College Quality

It's that time of the year again: high-school seniors around the country are anxiously awaiting the news that will change their lives -- early admission to the university of their choice. But while junior checks his email and the school's website 15 times an hour, parents are checking their savings account statements. As the recession bites into American families' incomes and makes the job search for recent graduates that much trickier, an increasing number of people are beginning to question the cost of attending colleges and universities in the United States.

[Over the last two months, Higher Ed Watch has examined how many for-profit colleges cook the books on the job placement rates they disclose to prospective students and regulators. In prior posts, we have looked at how the manipulation of these rates is a widespread problem throughout the industry; revealed some of the most common tricks of the trade for-profit schools have used to inflate these numbers; and showed how accreditors and regulators have been asleep at the switch as these abuses have been occurring. Today, we continue our series by reporting on the Obama administration’s unsuccessful effort (so far) to curb these practices.]

As part of the Obama administration’s Gainful Employment regulations, for-profit colleges and other vocational schools are required to disclose to prospective students more-detailed consumer information about the programs they offer. The aim of this effort is help students make better-informed decisions about the postsecondary educational programs they are considering.

But at least in one area, the information that prospective students are getting is fundamentally flawed. That’s because the job placement rates that for-profit higher education companies are required to disclose under the new rules are the same ones they report to accreditors and state regulatory agencies. As we wrote last week, the methodologies that career colleges use to calculate these rates vary state by state and accreditor by accreditor, making them impossible to compare. And because neither accreditors nor state regulators put much of an effort into verifying these rates, the schools don’t seem to have any qualms about gaming them.

It wasn’t supposed to be this way. Obama administration officials had an opportunity to establish a standard methodology for career colleges to use when calculating these rates, but they appear to have bungled it. And it isn’t clear whether they will get another shot at it anytime soon.

By Margaret Reiter

Last October, the U.S. Department of Education issued a new rule to implement the long-standing law requiring schools to have “state authorization” to offer postsecondary education if they want to participate in federal student financial aid programs. The rule has triggered hysterical calls from non-profit colleges for Congress to rescind the regulation. At the same time, the leading for-profit college lobbying group has sued the Education Department to overturn the rule. The new regulation provides some protection to taxpayers and students, but is so weak that the schools’ vociferous reaction to it seems akin to Chicken Little’s remarks. How could such a namby-pamby rule cause such a stir?

Although the state authorization requirement has long been in the law, the Education Department never explained what constituted state authorization to offer postsecondary education. Over time, the extremely profitable for-profit schools’ massive lobbying funds persuaded states to weaken or even abandon oversight entirely or to turn over oversight to private accrediting agencies. These private accrediting agencies, directly or through their affiliates, earn their revenues from the schools they accredit, much as rating agencies that rated toxic mortgage bonds triple A earned their revenues from the banks offering the bonds. The Department’s rule would, for the first time, establish a minimal standard for what constitutes state authorization: the school must either be established by name, state charter, constitution or other state action, or if not, it must be approved or licensed by the state, and the state must have a process to handle student complaints. 

The arguments against this rule simply don’t add up. 

By Craig Smith

Several weeks ago the Senate Health, Education, Labor and Pensions Committee focused the spotlight on the for-profit higher education company Bridgepoint Education as part of its on-going series of hearings examining the career-college sector. This hearing looked specifically at how Bridgepoint purchased a small private non-profit college in Iowa and transformed it into Ashford University, a giant for-profit school that enrolls tens of thousands of students mostly online. Sen. Tom Harkin, the Iowa Democrat who chairs the committee, identified a significant set of problems at Ashford including high withdrawal rates, the lack of any career placement services, and a growing percentage of student loan defaults.

But the data that caught my attention was what has happened to the school’s investment in instruction since Bridgepoint took over. In 2004, when the company bought Mount Saint Clare College, the institution was spending over $5,000 on instruction per student, according to data Bridgepoint provided the HELP Committee. Just five years later, with enrollment soaring at the-now Ashford University to nearly 54,000 students, the amount the company spent per student dropped to just  $700. Someone might suggest this is just another great example of a for-profit college figuring out how to “deliver education” more efficiently. However, when nearly 64 percent of your students pursuing a bachelor’s degree and 85 percent of your students pursuing an associate’s degree are withdrawing while you are capturing 30 percent of your (taxpayer-funded) revenue for profit, perhaps there is a problem with institutional priorities.

