A group of Democrats in the U.S. Senate sent a letter Friday to Education Secretary Arne Duncan and Internal Revenue Service Commissioner John Koskinen urging them to stop for-profit colleges from converting to nonprofit status.
Those colleges, they argue, are looking to evade federal income taxes, gainful employment regulations and the so-called 90/10 rule, which restricts for-profits from receiving more than 90 percent of their operating revenue from federal student loans and grants.
"These sham nonprofits make a mockery of traditional nonprofit governing and accountability structures with incestuous leadership arrangements, troubling debt structures, while continuing to make hefty profits for those in charge with questionable results for students," the senators wrote in a news release. "As the agencies responsible for granting nonprofit, tax exempt status and protecting students, the [IRS] and [Education Department] must work together to better assess these conversions based on the priorities and authority of both agencies."
The senators were spurred to action following a recent report from the Century Foundation's Robert Shireman, a former Education Department official who joined the foundation as a senior fellow. Shireman described how several for-profits became nonprofits, arguing that they did so to avoid federal regulations. He also wrote that the IRS and the Education Department haven't cracked down on these entities because of a "regulatory blind spot," so each agency assumes the other is doing the monitoring.
Delaware Senator Tom Carper, Ohio Senator Sherrod Brown, Illinois Senator Dick Durbin, Massachusetts Senator Elizabeth Warren, Rhode Island Senator Jack Reed and Connecticut Senators Chris Murphy and Richard Blumenthal signed the letter.
Submitted by Paul Fain on October 23, 2015 - 3:00am
Three Senate Republicans on Thursday wrote to the U.S. Department of Defense to question its recent decision to temporarily suspend the University of Phoenix's eligibility for military tuition benefits.
The Pentagon's sanction of the for-profit chain was due to allegations about Phoenix improperly sponsoring recruiting events and using the Defense Department's seal on commemorative coins. Newly enrolling students may not use military tuition assistance at the university. Roughly 4,000 Phoenix students currently receive the benefit, which active-duty members of the military are eligible to receive.
Senators John McCain, Lamar Alexander and Jeff Flake, all Republicans, wrote to Defense Secretary Ashton Carter, asking him to "examine and reconsider" the decision. They said the move was unfair and based on vague, technical violations the university has worked to fix. The senators also wrote that the Pentagon's sanction was motivated by partisan congressional critics of for-profits, and criticized that the Defense Department cited ongoing investigations of Phoenix by the U.S. Federal Trade Commission and California's attorney general as part of the justification for the decision.
"We strongly believe that these earned benefits and educational opportunities for our service members should not be jeopardized because of political or ideological opinions of some members of Congress regarding the types of institutions that provide postsecondary education to our troops," they wrote.
Submitted by Paul Fain on October 19, 2015 - 3:00am
ITT Educational Services will suspend new student enrollment at several of its 135 campus locations, including campuses in Wichita, Kans., and South Bend, Ind. The embattled for-profit chain, which is facing financial and legal challenges, has closed eight of its ITT Technical Institute locations during the last two years, according to ITT's national accreditor.
The company made the decision to temporarily supend a handful of locations based on its research about local market demands, said Nicole Elam, an ITT spokeswoman. The campus locations "undergoing market assessments" represent 3 percent of ITT's new student enrollment, she said. ITT enrolls roughly 50,000 students.
"There will not be any disruption to ongoing course work for continuously enrolled students as we will continue to teach classes for those students," Elam said via email. "Our primary focus is on our currently enrolled students at those campuses and providing them with the same level of service and education as they pursue their degrees."
The U.S. Securities and Exchange Commission this year charged ITT and its top two executives with fraud for allegedly concealing massive losses in two student loan programs the company backed. The Consumer Financial Protection Bureau has also sued ITT, and the U.S. Department of Education has begun more tightly monitoring the company and its finances.
Submitted by Ryan Craig on October 15, 2015 - 3:00am
Can you name 50 U.S. colleges or universities that (i) don’t carry the name of a state and (ii) don’t have a Division I football or basketball team? If you can, you’re an elite reader of Inside Higher Ed.If not, you’re probably suffering from myopia like the rest of us.
Myopia in higher education is the tendency to mistake elite institutions -- the Harvard of Love Story (or really the Harvard of any of Kevin Carey’s favorite films) -- for the whole of our wonderful, diverse system. But this is not the only form of myopia afflicting our sector.
Conventional wisdom on postsecondary education says that the entire enterprise is indistinguishable from the work of colleges and universities. However, a recent report by Tony Carnevale and the Georgetown Center on Education and the Workforce serves as a corrective lens: colleges and universities represent $407 billion of the $1.1 trillion spent on postsecondary education and training, or only 37 percent of the total.
On the other hand, spending on training provided by employers is nearly 50 percent greater than all college and university spending. And broken down by age group, while colleges and universities dominate total postsecondary spending for young adults, they account for less than a quarter of total spending on adult education and training.
