Monitoring the For-Profits

September 10, 2010

The U.S. Department of Education and -- possibly -- Congress are getting tougher on for-profit colleges, but the question of who enforces existing laws and regulations, let alone new ones, remains unanswered.

The Education Department has promised to step up its monitoring of financial aid issues involving for-profits, with plans to add staff to its investigative teams; other federal agencies, like the Securities and Exchange Commission, may get involved. Under pressure from the federal government, regional accreditors, in particular, have begun looking at for-profit institutions with a more critical eye than they did in the past, but maintain that their focus is on quality assurance and not consumer protection.

Neither set of agencies, which together are two of the three legs supporting the stool of postsecondary regulation, says it is willing or able to be the beat cop, so instead they point to the third leg: the states.

The only problem is that the states have never been required to take on great authority in authorizing for-profit colleges. Many do little more than give institutions a rubber stamp to operate as businesses. Others have agencies that approve new campuses and programs, and that investigate complaints, but even some of these stronger agencies say they don’t have the wherewithal to keep as close a watch on institutions as they’d like, let alone to enforce as they’d wish.

Wisconsin has one of the stronger agencies: the Educational Approval Board, headed by David C. Dies, a national voice in state regulation of postsecondary education. The agency is responsible for evaluating and approving new for-profit programs and institutions that operate in Wisconsin. Regulators visit institutions annually to monitor their compliance with state law, but the primary mission of their visits is "to assist the institution in strengthening its capacity to improve its internal processes, feedback loops and evaluation systems," according to the agency's website. The agency also serves a consumer protection role as an investigator of student complaints about for-profit colleges in the state.

“We’re not well-positioned to get multistate institutions to make changes,” said Dies, a former president of the National Association of State Administrators and Supervisors of Private Schools, which represents regulators in 28 states. “Corporate oversight doesn’t square too well with state oversight. We may be asking for one thing and another state may be asking for something different and other states where that company operates may not care either way.”

State governments, said Alan L. Contreras, administrator of the Oregon Office of Degree Authorization, “are really the only places that have a regular, ongoing enforcement apparatus that gets down to, in many cases, the program level.” It’s that kind of thinking that has the U.S. Department of Education on the verge of publishing final regulations requiring states to play a more active role in authorizing and reviewing postsecondary institutions.

Because states “have historically played a somewhat minor role” in regulating postsecondary institutions, Dies said, agencies like his that largely serve a consumer protection function for students at for-profit colleges have struggled to keep up with the sector’s dramatic growth.

Since 2000, the agency has gone from monitoring 100 campuses to more than 150, but has five staffers -- Dies, three consultants who visit campuses, and an administrative assistant -- just as it did a decade ago. Though it’s self-funded, the agency was still required to cut its budget during recent tough financial years, he said. “There’s this growing demand, a growing need for more and more regulatory oversight, but now we’re going to cut your budget even though you had the money to pay for additional staff.”

In other states, like Iowa, home to Sen. Tom Harkin, the Democrat who, as chair of the Health, Education, Labor and Pensions Committee, is leading the charge to question the sector, for-profit colleges are required only to register with the secretary of state. In California, policy makers and consumer advocates grappled for years over the role of state regulators -- a debate that left the state without a functional agency to approve new for-profit colleges from mid-2007 through the start of this year.

While the department has long considered the role of states in approving postsecondary institutions to be “minimal,” officials wrote in the preamble to June’s notice of proposed rule-making that “[u]pon further review, we believe the better approach is to view the State approval to offer postsecondary educational programs as a substantive requirement where the State is expected to take an active role in approving an institution and monitoring complaints from the public about its operations and responding appropriately.”

That regulatory vacuum is, in large part, what led the department to initiate its push to create new regulations on state authorization of institutions, through a negotiated rule-making process that started last year and is set to result in the publishing of final rules by Nov. 1, which would go into effect on July 1, 2011.

Patrick J. Sweeney, one of the three consultants who works for Dies in Wisconsin, said states need greater support from the Education Department and accrediting agencies to be able to take on a greater role policing for-profit colleges. “It can’t be three independent silos standing out there; we need to work with them, and get their support a lot more than we have in the past.”

At this point, Dies said he is doubtful that most states “have sufficient firepower to deal with these entities,” referring to companies that operate for-profit colleges in multiple states. “We certainly don’t.”

How One State's Regulators Work

It’s not quite a battle of David and Goliath -- because states wield the power to say no to a for-profit hoping to open new programs and campuses -- but Dies said his agency is often outmatched. “The size of regulatory agencies like ours means we don’t have a lot of leverage,” he said. “I don’t have a counsel -- I have to go to the state attorney general’s office when I have questions…. But when we meet to discuss an issue at a college, the for-profits come in with their CEO and four, five, six people, most of them lawyers.”

Accreditation teams generally visit each campus they approve only once a decade, and Education Department reviewers are even more infrequent in their visits, but agencies like EAB continue their “touch of [colleges] in a real way” with far greater regularity, said Sweeney. “We see the problems somewhere, let the institutions know they exist and ask for them to change their practices. We can see if they really did what they said they would do or if they make some progress and then go back on it.”

