Robert S. Eitel is working as a special assistant for Education Secretary Betsy DeVos while he is on unpaid leave as vice president for regulatory legal services at Bridgepoint Education Inc., The New York Times reported. It is not uncommon for some people with experience in the for-profit sector to take positions in the Education Department, but it is unusual for this to take place while they are on leave. A department spokesman said Eitel would recuse himself from any questions about Bridgepoint.
The U.S. Department of Education this week released the annual update of its financial responsibility test scores for private colleges, which is based on data from 2014-15. The 187 institutions that have a failing score -- most of which are small and either private nonprofit or for-profit -- will lose access to federal financial aid without a provisional certification from the department. The department may also require colleges with low or failing scores to take out a letter of credit or be subject to a sanction called heightened cash monitoring.
The test was designed to keep tabs on the fiscal stability of colleges, with an eye toward preventing financial aid from going to institutions that may shut down abruptly. For example, Dowling College, which shut down last year, has a failing score on the new list.
However, many private college officials have for years criticized the department's methodology for the test. They say the scoring system fails to use generally accepted accounting practices, is backward looking and does not capture the complexity of a college budget. For example, a decline in a college endowment's investment value is counted as an operating loss.
The department's Office of Inspector General recently agreed with some of that criticism, noting in an audit released last week that the test's methodology should be improved.
The U.S. Department of Education on Monday announced roughly three-month delays to deadlines for colleges to submit appeals or public disclosures under the gainful employment rule, Obama administration performance standards for the ability of graduates of vocational programs to repay their federal student loans.
The rule applies to for-profits and nondegree programs at community colleges and other nonprofit institutions. Congressional Republicans and the Trump administration have signaled that they will seek to roll back gainful employment.
The department's announcement this week means colleges have until July to submit appeals to academic programs' debt-to-earnings ratios. The deadline had been this month. Likewise, colleges will have until July to meet a previously set April mark for updating their public disclosures for 2017 rates. The Obama administration in December had announced a delay to a template for programmatic disclosures under the rule.
The Trump administration's Education Department said in a written statement that it decided to make the new delays to "allow the department to further review the gainful employment regulations and their implementation."
The Dream Center Foundation, a religious missionary organization based in Los Angeles, plans to buy EDMC, a struggling for-profit chain that enrolls 65,000 students. The resulting nonprofit college group will be secular.
Timothy Slottow, president of the University of Phoenix since 2014, has announced plans to step down, citing personal reasons.
Phoenix raised eyebrows with its hire of Slottow away from his post as executive vice president and chief financial officer at the University of Michigan. In an internal message he sent last week to Phoenix employees, Slottow said family challenges, including the recent death of his father-in-law, demand "my commitment and attention be devoted closer to home, with my wife, children and wider family."
Last month a group of private investors bought the university and its ownership company, the Apollo Education Group, for $1.14 billion.
When people talk about for-profit colleges, they often do so with disdain. If you are concerned about vulnerable people making expensive educational decisions with little information, then you might disdain the “predatory” for-profit schools. If you think that a strong work ethic can trump all manner of troubles, you might disdain the “weak” people who go to a “predatory” school. What is interesting to me is how much disdain is spread among students and schools and how little disdain there is for labor markets.
More than any other kind of college, for-profit colleges are judged by their ability to get their students jobs. And, given their high dropout rates and poor job-placement rates, we often blame them for what are, in fact, labor market failures.
Today’s lingo to describe how we work is “the new economy.” This new economy has produced a new breed of for-profit colleges that constitute a parallel education universe I have dubbed “Lower Ed.” Unlike the mom-and-pop for-profit colleges of yesteryear, these for-profit colleges are massive corporations and have generated billions of dollars in advertising revenue for broadcast and digital media. From the start, they were quite clear with investors and regulators that their market niche was contingent upon deteriorating labor market conditions. Poor labor market outcomes for their graduates (and nongraduates) are part of their business plan.
Job data has become the grounds on which we not only judge the quality of for-profit colleges, but also wage regulatory battles on behalf of the public (consumer) good. Some of this emphasis is due to how we regulate for-profit colleges. The job-placement data is part of the federal gainful-employment regulation that, to summarize, says programs that advertise as pathways to jobs must actually lead to said jobs and provide job-placement data to help students make good choices about their education.
For-profit colleges spend a lot of money pushing back on gainful-employment regulations. Yet through interviews with for-profit college executives, I have discovered that gainful employment is treated more like an unavoidable cost of doing business than the heated political rhetoric would suggest. As one vice president of a national shareholder chain told me with a sigh, “Well, gainful employment is the cost of dealing with the feds.”
