Bridgepoint also notes once again that its practices are
within industry norms and that the OIG did not find it had violated
incentive compensation regulations. Ashford University was not one of
the 15 institutions criticized by the GAO report on the for-profit
sector. Indeed, in the Chairman's February 7 remarks on the Senate
floor, he singled out four of our country's publicly traded, post-
secondary education providers for criticism. Three of them were
criticized by the Chairman for what he considered to be improper
recruiting practices. Ashford University was not among that group.
Rather, Ashford University was criticized for (1) having originally
been a small, religiously affiliated school that was acquired by a for-
profit company, under whose ownership the school has experienced
substantial growth, mostly in online offerings, and (2) having a 21
percent 3-year student loan default (well below the 30 percent
regulatory requirement and the reported 25 percent industry average).
It is difficult to understand why having acquired, and likely saved
from closure, a small liberal arts college, should subject Ashford
University to being singled out during the pendency of a regulatory
proceeding for a possible solo appearance at a public hearing when it
has statutorily acceptable and below average default rates.
We will provide the requested spreadsheet related to request four
under separate cover. We are reviewing the expanded set of document
requests that you posed to us on January 25, and will respond to you
about those separately.
Bridgepoint appreciates your understanding of our due process
rights and the need to engage with the FSA without prejudice.
Sincerely,
Jay P. Urwitz.
______
U.S. Senate,
Committee on HELP, Education,
Labor, and Pensions,
Washington, DC 20510-6300,
March 1, 2011.
Andrew S. Clark,
Chief Executive Officer,
Bridgepoint Education, Inc.,
San Diego, CA 92128.
Dear Mr. Clark: On March 10, 2011, the Senate HELP Committee will
hold a hearing titled, ``Bridgepoint Education, Inc.: A Case Study in
For-Profit Education.'' Notice of this hearing, together with a request
for your testimony, was provided to your attorneys in mid-January 2011.
At that time committee staff also requested to schedule bi-partisan
staff interviews with 6-7 additional Bridgepoint executives and
employees in advance of the hearing.
Also in January, the Department of Education Inspector General
issued the results of a final audit report making six findings with
regard to Bridgepoint-owned Ashford University's handling of title IV
financial aid dollars. At that time, your attorneys insisted that the
company had serious concerns about appearing at a hearing before the
completion of the final audit determination by the Department of
Education, a process that averages 12 to 18 months. Your attorneys
later insisted that Bridgepoint would, of course, not expect to
complete the process but would cooperate with the committee after the
company had the opportunity to submit comments on the audit to the
Department of Education, and to meet with the appropriate Department
officials. While neither the Department of Education nor the Inspector
General had any concern with regard to the hearing or your
participation, purely as a matter of courtesy, the committee agreed to
postpone the hearing from February 17 to March 10, on the condition
that you would provide testimony at the later hearing, and that the
company would also make the requested employees and executives
available for interview.
Notwithstanding this courtesy, Bridgepoint has continued to refuse
to make any of the relevant employees available for interviews. In
addition, on February 23, 2011, Bridgepoint submitted documents to the
Department of Education pursuant to the final audit determination
process. On that day your attorneys also provided assurances to the
committee that Bridgepoint was continuing to followup on its request to
immediately schedule a meeting with Department officials. However, on
February 24 Bridgepoint attorneys separately told the Department:
``[w]e would still like to have a call early on in the resolution
process, as discussed in our earlier email exchange, and plan to call
in 2 weeks to see if we can arrange a time that is convenient for
all.'' Thus while providing assurances to the HELP Committee through
one attorney, your company through a second set of attorneys was
simultaneously seeking a delay that would provide a colorable excuse
for your failure to appear and testify on March 10.
This letter is to inform you that the March 10, 2011 hearing will
proceed as planned. You will receive a formal invitation to appear and
provide testimony in the upcoming days. Should you choose not to
appear, leaving your company without the ability to respond to issues
raised in the hearing, that is your choice. However, you should be
aware that it will be made clear at the hearing that your failure to
appear is based on nothing other than your own apparent unwillingness
to testify regarding how a company that receives over 86 percent of its
revenues from the Federal Government saw a 1-year increase in profit
from $81 to $216 million, but also has student withdrawal rates of at
least 65 to 75 percent.
We look forward to a robust hearing and expect that you will see
the wisdom of joining the committee in the exercise of its oversight
authority.
Sincerely,
Daniel E. Smith,
Staff Director.
______
BridgepointEducation,
San Diego, CA 92128-8104,
March 7, 2011.
Hon. Tom Harkin, Chairman,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20510-6300.
Re: Invitation to Testify at March 10, 2011 Hearing
Dear Chairman Harkin: Thank you for your invitation of March 1,
2011 to testify at a hearing of the U.S. Senate Committee on Health,
Education, Labor, and Pensions. Bridgepoint Education makes an
important contribution to the education of the people of this country,
especially those who have difficulty availing themselves of education
elsewhere. In that spirit, we have extensively cooperated with your
staff, providing a wide range of documents about our operations,
inviting and hosting your staff at our Ashford University, Clinton, IA
campus, and answering specific questions your team has generated.
