What Happened in Wisconsin?

MILWAUKEE -- Earlier this year it looked like Wisconsin might slap some of the nation’s strictest performance standards on for-profit colleges. But a panel tasked with considering the proposed rules met just once before a state agency in March suspended the group and its work, indefinitely.

The short-lived regulatory enthusiasm in Wisconsin followed the collapse of for-profit campuses here in the state's biggest city. In some ways the push by state and city governments resembled federal efforts to rein in for-profits, particularly the Obama administration's pursuit of now-sidelined gainful employment rules.

Both fights became politicized, with a partisan flavor. For-profits and their advocates attacked the proposed regulations, arguing that they were not based on sound metrics. They also charged that the rules targeted for-profits unfairly and should have applied to nonprofit colleges, too.

“I just want to be held to the same standards as the nursing program down the street,” says Renée Herzing, president of the Herzing University System, which is headquartered here and operates for-profit institutions in eight states.

Gainful employment was halted last year by a federal court. The judge ruled that one of the thresholds, which included loan default rates and debt-to-income ratios, was set arbitrarily. However, the U.S. Department of Education was within its rights to seek to restrict federal aid eligibility to colleges that fail performance measures, according to the court.

Wisconsin’s proposed regulations folded in the face of political pressure, according to observers here. But some said the standards were too oversimplified to work.

The debate drew national attention from both for-profits and consumer protection groups, in part because the rules would have set a high bar. It also fed a narrative that with gainful employment stalled, the battle over for-profits was shifting to the states.

The Education Approval Board, a government agency that oversees 200 for-profits and some nonprofits in Wisconsin, had proposed that academic programs at colleges be required to maintain a 60 percent combined graduation and transfer rate as well as a 60 percent job placement rate for graduates.

Under the standards, a college would have been required to submit a plan for improvement if one of its academic programs failed to meet those thresholds. If the program failed for a second consecutive year, the board would have suspended enrollment in that particular academic track.

For-profits said the standards were unreasonable and would have tripped up most of the state’s public colleges as well the for-profits that operate there.

It wasn't just for-profits that had quibbles with the process. Sara Goldrick-Rab, an associate professor of educational policy studies and sociology at the University of Wisconsin at Madison, was on the 10-member panel that was to consider the standards. According to an audio recording of the panel's one meeting, Goldrick-Rab took issue with what she saw as flawed and "instigating" data the board's staff members had used to come up with the benchmarks. She criticized their focus on "input data" without adequate attention to the academic preparation of students who attend the state's for-profits.

State lawmakers also weighed in. Rep. Steve Nass, a Republican member of the state Assembly, who chairs the higher education committee and has tangled often with the University of Wisconsin System, was also on the panel. He said the process was “premature” and asked for the board to “work in a more cooperative atmosphere” with for-profits, according to the Wisconsin State Journal.

Nass called for the panel's suspension and two weeks later the board shelved the group.

“It may not be the right time,” says David C. Dies, the board’s executive secretary.

Gov. Scott Walker, also a Republican, had recently made three appointments to the seven-member board. Those new members are still learning the ropes, Dies says.

Ongoing federal scrutiny of for-profits was also a factor in the nixing of the panel. Dies says the board will likely wait to see what happens next with gainful employment and the reauthorization of the Higher Education Act. The Education Department recently said it would propose new gainful employment standards in a negotiated rule-making session this fall, and regulation of for-profits is likely to come up often during discussions about renewing the federal higher education law.

Critics of for-profits did succeed in getting some tighter rules passed in Wisconsin.

The city council here last month passed an ordinance that, while not particularly stringent, may be the first of its kind. Development projects can no longer receive city financing if they involve for-profit colleges that are not eligible to participate in federal financial aid programs.

“That was our hook,” says Michael Rosen, a professor of economics at Milwaukee Area Technical College.

Milwaukee Meltdown

Rosen has had a ringside seat to the fight over for-profits in Wisconsin.

He has been a professor for 26 years at the large community college, where he heads the college’s local branch of the American Federation of Teachers, a labor union.

Rosen has an office in the union’s headquarters here. The squat, modest building sits on the edge of the community college campus and a block away from the former brewing facilities of the Pabst Brewing Company. Pabst, following much of the city’s industrial might, left town in 1996. The old brewing complex is massive and largely deserted.