The public fights over job-placement data and gainful-employment regulations keep lots of people in business. Politicians look tough when they issue a statement in favor of gainful employment. Regulators relish press releases of cases filed against predatory for-profit colleges based on job-data manipulation. For-profit colleges look like they’re being led by the U.S. Department of Education to add a layer of expensive regulatory compliance against their will. They write to their investors and financial regulators about the “necessary requirements” of complying.
But does regulating job-placement data and gainful employment protect the public interest amid the turmoil of the new economy? It is hard to see how it does. The premise is simple: data makes for better choices. But this assumes that better choices are available, and I’m not sure that they are.
Consider Janice, a 28-year-old black registered nurse who worked in a hospital and enrolled in a for-profit college bachelor’s program. Janice was caught in the middle of a professionalization shift among nurses. Whereas the field had formerly only required a post-high school certificate in nursing, it was increasingly more common to earn a bachelor’s degree in nursing.
That kind of professionalization and educational inflation falls under the “declining internal labor markets” rubric of the new economy. Unlike in the past, when experience and subsequent licensures might be obtained through an employer -- in this case, a hospital -- the expectation now is that workers will increase their human capital at personal expense to “move up” the professional ladder. Janice’s choices for promotion were limited: she could hope for favorable reviews from a sympathetic management culture (a risky proposition) or earn a bachelor’s degree in nursing.
Janice described her workplace culture to me as one where people formed alliances with people who were similar to them. That meant the white nurses congregated with each other at work and sometimes socially. They attended the same nursing program and shared a common knowledge base, all of which felt like a form of exclusion to Janice.
Janice only indirectly attributed this dynamic to race, a distance that is probably similar to how that exclusion feels: ambivalent and hard to identify, but easy to feel. It could be about race only to the extent that so few black R.N.s had their bachelor’s degrees in nursing or had gone to the same nursing program as the nurses who had more management power. And that dynamic could be about race only to the extent that one might be less likely to have the financial means to enroll in the competitive nursing program. Because the program is one of the only ones in the local area to offer the degree, it is routinely at capacity. That means one could apply and be on a waiting list for a year or longer.
Janice felt that she couldn’t afford that kind of time off from greater earnings or promotability. Her ability to “afford” time could be about race and certainly about class and was likely about how all of those are always interacting at the same time. For Janice, time and access were expensive in ways that the debt she incurred attending a for-profit degree program in nursing was not.
Janice’s “choices” were instructive. In fact, of the 109 students formerly or presently enrolled in for-profit colleges that I interviewed between 2011 and 2015, no one talked about the context of their college choices in ways that would suggest that more accurate or clear job-placement data would have changed their circumstances or decisions.
Instead, they talked about a credential as insurance against risks they could not continue to bear alone. JJ, a military veteran at a for-profit college, was particularly exasperated by the nonchoices available to him. Community college was infantilizing. Traditional four-year colleges were impractical. Why should people who have served their country have to “start over,” was the gist of his argument.
I’ve led grown men in the battlefield. I’ve managed over $1.5 million of mission-critical assets at any given time. I’ve taken weeks strait [sic] of leadership development courses. I’ve been directly responsible for soldiers’ lives. I needed a piece of paper that would translate my expertise to employer terms.
What JJ really needed was to not need a credential at all. It was only when the conditions of the labor market devalued his and Janice’s experiences that they considered college. Job statistics won’t change the conditions of the labor market for people.
A Negative Social Insurance Program
Political wrangling over job statistics looks like action, but it is mostly a distraction. Sociologist David Brown has shown that credentials can be created without jobs to justify them. We produce risky credentials when how we work changes dramatically, and the way we work shapes what kind of credentials we produce. If we have a shitty credentialing system, in the case of for-profit colleges, then it is likely because we have a shitty labor market.
To be more precise, we have a labor market where the social contract between workers and the work on which college has previously relied has fundamentally changed and makes more workers vulnerable.
Substantial evidence suggests all of the changes have shifted new risks to workers. Employer tenure for young workers has dropped at the same time that part-time and temporary work has increased, meaning many workers expect to change jobs more frequently. Essentially, their employment is constantly temporary. As the rhetoric goes, the new economy values knowledge workers with cognitive skills, and degrees represent those kinds of skills. If that’s the case, the new economy has shed high-paid but low- to midskilled cognitive work in favor of high-skilled labor and low-wage, low-skilled labor. The best-case scenario proposes that this is a decade-long labor-market correction. The labor market will catch back up and millions will find themselves back in “middle-skill” jobs with middle-class wages and work conditions.
