Ever Wondered about the Explosive Growth of For-Profit Colleges in Jax?

[FayeforCure]

There are as many for-profit colleges in Jax as there are McDonalds............just about on every corner of our streets!!

AND they all rely on enormous government hand-outs and massive de-regulation!!!

See amazing growth charts here: http://big.assets.huffingtonpost.com.s3.amazonaws.com/Chart/column-stacked.htm

With a mere eight lines buried in an 82,000-word budget bill passed in 2006, Congress eliminated legislation that had for more than a decade limited how many students colleges could enroll in online courses -- rules aimed at protecting students against dubious programs. Those eight lines have proven a potent fertilizer for a for-profit college industry that has since grown to enormous proportions, collecting most of its profits via federal student aid dollars.

In the five years since Congress deregulated online education, enrollments at for-profit colleges have nearly doubled. Six major corporations owning for-profit institutions have enjoyed initial public offerings on Wall Street, with each promoting the rapid growth of online classes to investors and netting millions in compensation for executives. Revenues have doubled at the University of Phoenix and Kaplan University, two of the largest players -- so has the rate at which its students have defaulted on their federal loans.

The story of how this single snippet of legislation became law, propelling a collection of for-profit colleges into a full-scale industry, presents a classic case of the workings of power in Washington. It reveals the degree to which for-profit colleges -- now confronting accusations that they have preyed on students and cheated taxpayers -- owe their growth to a sophisticated lobbying effort that has cultivated powerful allies in Congress and in the administration of President George W. Bush. The lobby has played a crucial role in fighting off consumer protection rules that limited the companies' expansion opportunities.

Such was the case with the 2006 removal of a law known as the 50 Percent Rule, which had previously limited enrollment numbers at universities with online course offerings. That stricture was eliminated at the insistence of current House Speaker John Boehner, then the chairman of the House Education and Workforce committee -- now the prime public negotiator in a high-stakes clash over raising the nation's debt ceiling -- and Sen. Mike Enzi, a Wyoming Republican who headed the Senate Education committee. Their legislative handiwork opened the floodgates to online enrollment, while enabling for-profit colleges to more aggressively tap Wall Street for the capital they have used to expand.

"Most of the large publicly traded institutions would not be able to exist the way they do today if that rule had not been taken away," said Kevin Kinser, an associate professor at the University at Albany who studies the history of for-profit higher education. "You have an entirely new revenue source that's been open to these institutions. ... The cost goes down, the revenue goes up, and that's a pretty attractive investment vehicle."

Boehner did not respond to repeated requests for comment. A spokesman for Enzi said the change was needed to enable students who lack access to physical campuses to gain educational opportunities over the Web.


"Senator Enzi has always been a supporter of access to quality education throughout life," the spokesman said. "For many individuals, that means access through technology."

The 50 Percent Rule had been put in place with other consumer safeguard measures in the early 1990s, in an effort to protect students and taxpayers in the face of widespread reports of abuse and fraud involving federal student aid programs. The deregulation was the result of a fierce lobbying effort waged by the for profit-college industry, coupled with strategic campaign donations distributed to Boehner, Enzi and Rep. Howard "Buck" McKeon (R-Calif.), the men who controlled the Education committees in the House and the Senate.

McKeon held and sold stock for Corinthian Colleges Inc., a for-profit college corporation, during the time he was crafting policies for the industry on the House Education committee, according to his required personal financial disclosure forms. According to the documents, he owned between $1,000 and $15,000 in Corinthian stock in 2003, and sold it off in 2004.

For the three election cycles between 2002 and 2006, those three lawmakers and their political action committees alone took in nearly one-fifth of the money donated to federal candidates and committees by the for-profit college industry.

The industry has also benefited from Washington's traditional revolving door: President Bush's assistant secretary for post-secondary education, Sally Stroup, had served previously as a lobbyist for the Apollo Group, which owns the University of Phoenix. During her tenure overseeing higher education policy from 2002 through 2006, she authored a series of reports outlining an imperative to lift the online learning restrictions â€" a major impetus for Congress to ultimately scrap the 50 Percent Rule.

Through a spokeswoman, Stroup declined to comment.

AN ONLINE COLOSSUS

Any large industry takes heed of federal policy, but the for-profit college industry has a special interest: It has prospered by positioning itself to capture out-sized shares of federal student aid dollars.

