For-profit colleges

Essay by the University of Phoenix's new president on quality at the for-profit

Last week, we learned on this site that Matt Reed’s son had recently sincerely asked this question: “Is the University of Phoenix a good school?” I have been gratified by the response from Inside Higher Ed readers -- and from Reed himself. But much is at stake in that question, especially for those we serve at the University of Phoenix -- those long underserved by traditional institutions. And I want to answer it publicly.

Is the University of Phoenix a good school? Yes. Yes, it is. And we’re working to make it an even greater school for nontraditional students everywhere. Our students expect quality, career-relevant degree and certificate programs. We’re providing instruction with dedicated faculty that bring real-world experience to the classroom. We are online and at local campuses in more than 30 states.

I came to the University of Phoenix last year from the University of Michigan. My peers in Ann Arbor came up to me and offered congratulations when they heard the news. I was told countless times, “University of Phoenix is an important institution. I’m glad you’re going there.” And a surprising number of colleagues within the UM community came to me and told me of their own positive experience, or a family member’s, at the University of Phoenix. For example, one UM student -- the first in her family to attend college -- was pursuing a graduate degree at Michigan (which she has since completed). She told me that she never would have progressed academically had it not been for the role the University of Phoenix played in her life (she completed her bachelor’s degree here).

To be sure, the institution has its complexities and challenges. But, like all schools, especially those that serve nontraditional students, we’re continuously in a mode of evaluating, assessing and working to improve student learning outcomes and the entire student experience. In 2014, the University of Phoenix awarded more than 73,000 degrees, and we’re strongly positioned to continue playing a vital role in American higher education for decades to come.

Our institution is large and well-known, yes, but it need not continue serving as shorthand for larger debates about for-profit higher education, which are often politically motivated. Our mission is to provide access to higher education opportunities that enable students to develop the knowledge and skills necessary to achieve their professional goals, improve the performance of their organizations and provide leadership and service to their communities. The University of Phoenix has played an important role in higher education in this country by successfully serving nontraditional adult students at scale.

Over the past seven months, I have been spending an enormous amount of time meeting with and listening to the stories of our students and our dedicated adjunct faculty. The passion our faculty have for teaching, innovation and student outcomes is palpable. Similarly, our students’ dedication is apparent. They have told me time and time again, “It is hard work, but it is not impossible.” The reason they came to this school is not just to prepare for an occupation and career advancement, but to change the perspectives of their children, and to change the trajectory of their families for future generations. It is the individual stories of our students that I wish were amplified in the media. That’s unrealistic, of course, but I am committed to telling as many stories of our students, graduates, faculty and staff as possible.

I wish most of all that Reed’s son could have been with me in Pasadena last Friday when I met the families of the University of Phoenix graduates featured in these videos here -- graduates like Evelyn “Vonn” Banks, the former Command Master Chief for Naval Sea Systems Command. I spent time with Vonn last week. Here is how she answers the question: Yes, University of Phoenix is a great school. Vonn has had a groundbreaking career as the most senior ranking non-commissioned female officer in the U.S. Navy. Her success was made possible, in part, by the three degrees earned from University of Phoenix. She is working on a fourth degree – truly epitomizing her personal motto: “I am a Phoenix, and I never quit."

I could fill this Web site with stories like that of Vonn Banks, and we are nearing 1 million graduates of the University of Phoenix.

Reed’s son asked a sincere question. He deserves an answer and I have invited Reed to visit with us in Arizona. He will find a rigorous, career-focused, innovative curriculum that is adapted to how adult students learn and a unified team committed to high-touch, high-tech student support, focused on students’ learning and career outcomes.

At some point, I hope readers of Inside Higher Ed will stop and visit a local University of Phoenix campus before making up their minds. Spend time on phoenix.edu and consider taking a course online before summarily passing judgment.