By some measures, Milwaukee is the nation’s fourth-poorest city, with poverty rates of roughly 30 percent. That has made it attractive to for-profits, says Rosen.

Also a block or so from his office and abandoned, although occupied for a far shorter time than Pabst, is a former campus of Everest College, which is owned by Corinthian Colleges. The campus shut down last fall after being open for just two years. More than half of its students had dropped out and only 25 percent of graduates had found jobs, according to the Milwaukee Journal Sentinel. The community college has now leased the space.

Rosen was among several who in 2010 testified at city zoning hearings to oppose the private developer-led project to redevelop the 45,000-square foot building, which Everest leased. The deal went forward, however, and a developer eventually borrowed $11 million for the project by selling bonds issued in the city’s name.

Corinthian issued a mea culpa after the Everest campus went belly-up in 2012. Calling graduation and job placement rates at the campus both unprecedented and unacceptably low, the for-profit chain promised to pay off the loans for all students who attended it. The move will cost the company an estimated $3.7 million.

Everest wasn’t the only for-profit to leave Milwaukee. Campuses of Kaplan College, Sanford-Brown College and the University of Phoenix in the city or metropolitan area also closed last fall. Those moves were likely driven in part by the slumping enrollments and revenues that have walloped much of the for-profit sector.

The closures here probably contributed to the regulatory push in Wisconsin, says Herzing. “That was a lot of change.”

Rosen calls the campus implosions a scandal. He has tracked down former students of several of the shuttered campuses to get their stories.

“These were poor people with ambition,” he says, most of whom are now saddled with debt and “are not getting jobs.”

The U.S. Education Department in May held a public meeting of its negotiated rule making committee in Minneapolis. Rosen testified there and also submitted written testimonies of several local students of for-profits.

Wendy Soderbeck is one of those former students. She wrote to the committee about her “nightmare” experience at the shuttering Sanford-Brown College a few miles west of Milwaukee. Soderbeck said she failed to receive her associate degree in criminal justice from the college, which is owned by Career Education Corp., over a disputed $3,700 payment. She owes $25,000 in federal loans but said she has no job in criminal justice and no degree.

“Please do something about these schools that are ripping off students,” she wrote.

Soderbeck received her degree, according to a company spokesman. He said the dispute is over a replacement diploma. Career Education made the "difficult decision" to close the campus due to several factors, including student outcomes at the campus and an expiring lease. The college is conducting a "teach out" to serve remaining students through this fall. (Note: This paragraph has been changed from a previous version to include new information from the company.)

Defining Reasonable

The Education Approval Board had received an increasing number of complaints about underperforming for-profit campuses in recent years, says Dies. Federal scrutiny of the sector also piqued the board’s interest.

“We’re on the front lines,” he says. And two years ago the board decided it was time to “start asking some tough questions.”

The goal was to draft standards that identified program-specific problems early on, were relatively simple, and not too punitive, Dies says.

“The EAB is simply seeking to engage in a discussion about what are acceptable rates of student program completion and graduate employment,” Dies wrote in a February news release.

The board told the institutions it oversees to view the regulations as an opportunity rather than a threat. That didn’t work. Both local and national for-profits criticized the proposed rules as being unreasonable and unfair.

At least three for-profit chains submitted written statements opposing the regulations. Many academic programs at both nonprofit and for-profit colleges in the state would fail to meet the 60 percent completion standard, too, according to the statement from Herzing. And those strict standards would only apply to colleges under the board’s purview -- not unregulated colleges that operate largely outside of state and federal oversight.

Herzing officials wrote that the completion standard “is completely unrealistic and will severely limit choices for many adult and non-traditional students to pursue career focused education in Wisconsin.”

In an interview at his office in Madison, the state’s capital, Dies says opposition to the rules was fierce. The board he leads, with just six employees, decided it didn’t make sense to push too hard, at least not now.

Dies, however, says the standards should have been attainable for colleges. The board set the proposed thresholds based on standards of some national accreditors and also limited penalties to programs rather than colleges.

“It didn’t chop anyone off at the knees,” he says. “I thought 60 percent was reasonable.”