[Editor’s Note: Recently college lobbyists and leaders have begun raising a furor over a regulation that the U.S. Department of Education finalized in November that would require many states to strengthen their oversight over colleges, particularly for-profit ones. Earlier this month, the American Council on Education sent a letter to Education Secretary Arne Duncan, urging him to rescind the rule, which it argued could threaten the independence of the nation’s private colleges. Last week, Rep. Virginia Foxx, the North Carolina Republican who leads the House subcommittee in charge of higher education policy, took up this call in a hearing she held entitled “Education Regulations: Federal Overreach into Academic Affairs.” But Alan Contreras, the out-going chief of the Oregon Office of Degree Authorization, has a different view. Today at Higher Ed Watch, this leading expert on state higher education regulation explains why these concerns are overblown.]

By Alan Contreras

Now that almost every organization with the word “education” in its name has decided that the U.S. Department of Education should ditch its new “state authorization” requirement, perhaps it is time to look at just how colleges will be freed from oversight if this rule is killed off. The answer is simple: they won’t. The state authorization requirement is just that -- a state requirement that already exists, not a federal law. The rule didn’t create it, but merely called attention to it -- which is a good thing.

It has become an axiom of chatter regarding oversight of distance-education programs that when this wicked extrusion from the federal octopus is cut off at its roots, the sun will again rise on a blissful array of colleges all doing things exactly the way they were before the federal government shone a light into this less-than-visible corner of postsecondary oversight. This is complete nonsense for several reasons.

Now that the U.S. Department of Education’s notice of proposed rules on “gainful employment” is out, one thing should be perfectly clear: the Obama administration has come not to bury the for-profit college sector but to try and help save it from itself.

Yes, the proposal would cut off federal financial aid to for-profit college programs whose students take on the most unmanageable levels of debt (in relation to their expected future earnings) and have the poorest record of repayment. The administration, however, went out of its way to make sure that only the most irredeemable programs -- those, as described by Inside Higher Ed, “where fewer than 35 percent of former students are repaying their loans, and where graduates have a debt-to-income ratio greater than 12 percent of their total income and 30 percent of discretionary income” -- would be put in jeopardy.  What’s more, the proposal caps at 5 percent the number of programs that could become ineligible in the first year, and delays implementation until the 2012-13 academic year, which should at least theoretically give for-profit colleges an opportunity to bring their programs into compliance.

But as the administration explains in a document that accompanied the notice of proposed rule making [starting on p. 98], its real goal is to change the incentive structure driving the industry so that schools are motivated to “design and offer programs that will serve students well: preparing them for high-paying jobs without burdening them with excessive debts that cost them and taxpayers.” In short, administration officials say they are trying to push schools “to provide larger returns on their students’ investment.”

This is clever wording because for a long time now, the biggest players in the industry -- the publicly traded for-profit higher education companies -- have been largely taking their cues from Wall Street, which judges the performance of these companies almost entirely by their quarterly earnings. As a result, to keep their stock prices up and their investors happy, these companies must show that they are continually growing, even if that’s not in the best long-term interest of their students and their schools. Any retrenchment from this single-minded goal sets off alarm and panic.

Until fairly recently, policymakers and college leaders were pretty well convinced that they had eradicated the default rate problems that had once plagued the federal student loan program. After all, year after year, the U. S. Department of Education would announce, with great fanfare, that the official rate at which borrowers were defaulting on their student loans had reached a new record low (see here, here, and here).

Federal officials all the way up to the President would use this occasion to boast of their great skill in managing the federal student aid programs. At the same time, for-profit colleges, which experienced the most dramatic reductions in their rates, would present the results as evidence that they had overcome the problems of the past and were indeed faithful stewards of taxpayer dollars.

But as The Chronicle of Higher Education so ably documented in a set of articles this month, much of this progress has been illusory. The articles, written by my former colleagues Kelly Field and Goldie Blumenstyk, show "that the government's official 'cohort default rate,' which measures the percentage of borrowers who default in the first two years of repayment and is used to penalize colleges with high rates, downplays the long-term costs and defaults, capturing only a sliver of the loans that eventually lapse." Examining unpublished Education Department data, the Chronicle found that "one in every five government loans that entered repayment in 1995 has gone into default," and that the rate reached 40 percent for borrowers who had attended proprietary schools.