I spoke recently at a general session of the American Council on Education (ACE) and the University Professional and Continuing Education Association (UPCEA). They had convened in San Antonio to hear from national leaders. Before the general session began, the new president-elect of UPCEA, David Schejbal of the University of Wisconsin-Extension, stood to speak at the podium. He said, “We don’t typically talk to the for-profits,” which was met with good-natured laughter that I took as acceptance, agreement or, at least, understanding. Then he said, “We have a lot to learn from the University of Phoenix. I think that for-profits are not what we think they are. I’ve spent a lot of time with Tim Slottow, and his team’s focus on meeting the needs of adult students is really something we need to listen to.”

I am grateful for Schejbal. We have found similar leaders with open minds throughout the country. We are working closely together with a growing number of researchers at top-tier research universities and foundations who are eager to develop insights into how, together, we can measurably raise learning outcomes for all adult students. Our work with the Thurgood Marshall College Fund, the Gates Foundation (where Bill Gates himself paid us a visit) and researchers at Stanford University is just the beginning of what I hope will be a rich experimental learning environment for all devoted to the needs of nontraditional students. That is, I believe, among the best ways to honor the memory and resilience of our founder, John Sperling.

Whether friend or skeptic, our doors are open to all those working to serve nontraditional students, especially your readers at Inside Higher Ed.

Tim Slottow became president of the University of Phoenix in June 2014. Before joining the university, he served as the executive vice president and chief financial officer at the University of Michigan.

Guaranty agency buys half of Corinthian Colleges and forgives $480 million in student debt

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ECMC closes deal to buy 53 Corinthian campuses, earning praise from federal agencies and some consumer groups for deal to forgive $480 million in students' private loans.

Essay on the significance of the Super Bowl being played in the University of Phoenix Stadium

With all the Super Bowl hype (and there was plenty before the game, given Deflategate), little attention has been paid to the irony of where the actual game was played in Arizona: the University of Phoenix Stadium. Yes, really. 

Is there anything we can learn from the Super Bowl’s location for those of us toiling in the weeds of higher education?

The University of Phoenix, which boasts online enrollment in excess of 200,000 students at present (a decline from only several years ago when they had well more than half a million students), offers hundreds of degree programs at the undergraduate and graduate levels. Its Web site promotes a variety of tutoring and support programs, and the university has actual physical locations for classes in 39 states, although most courses are offered online.  

There is one thing the University of Phoenix most assuredly does not offer: intercollegiate athletics. Why would an institution of higher learning have a stadium named after it when that institution has no athletic offerings?

So, here’s a brief quiz as to possible explanations for why the University of Phoenix agreed in 2006 to pay $154.5 million over 20 years for the right to have its name used in perpetuity on the then new stadium in Arizona. Pick a, b, c, d, or e:

a. The university and its parent company, Apollo Education Group (enterprise value of $2.11 billion) could afford it. Compare this amount to the size of the 15th largest university endowment (Duke University) --  $6 billion in 2013.

b. It provides excellent ongoing marketing of the university, with its name promoted as part of the events held at the stadium, which include one of the most highly viewed sports events in the world. (Note: It’s the site of the Final Four in 2017.) Aren’t all higher education institutions investing in ways to market themselves better?

c. The stadium is big, holding up to 72,200 people with room for expansion, paralleling the university’s expansive approach to online learning that can serve thousands of students. What college is not looking to grow enrollment?

d. The construction of the stadium involved many partnerships, including with the Arizona Sports & Tourism Authority, and the University of Phoenix also just partnered with historically black colleges. Which institution is not seeking increased revenue or savings through partnering?

e. All of the above.

The answer, of course, is all of the above.

Now, for the bonus question: Who is the star high school running back who indicated he considering attending the University of Phoenix (actually, if the truth be told, he might likely want to play in its stadium for the Cardinals a year or two after he starts college)? The answer is Soso Jamabo, who is cleverly taking a swipe at the absurdity of college recruiting by conducting interviews against a backdrop containing the names of institutions he might ostensibly choose to attend -- including the University of Phoenix. By the by, the University of Phoenix tweeted that it was accepting Jamabo as a student.