College and University Share of Total Spending on Postsecondary Education
It appears as if higher education is suffering from double myopia: the first misconception of the system is mistaking elite universities for all colleges and universities. The second is mistaking colleges and universities for all postsecondary education.
As we refocus our vision, the next big opportunity for growth in education may not be in attempting to “do college better,” but rather found in the yawning gap between what we typically conceive as postsecondary education and the world of work.
U.S. employers are developing a global reputation for wanting the perfectly qualified candidate delivered on a silver spoon -- or they won’t hire. As Peter Capelli of Penn’s Wharton School astutely notes, “Employers are demanding more of job candidates than ever before. They want prospective workers to be able to fill a role right away, without any training or ramp-up time. To get a job, you have to have that job already.”
He calls it the “Home Depot view of the hiring process,” where filling a job vacancy is “akin to replacing a part in a washing machine.” The store either has the part, or it doesn’t. And if it doesn’t, the employer waits. The result is that while there are over eight million unemployed workers, we have over five million unfilled jobs, and perhaps as many articles featuring employers whining about unprepared workers.
In his wonderful monograph “Why Good People Can’t Get Jobs,” Capelli says we have a “skills standoff,” with employers dissatisfied with the level of new hire preparation but unwilling to provide training or otherwise engage in skill-building activities with candidates. One major reason? Employers don’t want to risk investing in employees who may leave the company soon after.
And so the supposed skills gap is a byproduct of a trust gap. How can we get employers to trust new hires and engage in training and skill building? Likewise, how can we get candidates to invest in their own skill building -- perhaps even skill building specific to an employer -- so that employers find the “right part in a washing machine”?
Bridging the skills gap is not work that employers are prepared to do. In response, over the past several years we have seen a variety of intermediaries emerging at the intersection of higher education and the labor market in an area we call pre-hire training.
Some focus solely on training. Some focus on training and placement or matching services. Others focus solely on matching candidates with employers. In terms of revenue, some seek revenue from job seekers. Others generate revenue from employers. Still others attempt to charge education providers. The result is a matrix that looks something like this:
While these pre-hire training companies are diverse and include boot camps, online training providers, employment brokers, staffing companies, e-portfolio providers, and competency and credentials marketplaces, what they have in common is the following:
Pre-hire training is skill specific and often employer specific.
Employers are not asked or expected to bear the cost of pre-hire training, or engage in any way until candidates are trained. Rather, the cost of pre-hire training is borne by the candidate or the intermediary. (Even when the intermediary bears the cost of the training, the candidate hasn’t been hired yet, so the employee has skin in the game.)
Once intermediaries are successful in aggregating a pipeline of qualified candidates for employers, employers jump in with both feet and are willing to compensate intermediaries for producing employees who will be productive from day one as well as engage in developing and improving training curricula.
Fast-growing pre-hire training intermediaries like Galvanize, eIntern, Credly, ProSky and Portfolium are establishing structures and programs that encourage employers and candidates to trust one another. For example, pre-hire training companies that are confident in their ability to train and place candidates, and thereby attract employers, can guarantee some outcome to candidates to bring them in the door in the first instance. This could be a guaranteed interview, or even a job guarantee if they successfully complete the pre-hire training.
While some of this should be the province of colleges and universities, much of it won’t be. Higher education institutions should be in the business of equipping students with general skills like coding or reading a balance sheet -- tangible skills that are directly relevant to thousands of workplaces across the country.
However, I don’t see colleges and universities involved in matching students with employers at the level of the competency -- a proposition that requires institutions to assess students’ competencies and then match, rather than simply arranging job fairs and interviews. Nor do I see institutions engaging in employer-specific training on products, systems and process, so new hires can hit the ground running like an experienced employee. When we get beyond skills-based training to matching students with employers, intermediaries aggregating candidates from multiple institutions and providing matching and training services for multiple employers will be much more productive for students and employers than a single institution: scale matters.
Many institutions (and their students) will benefit from partnerships with these intermediaries. By connecting students with employers, students will have a better sense of the placement and salary outcomes from their program of study. But colleges and universities need to be prepared for the consequences: higher ROI programs will benefit at the expense of low ROI programs; shorter, less expensive programs with credentials that clearly convey competencies are likely to flourish.
The impact of this new generation of pre-hire training companies on students and employers is likely to be more profound. They will provide employers with visibility into a deep pool of future talent, along with the means to engage and attract this talent. And they will provide students with a much clearer road map of the education and training required in order to be considered by employers of choice. While our vision now is still quite cloudy, pre-hire training companies have the potential to restore it to 20/20, and dramatically improve the efficiency of our labor and postsecondary education markets.
Ryan Craig is managing director of University Ventures, a fund focused on innovation from within higher education.