In 2000, for-profit colleges took in 13 percent of the dollar value of Pell Grants, which are awarded to low-income students, and 11 percent of federal student loan dollars overall. By the 2009 school year, for-profit schools were taking in 25 percent of both Pell grants and overall aid, an artery of cash that by then reached $32 billion -- a seven-fold increase in less than a decade.







The percentage of students failing to pay back their federal loans has also grown, with nearly a quarter of for-profit college students defaulting within three years of leaving school -- more than twice the rate of students at public colleges, and nearly four times the default rate at private non-profit colleges, according to Department of Education data.

Despite the fact that the online learning rule was lifted five years ago, the Department of Education has yet to collect specific data to track student loan default rates or graduation rates for programs that are mostly online.

Eduventures Inc., a higher education research and consulting firm, estimates that enrollment in college classes that are 80 percent online has more than doubled since 2006 -- when the 50 Percent Rule was abolished -- growing from 1.2 million students to nearly 2.5 million students in fall 2010.



Intake of federal Pell Grant dollars, by higher education sector
Source: Department of Education

The for-profit sector amounts to 43 percent of the total online enrollments, according to the firm, although only about 10 percent of students nationwide are enrolled at for-profit colleges.

The new frontier of online learning -- and the federal dollars that come with it -- has led to a host of new players in the for-profit education industry and continued growth for well-established stalwarts such as Education Management Corp. and the University of Phoenix, which now claims more students than the entire for-profit college sector did 10 years ago. Yet graduation rates for some of the largest online-only universities hover at less than 20 percent.

Among the new players since the rule was abolished is Bridgepoint Education Inc. of San Diego, which purchased a small, failing college in Iowa and grew enrollment from fewer than 350 students in 2005 to more than 76,000 students by the end of 2010. Grand Canyon Education Inc. grew online enrollments from 3,000 in 2003 to more than 42,000 by the beginning of 2011.

For the for-profit college industry, the bottom-line benefits of the online realm are considerable, allowing institutions to deliver courses to students virtually anywhere, without incurring the costs of operating a physical facility.

In the documents released to market its 2009 initial public offering, Education Management Corp., a Pittsburgh company backed in part by Goldman Sachs, noted the merits: "Online offerings are also a cost-effective means for us to utilize many of our existing education curricula and generate attractive returns on capital."

Online enrollments at the company grew fivefold between 2006 and July 2009, when the company went public, according to documents filed with the Securities and Exchange Commission. The Justice Department recently intervened in a whistleblower lawsuit filed against Education Management Corp. that accused the company of illegally handing out bonuses and raises to recruiters based on the number of enrollments they secured.

Major state universities, community colleges and long-entrenched private schools have themselves turned to the web in an effort to supplement their offerings and increase access to college. But experts assert that an absence of adequate quality controls governing the online programs at some for-profit schools make them particularly troubling.

"The bottom line is that the accreditation system just hasn't been modernized, and it isn't really structured to be able to deal with these fully online institutions in the for-profit sector," Donald Heller, director of the Center for the Study of Higher Education at Pennsylvania State University, told the Huffington Post, echoing criticisms he made in testimony before Congress in 2003. "Therefore they're not providing the necessary oversight to ensure that students aren't being fleeced and that money is being well spent."

REPEATING HISTORY

The 50 Percent Rule was put in place in 1992 in an effort to prevent the very problems that are again at the forefront of the conversation.

The rule was the product of a Senate investigation that featured a series of high-profile hearings probing waste and abuse of the federal student aid programs by for-profit colleges.

At that time, the makeup of the industry was much different than today. There were no multi-billion dollar, publicly-traded corporations with national advertising campaigns. Instead, the abuses stemmed from a series of fly-by-night vocational programs -- smaller, family-owned beauty and mechanical schools that made money by swindling unsuspecting students.

Timeline of regulations for the for-profit college industry

http://www.huffingtonpost.com/2011/07/29/john-boehner-for-profit-colleges_n_909589.html

[FayeforCure]

For-profit colleges

Monsters in the making?

Washington grapples with a booming education industry

Jul 22nd 2010 | chicago | from the print edition





..

IT SEEMS too good to be true, at least for companies. Customers arrive at for-profit colleges by the million. With them comes billions of dollars of federal student grants and loans, to be poured into corporate coffers. Public subsidies may provide up to 90% of revenue; the government bears the risk of loan defaults. This business model has served firms rather well. Its effect on students and taxpayers is less clear. This summer, however, a brawl over for-profit colleges has exploded at last.

.