Here’s a more deliberative take on all this. The very questions raised by the Super Bowl’s location are emblematic of the issues facing higher education: developing unique marketing opportunities to improve student enrollment and institutional name recognition; sorting through complex fiscal choices including strategies for developing auxiliary revenue streams; assessing the role, quantify and quality of online learning for students; addressing the challenges and cost of intercollegiate athletics; identifying partnership opportunities that improve the student experience and reduce costs or increase revenue; and determining what new construction merits the expenditure and accompanying borrowing. 

University of Phoenix Stadium brings to mind the Shakespearean question, “What’s in a name?” spoken by Juliet. The answer here is this: nothing and everything.

Karen Gross is the former president of Southern Vermont College.

 

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For-profit chain leaves the stock market to save money on public disclosures

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Education Management Corp. goes private as its enrollment and revenue slump, raising questions about the end of an era for publicly traded chains with disparate holdings.

Federal regulators accuse Corinthian Colleges of predatory lending scheme, strong-arm debt collection tactics

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The Consumer Financial Protection Bureau's lawsuit accuses the troubled for-profit college operator of luring students into predatory private loans and illegally harassing them to repay the debt.

Group wants to create voluntary standards for the for-profit industry

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New effort aims to create voluntary standards and a seal of approval aimed at for-profit colleges, this time by an outside group that works with a wide swath of the corporate world.

U. of Phoenix wins push for corrected numbers on veterans' enrollment at San Diego campus

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The U.S. Department of Veterans Affairs backs University of Phoenix in its squabble with a California state agency over veterans' enrollment numbers.

ITT's federal compliance scramble differs from Corinthian's shut down

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ITT's missed deadline with the Education Department prompts comparisons to Corinthian Colleges. But ITT is on firmer ground.

Essay questions use of anecdotal stories in for-profit debate

There is a pattern of dishonesty taking place in some of the criticism of for-profit colleges. Too frequently, opponents of the sector take advantage of students and use an individual as a “straw man” to try to prove a point about student debt and tuition.  

It is an attack by anecdote. Or more precisely, attack by false and partial anecdote.

The latest example is a filing from the Education Trust on the U.S. Department of Education’s proposed “gainful employment” (GE) rule. The rule would impose strict loan default and debt-to-earnings standards on private-sector colleges that would close the door to higher education opportunities for hundreds of thousands of minority and low-income students. 

In their filing, the Education Trust references by first name an anonymous student from Kaplan University, using a quote from her as firsthand evidence of someone allegedly burdened by debt because of high tuition. 

We know the student’s full story -- and, not surprisingly, the allegation is untrue. The quote claims that “tuition … ate up” the student’s financial aid.  In reality, Kaplan University’s average actual cost is less than most private, nonprofit colleges and many tax-supported public institutions. This student came to Kaplan with significant debt incurred elsewhere -- including a nonprofit institution whose tuition is significantly greater than ours. 

It was also alleged that we “maxed out her loans.” In reality the Education Department requires institutions to allow students to borrow up to the maximum amount for which they qualify. To cover personal expenses, students can take on debt far in excess of what is needed for tuition. Under the law, we cannot limit this. Particularly in non-residential, adult-serving institutions, these dollars do not stay with us -- the funds go to the student to cover his or her living expenses. Student academic success, such as the need to repeat failed courses, will also impact total cost and debt.

Sometimes, purveyors of these testimonials disclose full names. When a group calling themselves the “Young Invincibles” took to Capitol Hill last month to talk about student debt, it brought along 28-year-old Dymond Blackmon, who said he had incurred $90,000 in debt from pursuing an associate degree. Flanked by four U.S. senators, he said he did not make enough money to pay back loans from his photography program. As reported by Inside Higher Ed, the institution Blackmon attended had tuition and fees of $14,000 a year. Clearly, there’s more to the story than the tuition charged by his institution.

