Student Lending Analytics Blog

The Case for Truth In Educating (Part 4)...(Updated)

After reading the transcript (Download FRONTLINE college, inc.) from the Frontline special, College, Inc, that aired earlier this week, I couldn't help but think back to an earlier posts on the need for greater transparency in higher education, what I had referred to as "Truth in Educating." 

Here was the specific anecdote that stuck in my mind from College, Inc.:

For-Profit Education Woes Continue...

Tonight there is news from the Pittsburgh Tribune Review of a whistleblower suit filed against South University Online, a subsidiary of Education Management Corp.:

For-Profit Educators In The News, On TV And Declining on Wall Street

Frontline's expose' on the for-profit industry, College, Inc. aired today.  Here is an excerpt from their summary:

"Even in lean times, the $400 billion business of higher education is booming. Nowhere is this more true than in one of the fastest-growing -- and most controversial -- sectors of the industry: for-profit colleges and universities that cater to non-traditional students, often confer degrees over the Internet, and, along the way, successfully capture billions of federal financial aid dollars.

Why Is For-Profit Sector Selling Off This Morning?

Symbol	Last Trade		Change		Volume	Intraday	Related Info
APOL	12:24PM EDT	57.99	3.51	5.71%	3,448,024
ESI	12:24PM EDT	104.90	5.80	5.24%	1,172,404
DV	12:24PM EDT	62.11	4.59	6.88%	2,004,910
COCO	12:24PM EDT	15.95	0.96	5.68%	4,506,423

Note: 
APOL = Apollo Group (parent of University of Phoenix)
ESI = ITT Educational Services
DV = DeVry
COCO = Corinthian Colleges

Market watchers are attributing the drop to this article from Inside Higher Ed "Comparing Higher Ed To Wall Street":

Former Administrator Alleges Grade Inflation At ITT Educational Services

From IndyStar: 

"Carmel-based ITT Educational Services is again facing allegations of fraudulent record keeping and inflated student grades, much like a federal investigation rocked the college several years ago.

A former administrator of an ITT campus in California claims he was fired for telling senior executives of the private career-training college that he had seen ITT staffers changing grades and altering attendance records.

The incentive for the school to keep grades and attendance records looking good is to keep students eligible for federal financial aid programs and the keep ITT eligible for educational accreditation.

In the new suit filed Friday, an insider is saying he saw ITT staffers alter and destroy records last year and then he was fired when he reported it to corporate executives.

Jason Halasa, who was hired in February 2009 as director of the ITT campus at Lathrop, Calif. and fired in September, is seeking double back pay and other costs related to his dismissal."

A Sign of the Time: Pay Double To Get Off The Waiting List

Thanks to blog reader, Christine, for passing this one along from The Boston Channel: 

"A Massachusetts college has a new plan to give students an edge in getting admitted.Bristol Community College is about to launch a plan that would allow students to skip the waiting list if they agree to pay double the school's tuition.The school is teaming up the Princeton Review. As part of the deal, the for-profit company would invest $2 million in the college, which includes a new facility in downtown New Bedford.The program would specifically apply to courses designed to train health care workers and cost about $8,500 a year.

College officials said it's a creative way for the school to meet the growing demand for that kind of training.But the head of the state's Community College Council is already blasting the program saying allowing students who can pay more to go to the head of the line goes against the idea of public education."

In a survey accompanying this article, 85% of respondents didn't think this policy was fair.  Meanwhile in February, Kaplan has an agreement with the overcrowded California Community College system to offer their online courses:

Exemptions Proposed to Gainful Employment Rules; For-Profit Ed Stocks Rise Sharply

From Investor's Business Daily:

"ITT Educational Services (ESI), DeVry (DV) and other for-profit educators jumped after Credit Suisse hiked ITT and DeVry to outperform, saying they may benefit from new gov't programs. The Education Dept. has proposed exemptions to its so-called "gainful employment rule" that aims to limit student loans so they don't greatly exceed projected salaries. The exemption would apply to programs with a graduation rate of more than 50% and a placement rate over 70%. That could boost student funding for ITT and DeVry. ITT rose 9.6% to 119.20, DeVry surged 10% to 71.73 and Grand Canyon EducationLOPE) rose 4% to 27.35."

From the Wall Street Journal: 

Apollo (Parent of University of Phoenix) Comments on Gainful Employment Proposals

From their 2Q 2010 conference call (thanks to Seeking Alpha) earlier this week in which they lay out their position that new regs. would limit college access:

"To that end, we continue to actively monitor the rule making process and other developments in Washington. It is important to support the Department’s efforts to enhance accountability within higher education and we strive to play a leadership role in that regard.

Time for Accreditors To Share Information With Students

The New York Times had page one feature on Sunday "The New Poor:  For-Profit Schools Cashing In on Recession and Federal Student Aid" about for-profit schools and highlighted several students struggling with high debt burdens and low wages. 

Here were a few aspects of this all too familiar story that caught my attention:

• Disconnect between the perception and the reality: 

Our students are given the tools needed to become the future leaders in the industry," proclaims the Le Cordon Bleu Web site. "Many graduates have attained positions of responsibility, visibility, and entrepreneurship soon after completing their studies.

The job placement results that the school files with accrediting agencies suggest a different outcome. From July 2007 to June 2008, students who graduated from the culinary arts associate degree program landed jobs that paid an average of $21,000 a year, or about $10 an hour. Oregon’s minimum wage is $8.40 an hour."

Dept. of Education To Examine "Creative Arrangements" Stemming From For-Profit Acquisitions

From Business Week: 

"For-profit education companies, including ITT and Baltimore-based Laureate Education, have purchased at least 16 nonprofit colleges with regional accreditation since 2004. The U.S. Education Dept., which doled out $129 billion in federal financial aid to students at accredited postsecondary schools in the year ended Sept. 30, is examining whether these kinds of acquisitions circumvent a federal law that requires a two-year wait before new for-profit colleges can qualify for assistance, says Deputy Education Under Secretary Robert Shireman. Under federal regulations taking effect on July 1, accrediting bodies may also have to notify the Education Secretary if enrollment at a college with online courses increases more than 50% in one year. "It certainly has been a challenge both for accreditors and the Department of Education to keep up with the new creative arrangements that have been developing," Shireman says."