In this best-case scenario, workers have taken on debt waiting for the market to correct itself. Depending on the kind of debt and who took it on, it’s either manageable or crushing. And for the most vulnerable workers, the only way to remediate some of that debt is to accrue more of it by going back to school. If for-profit colleges like ITT are no longer around, then another form of short-term, on-demand credentials will respond to consumer demand by extracting profit from student loans and education savings accounts.
It is not an accident that financialized shareholder for-profit colleges expanded in the 2000s. Changes in how we work created demand for fast credentials. The federal student aid system made those credentials “cheap,” in the sense that students do not pay much for them up front. The new economy, by all accounts, will require all of us to maintain near-constant skills training so as to be employable and put a far greater onus on individuals to extend their education.
So far, our policy has been to rely on the student loan system to finance that onus. To the extent that has fueled for-profit colleges, our government response has positioned them as social insurance against labor-market innovation (or disruption, depending on your perspective). Let me be clear: these are all conditions that are expected to sustain, if not accelerate, individual costs for job retraining repeatedly over the working life course.
Our national response has been to increase public money to private profit-extraction regimes. That is, in effect, a negative social insurance program. Whereas actual social insurance, like Social Security, protects citizens from the vicissitudes of predatory labor-market relationships, negative social insurance does not.
A negative social insurance program positions private-sector goods to profit from predictable systemic social inequalities, ostensibly for the public good. How did for-profit colleges define their market? They said that greater inequalities in secondary schooling produced demand for higher education without a viable means for millions of people to attain it. They said that employers were less interested in providing in-house corporate training and more desiring of credentials to certify work experience. They said that the military and other public-sector employers were shedding jobs. These aren’t secrets.
If the new dominant work arrangement divests employers of the cost for their employees’ training or certification, workers will pursue certification and credentialing schemes. If we know the cost of those schemes is primarily funded through taxpayer-supported federal student aid programs, then we already have a mechanism for providing social insurance. But when we facilitate spending that benefits institutions that maximize cost to extract profit, we have perverted the public-good mission of social insurance.
Early in 2016, I attended a conference where people in education technology offered everything from online platforms for massive open online courses to financing schemes to help people borrow private money for short-term coding boot camp courses. In their presentations, they depicted a future of work where employers couldn’t find enough “on-demand,” “skilled” labor for “the jobs of the future.” They showed earnings gaps between those with credentials and those without. They described how inefficient graduate programs at traditional universities are because they ramp up too slowly, cost too much and take too long to finish.
Yet we know that tech jobs are disproportionately filled with white and Asian men and that the tech industry has demonstrated problems hiring and promoting women and ethnic and racial minorities. Like the early days of for-profit colleges’ Wall Street era, the new credentialism promises credentials in high-wage, high-demand jobs that have statistical discrimination baked into them.
New institutions and new credentials are by definition lacking in prestige, the kind of prestige that lower-status workers and students need for their credential to combat discrimination in the labor market. Opening the federal student aid spigot without paying attention to how this ends for the poorest makes us all vulnerable. And turning on the spigot is precisely where we seem to be going.
In 2015, the Education Department launched a pilot program to help people like those boot camp coders use federal student aid money to pay for their programs. Organizations that participate in the program could apply for a special waiver of regulatory and statutory requirements usually associated with gaining access to federal student aid. They didn’t have to offer a degree or a certificate, usually defined by some standard credit hour of attendance, or be accredited. This program -- the Educational Quality Through Innovative Partnerships (EQUIP) -- is said to encourage and reward “entrepreneurialism” in the higher education sector. The impetus? The jobs of the 21st century need mobile workers with specialized skills that employers will not pay for. It is the same pitch that shareholder for-profit colleges made to investors in the 1990s.
The proposed future of higher education looks a lot like the start of the Wall Street era of for-profit college expansion: occupational credentials in narrow fields, paid for through public financing schemes that start with exemplars of high-status white men in high-pay jobs and offer little hope for anyone else. By 2016, we knew how this ended for shareholders of for-profit colleges, but we’ve not yet fully counted the social cost. Meanwhile, one wonders how high student loan defaults, constrained choices, predictably poor job outcomes and negligible upward social mobility for those trapped in Lower Ed serve the public good.
After a slow drip of news about a higher education task force to be led by Liberty University President Jerry Falwell Jr. -- with Falwell himself the source -- Senate Democrats are demanding details from Education Secretary Betsy DeVos.
Falwell has said in interviews that the task force would re-evaluate "overreaching regulation" by the federal government in areas such as accreditation, student recruitment and loan discharge for defrauded students. The Senate Democrats who signed a letter to DeVos -- Elizabeth Warren of Massachusetts, Patty Murray of Washington, Richard Durbin of Illinois, Sheldon Whitehouse of Rhode Island, Tammy Baldwin of Wisconsin and Maggie Hassan of New Hampshire -- said those regulations provide important protections for students. And they told DeVos that a task force without a diverse membership could tilt its recommendations toward the interests of colleges and universities that receive large taxpayer subsidies.