For most students, completing college takes a lot of work and often does not go as planned. Some students take on debt at multiple institutions, need to repeat courses extending their course of study, or borrow more than needed. These details are rarely acknowledged, and those that put the spotlight on these individuals know the schools are prohibited by law from discussing a student’s details and, to protect our students, we are loath to do so.

Student loan debt is a problem. But solving it will require more than finger-pointing.

Policy should permit schools to limit loans for a particular course of study, helping us align debt with expected earnings in the field. College can be made more affordable if student loans are managed, in part, by people who share a big stake in seeing their students succeed -- the schools in which they enroll. 

Using misleading anecdotes may be a clever way to make an argument, but it doesn’t help illuminate the issue. Permitting colleges to help manage borrowing is the real issue here, and it is no straw man. 

Wade Dyke is president of Kaplan University.

For-profit colleges went astray, should return to their roots (essay)

The court of public opinion has not been kind to the for-profit college sector over the last few years. In particular, the reputations of the 15 publicly traded companies that dominate the sector have been tarnished through repeated stories of alleged abuse of federal financial aid programs and students aggressively lured into programs where some end up with unmanageable debt.

But for-profit education did not always operate this way. Some of the same companies barraged by today’s negative headlines were innovators of new business models that served populations left out of the traditional postsecondary education space. Others offered training programs for years before there even was a Higher Education Act that made federal financial aid available to students.

What led so many companies astray is a story of strategic choices made at the height of the 2000s boom. Faced with the means to achieve infinite scalability by tapping into a federal entitlement program, the opportunity to use online learning to cut costs, and motivated by Wall Street cash and its accompanying investor pressures, several companies pursued hypergrowth at all costs. They moved away from traditional missions, pursuing any and all students they could through sophisticated recruitment machines designed to feed the neverending demand for hitting enrollment and earnings targets.

U.S. Department of Education data on students who left school in 2008 and 2009 at the peak of the for-profit college boom show just how bad the strategic emphasis on growth over quality has been. In total, 40 percent of programs offered by publicly traded companies, representing 48 percent of for-profit students in the data, fail one or both of the tests of debt-to-earnings and student loan default that the Education Department is proposing to use to judge the success of career training programs. This includes 44 percent of students enrolled in colleges owned by the Apollo Group, which runs the University of Phoenix. It also includes 90 percent of students at ITT Technical Institutes.

But companies like Strayer and Capella that took a more measured approach to growth look much better in the data. Not a single program at Strayer appears to be leaving graduates overly indebted or headed for default, while just one of Capella’s 96 programs has problems — a bachelor’s degree in health informatics. Capella’s income results are so strong that not a single program had a debt-to-earnings ratio above 1 percent.

The results for Apollo and  ITT are particularly troubling because these are two companies with long operating histories that used to be some of the best examples of what successful for-profit education could be. The ITT Technical Institutes actually predate the Higher Education Act by nearly 20 years and were clearly able to recruit and educate students without being wholly reliant upon the federal grants and loans that make up the majority of its revenue. From its founding in the 1970s until the early 2000s, Phoenix would not admit students unless they were 23 or older, were working full-time, and had at least two years of workplace experience. This helped it build and maintain a reputation as a high-quality option for working adults that other colleges were reluctant to educate.

For those seeking to maximize profit, the entitlement nature of the federal student aid programs provides a clear path to unlimited growth. Anyone who meets minimal eligibility criteria qualifies for at least a multithousand-dollar student loan. Low-income students — the ones who just happen to be the least likely to go to college and can be recruited with the least competition — can bring thousands more in additional revenue each and every year through federal Pell Grants. As long as companies could find American students, there was little ceiling to the growth possibilities.

The internet pushed that growth ceiling even higher. Digital coursework could reach students anywhere in the country at a substantially reduced cost. Finding sufficient concentrations of students to justify face-to-face investments like classrooms and more professors became totally unnecessary. The recruitment pool had effectively become anyone with a pulse and an internet connection.

