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The Art of Spin Career-College Style

  • By
  • Stephen Burd
May 18, 2010

For years, career college lobbyists pushed the U.S. Department of Education to look the other way while some of the largest for-profit higher education companies deliberately violated a federal law prohibiting colleges from compensating recruiters based on their success in enrolling students. Now, with the Obama administration preparing to strengthen its rules banning incentive compensation, these very same lobbying groups are pointing to that lax enforcement to suggest that there weren’t any problems in the sector to begin with.

To support their claims, these lobbyists point to a report that the U.S. Government Accountability Office (GAO) issued in February that took a detailed look at “incentive compensation violations substantiated by the Education Department” over the last decade. The GAO reported that between 1998 and 2009, the Department penalized 32 colleges for violating the ban, 19 or which were proprietary schools. However, the GAO found that the differences between the sectors have disappeared since 2002, when the Bush administration rewrote the Department's student aid regulations to significantly weaken the prohibition by adding loopholes – or “safe harbors” – to the rules. Over the last seven years, 14 colleges have been penalized, with an equal number coming from the non-profit and for-profit college sectors.

The Career College Association in recent weeks has touted these results to argue that the Obama administration’s plan to toughen the rules by eliminating the “safe harbors” that the previous administration put into place is unwarranted. “The Department is now proposing wholesale elimination of all those regulations and all the guidance previously provided without documenting problems with specific parts of the incentive compensation regulation,” Harris Miller, CCA’s president, wrote in a “briefing memorandum” he sent to Congressional staff members last week. “This is notwithstanding a report mandated by Congress done by the Government Accountability Office, issued after the negotiated rulemaking continued, showing that violations of the incentive compensation ban are a) rare, b) have not increased or decreased since the regulations were adopted in 2002, and c) are fairly evenly split among traditional colleges.”

You have to hand it to the lobbyists at the Career College Association. They certainly have a gift for spin. Unfortunately for Miller, his claims about the GAO report’s conclusions are entirely misleading.

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Guest Post: Why Rewarding Recruiters for Enrolling Students Needs to Stop

May 13, 2010

(The U.S. Department of Education is expected to soon release proposed regulations aimed at strengthening the integrity of the federal student aid programs. Among other things, the Education Department is considering toughening rules that bar colleges from compensating recruiters based on their success in enrolling students. In this guest post, David Hawkins, the director of public policy and research for the National Association for College Admission Counseling, explains why his organization is playing a leading role in fighting to ban recruiters from receiving incentive compensation.)

By David Hawkins

By proposing to tighten the rules on incentive compensation for admission and financial aid officers in the current round of rulemaking for the federal financial aid programs, the Department of Education is poised to re-establish stricter standards for college recruiting. At the National Association for College Admission Counseling (NACAC), we agree with the Department that banning the payment of commissions and other bonuses to admission and financial aid officers based on their success in enrolling students is critical to safeguarding the integrity of the taxpayer-supported federal financial aid programs.

Our organization’s historic concern with the treatment of admission officers as professionals, rather than salespersons, is rooted in the interest of students in transition to postsecondary education. Because the transition to higher education is an unsystematic, often opaque process that individuals possessing varying levels of ‘college knowledge’ must navigate, the information gap between the employees in charge of recruiting and prospective students is immense. In an unregulated environment, the potential for misrepresentation and outright fraud is a clear and present threat, which can result in harm to students and, in the case of federal aid and loans, to the taxpayer.

In 1992, Congress recognized these dangers when, reacting to widespread reports of abuse, it outlawed colleges from providing incentive compensation to admissions officers. However, under heavy pressure from  the for-profit higher education industry, the Bush Administration in 2002 created 12 loopholes to the incentive compensation ban. As a result, the commissioned sales model roared back to life, once again exposing federal financial aid funds to abuse by for-profit colleges that were providing highly incentivized pay to their recruiters.

At the time, NACAC helped lead the opposition to these changes, which we believed were in direction violation of the law. We argued that the so-called “safe harbors” would so dilute the government’s regulatory authority that they would sanction activities that put both students and taxpayer funds at risk. We’re sorry to say that our concerns have been well borne out.

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A Missed Opportunity to Make Private Loans Safer?

  • By
  • Stephen Burd
May 11, 2010

Senate Democratic leaders are coming dangerously close to allowing a golden opportunity to rein in predatory private student loan practices pass them by.

The Senate is expected to complete work over the next week on its version of a financial regulatory overhaul bill that would create a new federal watchdog agency in charge of regulating all forms of consumer credit, including private student loans. The aim of the Consumer Financial Protection Bureau would be to protect consumers from the types of unscrupulous lending practices that led to the near collapse of the financial markets not so long ago.

The legislation holds out the promise that private loans would for the first time be regulated by a single entity, rather than the patchwork of federal agencies that have done little to curb even the worst private lending abuses in the past.