As we explained to both Ms. Stein on February 10, 2011, and Mr.
Smith on March 7, 2011, Bridgepoint Education will not be able to
testify on March 10, 2011 (copies included.) We are currently in
proceedings before the Department of Education's Office of Federal
Student Aid (``FSA''). FSA now has jurisdiction over the completion of
the review process for a report by the Office of Inspector General. The
FSA must determine whether facts exist that would justify any
remediation, and must interpret the statute and regulation. Those
proceedings have not advanced to the point where we have had a
meaningful opportunity to discuss scope and resolution of the matter.
Thus, Ashford University cannot respond publicly to questions which
will be the subject of non-public discussions and negotiations with
FSA.
I am confident that you will understand our decision at this time.
Thank you for your appreciation of this important process.
Respectfully submitted,
Andrew Clark,
President and CEO.
WilmerHale,
Washington, DC 20006,
March 7, 2011.
Daniel E. Smith,
Staff Director,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20510-6300.
Re: March 1, 2011 Letter to Bridgepoint Education
Dear Mr. Smith: We have received your letter of March 1, 2011,
addressed to Andrew Clark, Chief Executive Officer of Bridgepoint
Education (``Bridgepoint''), and are responding on Mr. Clark's behalf.
The letter does not accurately represent the conversations and
correspondence among Bridgepoint, HELP Committee staff, and the Office
of Federal Student Aid. Bridgepoint has sought to cooperate throughout
its discussions with committee staff and has repeatedly indicated its
willingness to have a representative of Bridgepoint or Ashford
University testify before the committee at an appropriate time.
However, Bridgepoint has also indicated certain limitations as to the
timing of such testimony. Bridgepoint takes this opportunity to
reiterate its efforts to cooperate with the committee and the
circumstances under which a Bridgepoint or Ashford University
representative could testify.
As you know, the Department of Education Office of Inspector
General (``OIG'') issued its audit report entitled ``Ashford
University's Administration of the Title IV, Higher Education Act
Programs'' on January 21. In accordance with standard procedure, the
Department asked for Ashford University's comments on the audit report,
and Ashford University submitted comments to the Department's Office of
Federal Student Aid (``FSA'') on February 23, 2011.
FSA now has jurisdiction over the completion of the review process.
The FSA must determine whether facts exist that would justify any
remediation, and must interpret the statute and regulation. Following
Ashford University's submission, the regulatory process allows for
discussions between FSA and Ashford University, issuance of a Final
Audit Determination Letter, a formal administrative adjudication if
necessary, and Federal court proceedings if necessary.
On Monday, January 24, the first business day after the OIG issued
its audit report the committee staff informed Bridgepoint that it would
like a representative to appear at a hearing that would focus on some
of the practices that were discussed in the audit report. That same
day, the committee issued a press release that inaccurately described
the OIG findings. Since then Bridgepoint has had several conversations
with committee staff. Through these conversations, Bridgepoint has
consistently explained that it is not in a position to testify in a
public hearing prior to having a meaningful opportunity to discuss the
scope and resolution of this matter with the FSA. Ashford University
cannot make individuals available or respond publicly to questions
concerning a matter in which it is potentially exposed to significant
adverse action by FSA, anticipates being engaged in non-public
exchanges with FSA, and is yet to have a substantive exchange with FSA
as to the scope and resolution of the matter. To do otherwise would
interfere with Ashford University's due process and its ability to
protect its students' interests and the institution in the proceedings
before the Department of Education.
The second paragraph of the letter misstates what the committee has
been told about the circumstances under which Bridgepoint could
testify. Bridgepoint has never said that it would not voluntarily
appear at a hearing ``before the completion of the final audit
determination.'' Nor has it ever stated that it would be able to appear
directly ``after the company had the opportunity to submit comments on
the audit to the Department of Education, and to meet with the
appropriate Department officials.'' Instead Bridgepoint clearly
reiterated, in writing, the circumstances regarding its appearance in
the letter of February 10 sent to the committee's Chief Investigative
Counsel, which is attached. It stated: ``Bridgepoint Education
(``Bridgepoint'') is simply not in a position to make witnesses
available or agree to testify in a public hearing prior to submitting
its response to FSA and having a meaningful opportunity to discuss
scope and resolution of this matter with the FSA'' (February 10, 2011
letter to Beth Stein from Jay Urwitz). Indeed, in that letter
Bridgepoint further stated that the assertion about our alleged
agreement to testify on March 10 ``does not accurately represent our
ongoing correspondence and conversations.''
These are not random conditions, but rather stem from the real due
process concerns that have been noted--namely, that Bridgepoint or
Ashford University could not characterize the facts or the law until
they had a meaningful and substantive dialogue with the body that is
able to determine whether to seek remediation.