Meanwhile, the Chronicle's reporting also clearly shows that changes Congress made in 2008 to help the government more accurately measure the student loan default rate did not go far enough.

By Patrick M. Callan

As I wrote yesterday, President Obama’s target of global leadership in higher education attainment by 2020 is a credible goal. But without a broad political consensus supporting this goal and seeking to improve college access and completion state-by-state, new federal investments will not get us there. As is the case with other complex areas of domestic policy (e.g., public assistance, health care, public education, and energy), policy solutions that do not recognize and incorporate the roles of states, institutions, communities, and other stakeholders are unlikely to succeed. Federal programs are necessary but not sufficient for the magnitude of improvement that is needed in higher education.

What are some of the elements of a national policy that could significantly improve higher education access and attainment consistent with the Obama goal? This will require strategies that are national in scope but that build upon commitment and buy-in from the states and from colleges and universities, as well as from students and families. Substantial gains in high school graduation rates and in the preparation of students for college are essential. But these gains in elementary and secondary education will be insufficient. In forging a nationwide strategy for higher education, policymakers must:

By Patrick M. Callan

The importance of the recent federal legislation that shifted substantial public subsidies from financial institutions to college students should not be underestimated. But neither should it be thought of as more than a first step towards the restructuring of college financing that will be required if the nation is to significantly strengthen college access and affordability, close equity gaps, and raise national levels of educational attainment.

Because the “system” of public and private finance of higher education that served the G.I.s, the Baby Boomers, and their children is broken. The funding flows are unstable, the responsibilities of the partners are increasingly blurred, equity gaps persist, and students are leaving college with unprecedented levels of debt. The dysfunctional finance system accounts in part for the underperformance of American higher education as reported in the Measuring Up state and national report cards and in international comparisons. In my view, this underperformance is unlikely to be fixed unless the nation, the states, and our institutions of higher education reopen fundamental questions in a quest for a restructured policy and finance framework -- one that is national in scope and designed for the economy and demographics of the 21^st century, not the last one.

In December, the U.S. Department of Education’s Inspector General (IG) called on the Department to consider terminating the authority of the nation’s largest regional accreditation agency because it had accredited a major chain of for-profit universities despite findings that raised serious questions about the quality of training the institution was providing. Since then, officials at the Higher Learning Commission of the North Central Association of Colleges and Schools have been vigorously fighting back, arguing that the IG seriously misrepresented their actions.

At issue was the commission’s decision last May to give “full initial accreditation without limitation” to the Career Education Corporation’s American Intercontinental University (AIU) despite concluding that the school had significantly -- and, in the words of the commission’s reviewers, “egregiously” -- inflated the course credits it was providing to its large population of online students. The IG, in a blistering report in December, said that the agency’s action called “into question whether the accrediting decisions made by HLC should be relied upon by the Department of Education, when assisting students to obtain quality education through the Title IV [student aid] programs.”

In her official response, which the IG released this week as part of its final report on the case (starting on p.19), Sylvia Manning, the commission’s president, said she disagreed “profoundly with the conclusions drawn by the Inspector General’s team.” She particularly blasted the IG for suggesting that the agency had not placed “conditions and limitations” on AIU in reaction to the findings. Manning wrote that, among other things, the commission had required the school to conduct a self-study on the awarding of credit hours in preparation for a focused site visit from the agency in the 2010-11 academic year. The accreditor also required the institution to seek the commission’s approval before starting any new degree programs or sites. “These restrictions were intended to force change and to force it quickly,” she stated.

Career Education Corporation has, in fact, recently changed its policy, cutting the credits it awards for AIU's online classes in half – from 9 to 4.5 credits per course. This shows, she argued, that  “the Commission’s approach works":

The Commission’s evaluation team identified a significant problem with the awarding of academic credit in a small percentage of online upper-division courses offered by the institution. The team outlined a regime of monitoring to result in prompt remediation of the problem. A Commission evaluation team has been on campus this winter to ensure that prompt action is indeed being taken by the institution to ameliorate the problem. The online upper-division students of AIU attending an institution with a twenty-year history of regional accreditation will be benefiting from this change, which, with the Commission’s intervention, might not have taken place or at least not as quickly.

But the IG does not buy Manning’s explanation, and at Higher Ed Watch, neither do we.