Unfortunately, the Senate bill, as currently written, falls far short of that goal. As our colleagues at the Project on Student Debt have pointed out, the measure includes “worrisome gaps” that would hamper the bureau’s ability to provide meaningful oversight over the private loan market and to ensure that students are not being led to take on high-cost private loans unnecessarily.

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Blaming the Messenger at the Career College Association

  • By
  • Stephen Burd
May 7, 2010

Harris Miller, the president of the Career College Association, often claims that his organization doesn’t have any tolerance for proprietary schools that engage in unscrupulous practices that harm students. “Hang them high,” he likes to say.

This week, the association certainly had the opportunity to live up to its word. As we reported on Tuesday, the latest issue of BusinessWeek includes startling revelations that some for-profit colleges are once again trolling homeless shelters trying to lure their residents in by promising them rich financial aid awards -- while at least in some cases, pushing these extremely vulnerable students to take on heavy amounts of student loan debt.

But instead of seizing the chance to show that it is willing to call out bad practices in the sector and demonstrate that the for-profit higher education industry can police itself, the association did what it has done time and time again: it lashed out at the journalist who uncovered the story -- in this case, the Pulitzer Prize-winning reporter Daniel Golden. Because the one thing that the Career College Association truly doesn’t have any tolerance for are the reporters who bring its member schools’ unscrupulous practices to light. (In the spirit of full disclosure, I have been one of his favorite targets – see here and here.)

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Paging Sam Nunn: For-Profit Colleges Caught Targeting the Homeless Again

  • By
  • Stephen Burd
May 4, 2010

Remember the bad old days when unscrupulous trade schools -- set up solely to reap profits from the federal student aid programs -- were enrolling students straight off of the welfare lines and pressuring them to sign up federal student loans they had little hope of ever repaying?

Those times have long past, right? Think again.

According to an investigative report in the latest edition of BusinessWeek by the Pulitzer Prize-winning reporter Daniel Golden, some for-profit colleges have been up to their old tricks, trolling homeless shelters trying to lure their residents in by promising them rich financial aid awards. The big difference now is that these schools are not fly-by-night operations. They are extremely profitable publicly traded or privately held corporations.

Take Drake College of Business, a privately-held institution in New Jersey that trains students in allied health and computer related fields. The school has gone out of its way to attract homeless students, who make up nearly 5 percent of the student body at its Newark branch campus. According to the article, Drake has a pretty unique way (at least we think it’s unique) of enticing these students to enroll:

Late in 2008, it began offering a $350 biweekly stipend to students who show up for 80 percent of classes and maintain a “C” average.

“It’s basically known in the community: If you’re homeless, and you need some money, go to Drake,” says Carmella Hutson, a case manager at the Goodwill Rescue Mission in Newark where about 20 clients have enrolled at Drake in the past two years. “It would put money in my pocket, help me buy a car,” adds Jerome Nickens, 45, who lived at the mission when he talked to a Drake representative but decided not to enroll.

Predictably, officials at Drake say they are doing the Lord’s work -- providing educational opportunities to those with the greatest financial need. What they neglect to mention is the heavy amount of student loan debt that they are pushing these extremely high-risk students to take on to attend the school, which has nearly quadrupled its tuition since 2007.

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A Student Debt Crisis That Can Not Be Denied

  • By
  • Stephen Burd
April 29, 2010

For-profit college lobbyists have been flooding Capitol Hill lately trying to persuade lawmakers to ignore the growing student debt crisis at their institutions. But a new report from the College Board is going to make their jobs that much harder.

Using the most recent data available from the U.S. Department of Education’s National Postsecondary Student Aid Study (NPSAS), the authors of the report, “Who Borrows Most? Bachelor’s Degree Recipients with High Levels of Student Debt,” set out to look specifically at the characteristics of borrowers who are going the deepest in hock to pay for college. What they discovered was that “for-profit bachelor’s degree recipients at all income levels” are much more likely than those at other schools to take on extremely high debt loads.

According to the report, more than half (53 percent) of all bachelor’s degree recipients at for-profit colleges left school in 2007-08 with a total student debt loan of $30,500 or more. That’s more than double the proportion of students who graduated with that level of debt at private colleges (24 percent) and more than four times as many who did at public four-year colleges (12 percent). Much of this debt came in the form of high-cost private loans. The report found that nearly two-thirds of bachelor’s degree recipients graduated with private loan debt at proprietary schools that year, compared to 42 percent at private colleges, and 28 percent at public colleges.

Meanwhile, only 4 percent of bachelor’s degree recipients at for-profit colleges left without any debt in 2007-08. In comparison, 28 percent of degree recipients at private colleges and 38 percent at public colleges graduated debt-free that year.