On May 26th Steven Eisman, a big shorter, warned investors that for-profit colleges could echo subprime mortgages. June brought a Senate hearing (including testimony from Mr Eisman, to the industry’s horror) and proposed regulations from the Education Department. As The Economist went to press the department was expected to release another, even more controversial rule. Behind this fight lies a new, rather uncomfortable urgency. For-profit colleges have happily depended on government support. Now education may increasingly come to depend on for-profit colleges.

Proprietary colleges have morphed into behemoths, some of them publicly traded companies that reach hundreds of thousands of students in classrooms and online. Enrolment jumped by 225% between 1998 to 2008, more than seven times the rate for all post-secondary programmes. The recession has accelerated this trend. The Apollo Group’s University of Phoenix, the biggest proprietary college, now enrolls 476,500 students. With more students comes more public money. In 2008-09 $24 billion in Pell grants and federal loans went to for-profit colleges.


The return on investment is harder to calculate. The industry is shrouded in fuzzy numbers. Reliable graduation rates and earnings data do not exist. More certain, however, is that the debt burden and default rates for graduates are particularly high. In 2009 the average yearly tuition was about $14,000, compared with $2,500 at a community college. Critics claim that misleading recruiting lures students into programmes that leave them with heavy debt and flimsy skills.

Of post-secondary investigations by the Education Department, 70% are related to proprietary schools. Litigation is common. In 2009 Apollo agreed to pay $78.5m to settle a suit over pay schemes for recruiters.

http://www.economist.com/node/16643333

[Tacachale]

Thanks Faye. This is a problem that isn't going to go away without some serious action. These colleges can only function because people who attend are eligible for federal grants and loans, and the default rates on the loans is alarming. But even in the high percentage of cases where the student defaults on their loan, the school already has its money. They are essentially turning a profit for themselves by taking money from the government.

And with their profits have come lobbying. Unfortunately this has become a highly issue debate in DC, so resolution is going to take some work.

And all this is besides the debate about the quality of education (or lack thereof) that these schools provide. This is a very disturbing development.

[avonjax]

another by-product of deregulating everything! As usual tossing foxes in the hen house. Everyone loses, every time. So much for fiscal conservatism....(an oxymoron)

[emptycagegirl]

It is kind of sad. Some of these institutions really lead their "students" to believe that they are worth all of the money that they have to pay to attend them. Back when I was in college  (Calif. State) a friend of mine was attending one of these for profit colleges to supposedly find her work in the dental field. She was having a hard time studying for her big exam and asked me to help her prep for it. I have never taken a course for "the dental field" but knew every answer on her practice exam already from my common knowledge. It was really very sad. She did end up graduating and owing over 30k in student loans that they convinced her to take out. They promised her work out of their program and that never ended up materializing for her either. I really felt bad for her because she had nothing to show for her education, no one would hire her and she owed tons of money. These are such bad decisions and it is really sad that they feed on low socio-economic areas to thrive in.

[danem]

The silliest name for one of these I've heard yet: University of Maryland University College.

Having to wrap my head around whether any of these school's degrees are accredited properly is just too much. I have to ask people who are thinking of these places, why not just go start out at community/state college?

[Tacachale]

^University of Maryland University College actually isn't a for-profit school. It's a state school in the University System of Maryland that offers distance and online courses, with particular focus on the military. This means that it is definitely accredited by the regional accrediting body that covers Maryland (MSACS, I believe) and is a hell of a lot cheaper, particularly for in-state students, than a for-profit college would be.

UMUC doesn't have the major problems of for-profit colleges, like the accreditation issues, the exorbitant tuitions, or the dubious recruitment practices. Unfortunately the situation described by emptycagegirl is not uncommon, and a lot of people - including the taxpayer - have been burned.

[BridgeTroll]

http://www.cato.org/pub_display.php?pub_id=13754

D.C. Drove Up Your Student Debt

by Neal McCluskey and Vance Fried

Neal McCluskey is associate director of the Cato Institute's Center for Educational Freedom. Vance Fried is the Riata Professor of Entrepreneurship at Oklahoma State University and author of the Cato study "Federal Higher Education Policy and the Profitable Nonprofits."
Added to cato.org on October 10, 2011
This article appeared in The New York Daily News on October 10, 2011.


One of the major complaints of the Occupy Wall Street crowd, many of whom have taken on significant student debt, is that the cost of college is too darn high. And they're right, but not because of greedy corporate fat cats. No, the real guilty party here is federal politicians, who for decades have been fueling high profits â€" and prices â€" at both for-profit and nonprofit schools.