Entitlement programs and distance learning provided an opportunity and means for exceptional growth, but it was Wall Street that came in with the motive. The Apollo Group and ITT became publicly traded in the mid-1990s. At Apollo, enrollments rose from 124,000 in the fall of 2001 to 470,800 in the fall of 2010. ITT, meanwhile, grew from 28,600 to 88,000 over the same period.

Enrollments grew even faster from 2006 on, fueled by cheap credit available elsewhere in the economy and constant demands for showing increased student starts. But such growth pressure can coexist with historical standards and missions only while there’s a glut of students who fit that mold. Once that pool is tapped out, either standards or enrollment targets have to give.

Standards and institutional mission lost. Phoenix removed its enrollment requirements and began placing more emphasis on two-year degrees to students regardless of age or work experience through Axia College. A university with over two decades of experience catering to one type of student immediately started enrolling anyone it could. As former Phoenix Senior Vice President John Murphy wrote in his book Mission Forsaken,  “It was a money-spinning financial decision, but a cheerless academic disaster.” 

The Education Department data show what an academic disaster looks like in numerical terms. Take Phoenix’s associate degree in office management and supervision. It is the second-largest associate degree program offered by any institution in the country. And more than 9,800 of the 27,500 students who started making payments on federal student loans for this program from October 2008 through the following September ended up defaulting on their debt by the fall of 2012. These individuals had their credit ruined and balances inflated through a host of fees and penalties, and will almost certainly never be able to discharge their debts through bankruptcy.

The office management and supervision program is just one of 20 programs at Phoenix with a default rate of 30 percent or higher. This represents over 32,200 individuals — about the same size as the University of Alabama. Every single one of these programs offers an associate degree. It even includes programs that should have direct market payoff, such as network systems administration (default rate of 44 percent) and information technology (42 percent).

By contrast, Phoenix’s graduate programs do not look so bad. None of them had unacceptable results and just one — a doctorate in higher education management — had a default rate over 15 percent. Two doctoral programs (business administration and organizational leadership) even had typical earnings over $100,000. One has to wonder how many students might have been prevented unnecessary financial harm had Phoenix stuck to its core business model and not pursued such expansion.

Unfortunately, Phoenix provided a case study for other companies to emulate, especially for recruitment. For ITT that meant creating an aggressive recruitment machine that used a “pain funnel” tactic to increase enrollment by preying on students’ fears and insecurities. And since many of those students were low-income, it created new debt products for students who needed money to cover the gap between tuition and federal aid.

The high-growth model has created legal headaches and poor student results for ITT. It has the largest share of students in failing programs of any publicly traded company. ITT also has programs like its $47,000 associate degree in visual communications, where a higher percentage of students default on federal student loans (45 percent) than find jobs in their field (30 percent).

ITT has also run afoul of the Consumer Financial Protection Bureau (CFPB), which sued the company in February for the debt it offered to cover tuition gaps. In its lawsuit the CFPB alleged that ITT lured students into high-priced private student loans with default rates as high as 60 percent and “sacrificed its students’ futures by saddling them with debt on which it knew they would likely default.”

Recent efforts suggest that there may be ways to turn back the tide and get some companies to focus again on students over growth. Chastened by regulatory efforts aimed at reshaping recruitment practices and holding institutions accountable for debt, coupled with lawsuits and investigations against the worst behaviors, many companies have had to reduce enrollment, offer trial periods, and freeze or lower tuition. This includes initiatives like the Kaplan Commitment, which lets students test out classes for three weeks without paying tuition. Or DeVry’s Fixed Tuition Promise, which guarantees costs will not go up as long as students stay enrolled and came one year after a tuition freeze. Hopefully, these changes will result in better outcomes for students.

But short-term improvement is not enough. The last 15 years has shown just how Wall Street can trump old values and prompt reckless behavior if their ambitions and actions are left unchecked. Without a stronger accountability structure around them, there’s no promise that growth at all costs will not return.

Ben Miller is senior policy analyst for the New America Foundation's Education Policy Program.

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