The EAB has “a range of sanctions that are open, from a corrective action plan to suspending new enrollment” when a consultant identifies problems at an institution, Sweeney said. “And we have the extreme remedy -- to pull the approval.”

But the agency rarely gets that tough with institutions. “In reality, when you have several hundred students at an institution, to teach that out, to make people whole would be a nightmare,” he said, “so you work with an institution in a collaborative way for quality improvement over time.”

In 11 years, Contreras, of Oregon, has closed only a handful of programs. “If the agency should focus on what’s best for students, it’s rarely best to shut a program down unless it’s really god-awful,” he said.

Sweeney visited the University of Phoenix’s Wisconsin campuses in 2004, 2006, 2007 and 2009. In its visits, the EAB focused its attention on the institution’s efforts to improve -- creating “Graduation Teams” at each campus, changing sequencing of math and writing courses, creating “Student Success Centers” and introducing tutoring sessions led by course instructors.

During the EAB’s earliest visits, the Graduation Team structure was still in its infancy, but in March 2007, Sweeney met with a Graduation Team -- a functional set of enrollment, academic and financial aid counselors -- whose members worked together to serve students on the ground level at a campus and was relatively satisfied with what he saw. Less than a year later, though, Phoenix changed its advising structure, placing academic and financial counselors at a call center in Kansas, a transition intended “supposedly to provide students better access to more knowledgeable counselors,” Sweeney wrote in an October 2009 letter sent to Phoenix’s Wisconsin campus directors and its corporate counsel.

The change in how advising worked, Sweeney found in interviews with students in 2009, led to “poor customer service, with calls not being returned, staff changes being made, and academic counselors often not being helpful at solving course and degree programs,” he wrote in his letter. Students said they did not have a clear path to graduation, despite the Graduation Team website’s promise of the help of an academic adviser in “map[ping] out your entire program path, including the exact date of your graduation.” Even after reaching upper-level courses, students told Sweeney, they still often struggled to project their graduation dates.

The whole experience was frustrating, Sweeney said. “We’ve been trying for years to promote quality, to get [Phoenix and other for-profits in the state] putting data out, talking to their consumers and being honest and forthright,” he said. “It felt like they betrayed everything.”

His options for how to respond are limited. “What do you do -- hit ’em with a bigger stick?” he said. “If you beat people over the head all you get is resentment.”

Sweeney also identified issues with recruitment. Students told him that enrollment counselors “did not give a realistic picture of how difficult and academically rigorous it was to obtain a Phoenix degree given the accelerated courses.” In many instances, he said, enrollment officers gave students “unofficial” estimates of how many credits they would get for prior learning that were often more generous than the “official” assessments, meaning that students had to spend more time and money than they had anticipated when enrolling.

Manny Rivera, executive director of public affairs for Phoenix parent company Apollo Group, said the university “maintain[s] a close working relationship with each of our regulators, including the Wisconsin Education Approval Board.” Phoenix responded to Sweeney’s letter, Rivera said, and the EAB deemed the issues resolved in December.

Sweeney said he’s not philosophically opposed to for-profit colleges but finds the business model -- relying on constant growth in the number of new enrollments -- contradictory to the mission of serving and educating students. But the issues he identified involving the weakness of Phoenix’s advising functions and the incentivizing of recruiters to draw in new enrollments at an ever-increasing rate, speak to the problems he does see in how multistate for-profit institutions operate.

“The professional development and accountability of recruiting staff isn’t strong,” he said. “In many of these places we see a high turnover of instructors and staff. In any organization, that doesn’t work, and with things like recruiting or career stuff, placing students in externships, it becomes problematic.”

Sweeney’s letter to Phoenix was first published last week by the higher education division of the American Federation of Teachers, along with two reports outlining his concerns following visits to Anthem College, formerly High-Tech Institute, in the Milwaukee suburb of Brookfield.

Instructors at the college filed a complaint with the EAB earlier this year voicing concerns about the institution’s operations, educational quality and treatment of students. In a March visit to the campus, Sweeney found the college’s programs “in disarray,” he wrote. Instructors said that some of their students were unprepared for the academic and physical challenges of their courses. Students and faculty complained to him about the college’s recruitment tactics, constant turnover in administration and the ineffectiveness of its “wheel/spiral” curriculum, where any course can be a student’s first or last in a program.

In early May, EAB ordered Anthem (then High-Tech) to stop new enrollments in its medical billing and coding program, which lacked a program chair and an externship coordinator and had high levels of instructor turnover. (The Accrediting Bureau of Health Education Schools, the national agency that oversees the campus, had in late 2009 identified similar issues in High-Tech’s surgical technologist program, which had been ameliorated by the time EAB visited the campus to check on the issues in February.) Sweeney also identified similar, though less severe, problems in High-Tech’s medical assisting and massage therapy programs.

When he visited the college in July, Sweeney wrote that the progress he saw "was positive” and that he “found a more stable and smoothly operating institution.” Nonetheless, he still had several concerns about whether the institution would be able to sustain its gains and build on them.

He’s scheduled another visit for Sept. 15 and hopes to see the institution running smoothly. “If things seem to be going well, I won’t visit again for another six months,” he said.

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