Submitted by Paul Fain on October 9, 2015 - 3:00am
The U.S. Department of Defense has suspended the University of Phoenix's participation in the federal tuition-assistance program for members of the U.S. military, the for-profit chain's holding company disclosed in a corporate filing. A Defense Department website said the University of Phoenix is on probation.
The sanction appears to be related to allegations about the for-profit chain paying for preferential recruiting access to veterans and service members. The nonprofit Center for Investigative Reporting published an article in July asserting that Phoenix has paid the U.S. military $250,000 over the last three years to sponsor 89 recruiting events, including concerts, a chocolate festival and a fashion show. The center also reported that Phoenix produced a commemorative coin, which it distributed on military bases, that included the Defense Department's seal.
The Defense Department's inquiry also cited investigations of Phoenix by the U.S. Federal Trade Commission and California's attorney general. Those investigations, both of which revolve around student recruiting and marketing, are still ongoing.
Apollo Education Group, which owns Phoenix, said it had fixed its military student-recruiting compliance issues and that the Defense Department had acknowledged that corrective action.
“The university intends to continue its cooperation with federal and state agencies to respond to their requests. We will continue to hold ourselves to the highest standards of accountability, transparency, ethics and compliance," Timothy Slottow, Phoenix's president, said in a written statement. "The Department of Defense in its letter acknowledged the corrective actions taken by the university to date. University representatives had been working closely with DoD leaders and we all expected a different response from DoD.
"It is troubling that the DoD has used requests for information from other governmental agencies as grounds for placing the university’s DoD MOU in a probationary status. At this time, the university will not accept new students who wish to use Tuition Assistance Program funds.”
Roughly 4,000 Phoenix students receive military tuition assistance, Apollo said, accounting for about 1 percent of the university's revenue.
Senator Dick Durbin, the Illinois Democrat, praised the Defense Department's decision to put Phoenix on probation, which he said would prevent the university from enrolling new service members under the tuition-assistance program. Durbin called for an investigation of the university based on the center's reporting. “This is a decisive action by the Department of Defense to protect service members and taxpayers from a company that offers degrees of questionable value,” he said in a written statement.
Submitted by Paul Fain on October 6, 2015 - 3:00am
A new report from the Century Foundation questions the legitimacy of four former for-profit colleges' recent transformations to nonprofit status. Those institutions are "covert for-profits," according to the report, "where owners have managed to affix a nonprofit label to their colleges while engineering substantial ongoing personal financial benefits for themselves."
The report's author is Robert Shireman, a former U.S. Department of Education official who recently joined the foundation as a senior fellow. The report said several for-profits have sought to become nonprofits to avoid federal regulations, some of which Shireman worked to create. By using public information requests, Shireman wrote case studies about the conversions of Herzing University, Remington Colleges Inc., Everglades College and the Center for Excellence in Higher Education (CEHE).
All four of the institutions signed contracts committing them to pay their former owners hundreds of millions of dollars, the report found, while those former owners remain involved in the governance of the nonprofits. For example, Keiser University told the IRS that neither its founder, Arthur Keiser, nor his family members would receive any "nonincidental private benefit attributable" to the newly nonprofit Everglades College. Yet in 2011 Everglades paid more than $34 million to entities owned by Keiser's family members.
Despite what Shireman called the "egregious" examples of covert for-profits, the IRS and the Education Department have failed to crack down. The reason, he said, is a regulatory blind spot where each agency assumes the other is doing the monitoring.
The company also announced Friday that it has become a public benefit corporation. That switch means the company remains for-profit but legally is allowed to focus more on activities that aren’t related to boosting its profit margin. The process requires companies to alter their governance structures. Another for-profit chain, Rasmussen College, made the same change last year.
Becker explained the decision in a written statement:
“Most of our operations are outside of the United States, where there are many barriers that inhibit participation in higher education. We committed ourselves to overcoming these barriers in order to expand access. For a long time, we didn't have an easy way to explain the idea of a for-profit company with such a deep commitment to benefiting society. In 2010, we took notice when the first state in the U.S. passed legislation creating the concept of a public benefit corporation, a new type of for-profit corporation with an expressed commitment to creating a material, positive impact on society. Our public benefit is firmly rooted in our belief that when our students succeed, countries prosper and societies benefit.”
Oscar Braynon II, a Florida state senator who is expected to become leader of the Senate Democrats next year, recently urged Florida’s Board of Physical Therapy to continue to allow colleges to operate unaccredited physical therapy programs, The Miami Herald reported. While some believe such programs lack appropriate oversight and may be of poor quality, Braynon spoke of the importance of preserving them.
While addressing the board, Braynon didn't reveal that he is senior vice president of government and senior relations at a for-profit college, the University of Southernmost Florida. And that college announced, shortly after Braynon's appearance before the physical therapy board, that it is launching a physical therapy assistant program that is just the kind of program Braynon was lobbying to preserve. Braynon told the newspaper that he was unaware of the college's plans to start the program.