Falwell's own financial interest in regulation of higher education also concerned the Democrats. Last year Liberty University took in $766 million in revenue from federal Title IV aid and was the third-largest recipient of federal student loans in the country, they wrote.
The senators asked DeVos to provide by March 9 answers to a number of questions about the task force, including the mission and scope of the task force as well as the process for identifying prospective members.
Falwell himself has said in recent comments that he has not had discussions with the Trump administration about the specific aims of the task force.
Submitted by Paul Fain on February 23, 2017 - 3:00am
Career Education Corp. on Wednesday announced that it had settled a false claims lawsuit with private plaintiffs. The suit against the for-profit chain and its American InterContinental University was originally filed in 2008.
The federal government declined to intervene in the case. However, Career Education said it would pay the United States $10 million under the terms of the settlement. Under a separate settlement, the company said it would pay $22 million to the lawyers who represented the plaintiffs.
Career Education did not admit to any violations of law or liability under the settlements.
"[B]y eliminating the distraction caused by this lawsuit, the company’s management can provide more attention to the company’s core operations and its goal of enhancing retention and outcomes for its students," Career Education said in a corporate filing.
College students have particular reason to be concerned about the hostility toward the CFPB, given how effective the agency has been in solving their problems with debt. But taxpayers should be alarmed, too.
One of the vulnerable populations receiving special attention at the agency, college students over the past several decades have experienced increasing financial barriers to their educational paths, despite our intent to remove those barriers. To ensure that all qualified students get the education that we want them to pursue, we, the taxpayers, support the federal financial aid programs by spending $128 billion on them in 2015, not to mention spending billions more to fund public institutions in every state.
Despite that support, student debt remains a huge obstacle for graduates. Sixty-nine percent of college students are graduating with an average of $28,950 in debt. This debt is a drag on individual borrowers, who will see a decrease in their lifetime savings as their money is spent paying down educational debt. It has also become a drag on the economy as a whole, as borrowers put off purchasing a home and starting a family until they achieve the firmer footing we hoped they’d have at graduation.
These problems stem from shrinking state budgets for education and grant programs that don’t keep pace. But they are exacerbated when students lose even more money to tricky financial products and predatory lending schemes that are marketed right on campuses.
During the financial crisis, 67 percent of students reported being stopped on campus to be offered a credit card application. Often, these offers were accompanied by freebies -- pizza, a tee shirt or even a chance to get an iPod -- if the student just applied. Unfortunately, the rates paid by those with the worst credit, such as traditional-aged students with their spotty to non-existent credit histories, were upward of 20 percent, plus an additional 23 percent in fees on their balances. Now, the CFPB is the leading watchdog of the campus credit card marketplace, conducting a bi-annual survey of the trends on campuses.
Students, as the captive audience they are, have become targets for higher-priced private loans than what they can get on the open market. In 2007, then-Attorney General Andrew Cuomo found that students and families were assuming pricey private loans because their college aid offices, enticed by banks hoping to gain more federal loan customers at the institutions, were pushing them over other products, sometimes even including loan offers in aid awards. CFPB generates an annual report on the private loan marketplace to Congress, highlight the troubling developments.
Also, in 2009 the for-profit chain Corinthian Colleges revealed to investors that it would issue $130 million in private loans for the year to its students, even as it admitted its students wouldn’t be able to repay them. Now, CFPB has specific authority to investigate deceptive lending practices on campuses, which has led to lawsuits against prominent for-profit college chains such as ITT Tech, Bridgepoint, and Corinthian. For instance, it won $480 million in relief for borrowers at Corinthian schools, who were tricked into assuming private loans that carried interest at almost 10 percent.
And recently the agency announced a lawsuit against Navient, the student loan servicing giant formerly known as Sallie Mae, which services 12 million borrowers. The lawsuit alleges that the firm cheated borrowers out of their right to lower monthly payments and lower interest accrual by downplaying enrollment and renewal deadlines for those programs.
These problems are especially outrageous on two fronts. First, they undermine the ability of students to get an education. Second, they devalue the investment that taxpayers have made in our college students, as our financial aid dollars end up flowing away from the students we aim to help, and toward predatory lenders that are breaking the law.
As over 50 student and consumer and educational groups declared in a recent letter to Congress, neither students nor taxpayers should have to tolerate these problems. Now is not the time to render ineffective the agency that is stepping in on our behalf.
Christine Lindstrom is the higher education program director for U.S. Public Interest Research Group student chapters.