The characterization of Bridgepoint's efforts as trying to slow the
FSA process is unfounded, and the quotations from the correspondence
with FSA were taken completely out of context. That context, provided
in the attached letters to FSA and from FSA, shows that Ashford
University first requested a meeting with FSA on January 31, 2011,
promptly after receiving the OIG Report. The correspondence also shows
that Ashford suggested to FSA that it was available to talk as soon as
is FSA. In two separate letters, Ashford University asked for a
conference call; twice FSA responded by saying it would review the
documents and call Ashford University when and if necessary (``[U]pon
receipt of the institution's formal response to the audit . . . if
additional information is needed for the final audit determination, FSA
will contact the University.''). In the February 24 letter, Ashford
University reiterated its willingness to meet and then suggested that,
in any case, counsel would call in 2 weeks.
On March 4, an initial telephone conference took place between FSA
officials and representatives of Ashford. However, on March 3, the
representatives were informed by FSA that it would not be in a position
to engage in meaningful discussions. Specifically, an FSA official told
the representatives that FSA would not be in a position to provide
conclusions and that the purpose of the call was for Ashford to ``bring
to FSA's attention anything that you may wish.'' This, in fact, was the
nature of the call. FSA confirmed that its review was at a preliminary
stage and that it was not yet in a position to engage in a substantive
discussion about the matters under review or their resolution.
The assertion that ``neither the Department of Education nor the
Inspector General had any concern with regard'' to Bridgepoint's
participation in the hearing is irrelevant. Neither the accuser (the
OIG) nor the adjudicator (FSA, at least initially) have to be concerned
about Bridgepoint not exercising its rights.
Since the committee began its industry-wide inquiry examining 30
companies providing post-secondary education in August of last year,
Bridgepoint has cooperated. Within 2 business days of receiving your
request, Bridgepoint issued a comprehensive document preservation
notice to all relevant employees. Bridgepoint immediately began
collecting documents and made its first production in response to your
39-item request on August 31, 2010, after we met with the committee
staff on August 26. Bridgepoint made seven additional productions and
completed its response in early December.
All of this was a very significant undertaking that was
accomplished quite quickly, based on the committee's time demands. In
total, Bridgepoint produced tens of thousands of pages in response to
your requests. Further, Bridgepoint has responded to multiple requests
from the committee staff for specific information, some under very
short timetables.
In addition to the productions listed above, Bridgepoint went one
step further by inviting your staff to visit Ashford University's
campus in Clinton, IA on October 14, 2010. They had the opportunity to
meet students, staff, and administration. They also were provided a
demonstration of an online course, visited a campus class in session,
and toured the campus.
It is difficult to understand why having acquired, and likely saved
from closure, a small liberal arts university in Iowa should subject
Ashford University to being singled out for a solo appearance at a
public hearing. This is especially difficult to rationalize when
Ashford University has been cooperative with the committee and has
always maintained acceptable outcomes by all regulatory measures.
Ashford University is dedicated to providing access to higher
education to groups who have traditionally been excluded from its
benefits. We have dedicated ourselves to doing so in a way that is
affordable to them. Our mix of students--71 percent of our online
students are women; half identify themselves as minorities; and, at an
average age of 35, they are attempting to better their situation even
past the time when traditional students do so--face more challenges in
undertaking their higher education, and we are proud to offer them this
opportunity.
Finally, Bridgepoint is troubled by the apparent involvement of
Senate staff in Ashford University's ongoing agency proceeding, as
evidenced by the excerpt from Ashford University's letter to the FSA,
which is not a public document, that was quoted in your letter.
Interference in an agency adjudication by a third party, even Congress,
``may undermine the integrity of the ensuing decision,'' as the U.S.
Court of Appeals for the D.C. Circuit has held. American Public Gas
Ass'n v. Federal Power Com'n, 567 F.2d 1016, 1069 (D.C. Cir. 1977)
(``Congressional intervention which occurs during the still pending
decisional process of an agency endangers, and may undermine, the
integrity of the ensuing decision, which Congress has required be made
by an impartial agency charged with responsibility for resolving
controversies within its jurisdiction. Congress as well as the courts
has responsibility to protect the decisional integrity of such an
agency.''); see also Morton Rosenberg and Jack H. Maskell,
Congressional Intervention in the Administrative Process: Legal and
Ethical Considerations, CRS Report for Congress, Sept. 25, 2003, at 4
(``[I]nsulation of the decisionmaker from political influence through
public pressure or unrevealed ex parte contacts has been deemed
justified by basic notions of due process to the parties involved'' in
agency adjudications, whether formal or informal.''). Thus, your
involvement in that process deepens Bridgepoint's concerns about
receiving adequate due process in the context of the FSA's proceeding
and reinforces our belief that now is not the appropriate time to
testify.
Bridgepoint appreciates the opportunity to correct the record in
this matter.
Sincerely,
Jay P. Urwitz.
[Whereupon, at 12:40 p.m., the hearing was adjourned.]