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Will Sallie Mae Escape the Consumer Financial Protection Agency's Oversight?

  • By
  • Stephen Burd
April 27, 2010

The U.S. Senate is expected to begin considering financial regulatory reform legislation this week that would create a new federal watchdog agency in charge of regulating all forms of consumer credit, including private student loans. The aim of the Consumer Financial Protection Bureau (which is called the Consumer Financial Protection Agency in the version of the legislation that the House of Representatives approved in December) is to protect consumers from the types of predatory lending practices that led to the near collapse of the financial markets in the not-so-distant past.

But at least in terms of strengthening regulation over the private loan market, the Senate bill’s authors seem to have committed a major oversight of their own: as written, the legislation appears to prevent the consumer protection bureau from having any oversight authority over Sallie Mae, which is by far the single largest private student loan provider in the country. According to Student Lending Analytics, the company made nearly $5 billion in private loans in 2008-09, over three times more than its closest competitor.

Under the bill, the Consumer Financial Protection Bureau would not have any supervision or enforcement authority over banks with less than $10 billion in assets. Instead, these banks would remain under the jurisdiction of the existing bank regulatory agencies, such as the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC). The legislation’s authors included this provision to try and limit the regulatory burden that the measure would place on smaller banks and credit unions.

So what does this have to do with Sallie Mae? According to some consumer advocates and lawmakers, the student loan giant appears to fall under this exemption because it is currently financing private student loans through a bank it owns in Utah (appropriately called the “Sallie Mae Bank”) whose total assets fall well below the threshold.

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Senator Dodd's Second Chance

  • By
  • Stephen Burd
April 23, 2010

Will Sen. Chris Dodd once again stand in the way of a vital reform proposal that aims to prevent students from taking on unnecessary private loan debt? We will find out next week when the Senate takes up legislation that the Democratic Senator from Connecticut drafted to overhaul the nation’s financial regulatory system.

At issue is a proposal that is included in the House of Representatives version of the Wall Street reform bill that would require colleges to certify a student’s need for private loans before that individual could receive them. The plan aims to give college financial aid administrators the opportunity to counsel students before they take out expensive private student loans. This is important because, according to the most recent U.S. Department of Education data available, nearly two-thirds of undergraduates who borrow private loans do so even though they haven’t exhausted their eligibility for lower-cost federal student loans first. One quarter of these private loan borrowers do not take out any federal loans at all.

The Senate bill does not include this provision. So far, Dodd has resisted pleas from college lobbyists, consumer advocates, and student groups to include it. Instead, he continues to support a toothless alternative measure he helped push through Congress in 2008.

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Guest Post: Give Borrowers the Means to Protect Themselves Against Trade School Abuses

April 22, 2010

By Deanne Loonin

At the Student Loan Borrower Assistance Project, we support the U.S. Department of Education’s efforts to rewrite its regulations to strengthen the integrity of the federal student aid programs and to try to better protect for-profit college students from the types of abuses that have become all too common in this sector.  If enacted, these potential rule changes could help ensure that government funds are well spent and that there is some minimum level of quality in higher education. They could also put an end to some of the worst recruiting practices that have put low-income students in harm’s way.

But the changes under consideration fall short in one crucial area -- they fail to provide any new relief for student loan borrowers who are harmed by the illegal and deceptive practices of unscrupulous proprietary schools. This is unfortunate because as it stands now, it is extremely difficult, if not virtually impossible, for those who are victimized by these schools to get relief and move on with their lives.

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The Case for Need-Based College Aid

  • By
  • Jennifer Cohen Kabaker
April 20, 2010

A couple weeks ago, The New York Times’ Freakonomics blog posted a research study about who gains the most from college. The study, published in the most recent edition of the American Sociological Review, uses demographic, academic achievement, and income data to determine the effect of a college degree on income. Buried in the dense technical study is a significant finding: individuals who are least likely to go to college benefit the most economically from a college degree. It provides, in other words, more evidence that the need-based financial aid the federal government, states, and colleges provide is a worthy investment.

But the new study also turns conventional theory on its head. Conventional thinking among academics is that individuals who are most likely to attend college will benefit the most from college. This is because economists believe that students choose to attend college because they believe that income gains as a result of a college degree will outweigh the cost of college. But authors Jennie Brand and Yu Xie suggest instead that individuals choose to attend college based on a host of reasons of which economic benefit is only one. These can include family expectations, whether an individual’s friends are also going to college, and even how many siblings an individual has.

Instead, Brand and Xie hypothesized that individuals that are least likely to attend college actually base their decision to attend college primarily on economics factors, unlike students that are most likely to attend. Study after study suggests, after all, that a college degree significantly increases an individual’s potential earnings. As a result, it is possible that those that are least likely to attend college benefit the most from college because they have the most to gain.

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