A jury in Missouri last week awarded $13 million in damages to a former student of Vatterott College who claimed the for-profit institution had misled her, The Kansas City Star reported. The jury found that Vatterott, which is based in Missouri and owned by a private equity firm, gave inaccurate information about a health care degree program to Jennifer Kerr, a 42-year-old former student. Kerr was awarded $27,000 in actual damages, with the rest of the $13 million being "punitive damages," according to the Kansas City Business Journal. A statement from the college said: "We cannot comment on pending litigation. We are confident at Vatterott that our systems and admission processes are handled professionally. Our mission is to transform and better the lives of our students through quality, career education. We are proud of this mission and will continue to pursue it with professionalism and integrity."
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Senator Dick Durbin, an Illinois Democrat, was sharply critical of the for-profit sector during a hearing Wednesday of the Senate Appropriations Subcommittee on Defense. The hearing was on the U.S. Department of Defense's tuition assistance program for members of the U.S. military. Durbin, who has tangled with for-profits before, grilled Frederick Vollrath, the assistant secretary of defense for readiness and force management, over the Pentagon's oversight of the program. For-profits received half of the $660 million the federal government spent on military tuition assistance last year. Yet Durbin said only 200 department counselors are on hand to help the 200,000 military students who receive tuition assistance. And he said the department audits only 1 percent of participating colleges each year.
Western International University, a for-profit institution owned by the Apollo Group, has slashed its tuition by 51 percent. The university's bachelor's degrees, which are aimed at working adults, will cost $30,400. Master's degrees will be $11,950. Western, which enrolls 2,500 students, is also offering a "test drive" in which the first two online courses will cost $200 each. Several for-profits have cut prices recently amid slumping enrollments, including ITT Technical Institute and Strayer University.
The U.S. Department of Education plans this fall to begin a stand-alone round of negotiated rule making on "gainful employment" regulations, which would keep tabs on vocational programs at for-profit colleges and some nonprofit institutions. The department's plan to pursue a new set of regulations, given that a federal judge struck down the original version last year, is not a surprise. But in an announcement in the Federal Register this week, the Education Department said it planned to hold separate discussions on gainful employment this fall, rather than as part of a broader rule-making session that might also tackle fraud protection or state authorization of distance education.
The federal court ruled that the department had failed to adequately establish justification for the threshold it set for loan repayment rates. (The other standards dealt with debt-to-income ratios.) However, the judge said the department was on firm ground philosophically in its effort to regulate the return on investment of vocational programs. But the Obama administration appears to have chosen to take another run at crafting a new set of rules rather than trying to resuscitate the old ones in court.
Gainful employment was a long, bruising battle. For-profits and some Republican lawmakers had asked that a new debate over how to regulate vocational programs be folded into the renewal of the Higher Education Act, which is scheduled to expire this year. By pursuing a new round of rule making on gainful employment, the department appears to be continuing to focus primarily on for-profits , in contrast to proposed legislation that would scrutinize employment outcomes of higher education more broadly. The Association of Private Sector Colleges and Universities, the sector's primary trade group, issued a written statement saying it was disappointed by the prospect of a "repeated, faulty and confrontational process" on gainful employment. The department will select members of the committee, which is slated to meet first in September.
The Securities and Exchange Commission is investigating Corinthian Colleges Inc., the for-profit chain disclosed Monday in a corporate filing. In a subpoena, the commission requested documentation relating to student recruitment, attendance, completion, placement and defaults on loans, according to the company, as well as information about compliance with U.S. Department of Education financial requirements.
American Commercial Colleges, a for-profit higher education business in Texas, has agreed to pay the federal government up to $2.5 million to settle claims that it falsely certified that it was in compliance with certain requirements to receive federal student aid. A statement on the settlement from the Justice Department said that American Commercial Colleges had "orchestrated certain short-term private student loans" that the college repaid in order to appear to comply with the "90/10" rule. That rule requires that colleges seeking to participate in federal student aid programs receive at least 10 percent of their revenues from sources other than federal student aid. H. Grady Terrill, a lawyer for American Commercial Colleges, told The Lubbock Avalanche-Journal that he anticipated the institutions soon reapplying for authority to operate.
Alumni of the Thunderbird School of Global Management are protesting plans for the nonprofit business school to create a joint venture with for-profit Laureate Education. The joint venture would allow Thunderbird to set up programs at some of Laureate's network of campuses around the world. A petition signed by nearly 2,000 alumni says: "For-profit education may have its place, but it certainly does not align with the goals, culture or mission of Thunderbird. Furthermore, this selling out of the Thunderbird name will further dilute the brand, and as a result cheapen the value of the degree." The petition cites various investigations of for-profit higher education, and also questions why alumni were not consulted about the possible impact of the alliance on the reputation of their alma mater. Many of those posting comments on the petition cite concerns about for-profit higher education generally, not Laureate specifically, but argue that Thunderbird would be linked to the sector, not just Laureate. "When I tell people I got my M.B.A. from Thunderbird, I would like that to have meaning and not drawing comparisons to University of Phoenix," wrote one alumnus.
Thunderbird has created a webpage devoted to providing information about the collaboration and how it might help the institution. A spokeswoman said via e-mail that some of the criticisms of for-profit higher education made in the petition do not apply to Laureate. "We believe strongly that the Thunderbird-Laureate partnership is a strategic one that will enable Thunderbird to realize its academic mission while providing financial sustainability over the long term," she said. "The partnership with Laureate is a complex arrangement. We have been as transparent as possible about the partnership plans, within the constraints of the MOU. We look forward to sharing more information with our stakeholders, especially alumni, about the specifics of how this partnership will positively impact Thunderbird. We believe there will be even greater support when we are able to do so."
Capella University has received approval from its regional accreditor to proceed with a pilot program in competency-based education that does not rely on the credit hour standard, an approach called "direct assessment." The Higher Learning Commission of the North Central Association of Colleges and Schools approved the for-profit institution's "FlexPath" bachelor of science in business and master of business administration. University officials said the direct assessment tracks could reduce the cost of a degree and the time needed to complete it.
Historically black colleges urge Education Department to reconsider changes to some student loan criteria, and for-profit colleges and student advocates gear up for rewrite of "gainful employment" regulation.