Wait. Big profits at nonprofit colleges? Yes, money has been piling up even at schools you thought had no interest in profit. And Washington, D.C., is the biggest hand feeding the beast.

Thanks to recent congressional hearings and battling over new regulations for for-profit schools, most people â€" including many college-aged, profit-disdaining Wall Street squatters â€" are probably at least vaguely aware that for-profit colleges are making good money.

But not just openly profit-seeking schools are making big bucks. If we define profit simply as revenue derived from providing a service exceeding costs, putatively nonprofit colleges actually have much higher margins than for-profit schools.

How do we know that? It's tough, because nonprofit schools typically report all their profits as expenses. Basically, they take excess revenues coming from undergraduate education and distribute them throughout the college in subsidies for research, graduate education, low-demand majors, low faculty teaching loads, excess compensation or featherbedding. In other words, rather than rewarding investors, colleges pay themselves.

Given this surplus-into-costs alchemy, there are just a few ways to get at schools' real costs. One is the buildup method, in which you calculate all the inputs required to educate undergrads, from market-rate professors' salaries to photocopying costs. The second is to get the best internal accounting of actual college expenditures you can, which a few states furnish, and estimate costs from that.

Using both methods reveals that it costs roughly $8,000 to educate an undergraduate at an average, residential college.

Now look at your college bill, including room and board: An average of almost $37,000 at a private four-year university, and $16,000 at a public equivalent.

So what's the profit? The average tuition and fee charge at a private bachelor's college, minus institutional aid, was $13,515 in 2008. Subtract $8,000 from that, and just from tuition and fees the school made about $5,500 per student, a margin of 41%. Add donated money like endowment funds, which are often intended to help undergraduate students, and the margins become even bigger.

Profits are similar at public institutions â€" only what schools don't get from tuition they make in state subsidies.

This is where Washington's policies come in.

Colleges have been able to achieve these stunningly high profit margins by radically increasing the prices they charge students. Inflation-adjusted tuition and fees have tripled in the last 30 years.

Politicians have enabled schools to charge these skyrocketing rates in the name, ironically, of helping students. Indeed, inflation-adjusted federal aid to students has quadrupled since 1980, going from $35.4 billion to approximately $146.5 billion. Meanwhile, total student debt has leapt ahead of total credit card debt, blowing past the $800 billion mark.

In other words, the feds have been blasting helium into the college-cost bubble, enabling profits â€" which, if driven by undistorted demand, could be good â€" to balloon at the expense of students and taxpayers.

Fortunately, since Washington has been a big part of the problem, it can be a major part of the solution. One relatively easy thing it can do is change financial aid rules that give schools sizable advantages over students when setting after-aid prices. Basically, when students apply for aid the feds give schools students' total financial pictures, enabling colleges to change their after-aid prices on a student-by-student basis. Students have no such insider knowledge about schools.

The politically tougher, but essential, move would be to phase out the big subsidies to students that enable schools to raise prices with impunity. That means reducing everything from Pell Grants, to cheap student loans, to tuition tax deductions.

The outcry would be that this will hurt students, an objection that would probably issue loudly from the people raging against the financial machine. But it would do the opposite, forcing schools to keep their prices in line with the real cost of providing education, and saving both students and taxpayers big bucks. And that is what everyone should want.

[Tacachale]

http://www.cato.org/pub_display.php?pub_id=13754

D.C. Drove Up Your Student Debt

by Neal McCluskey and Vance Fried

Neal McCluskey is associate director of the Cato Institute's Center for Educational Freedom. Vance Fried is the Riata Professor of Entrepreneurship at Oklahoma State University and author of the Cato study "Federal Higher Education Policy and the Profitable Nonprofits."
Added to cato.org on October 10, 2011
This article appeared in The New York Daily News on October 10, 2011.


One of the major complaints of the Occupy Wall Street crowd, many of whom have taken on significant student debt, is that the cost of college is too darn high. And they're right, but not because of greedy corporate fat cats. No, the real guilty party here is federal politicians, who for decades have been fueling high profits â€" and prices â€" at both for-profit and nonprofit schools.

Wait. Big profits at nonprofit colleges? Yes, money has been piling up even at schools you thought had no interest in profit. And Washington, D.C., is the biggest hand feeding the beast.

Thanks to recent congressional hearings and battling over new regulations for for-profit schools, most people â€" including many college-aged, profit-disdaining Wall Street squatters â€" are probably at least vaguely aware that for-profit colleges are making good money.

But not just openly profit-seeking schools are making big bucks. If we define profit simply as revenue derived from providing a service exceeding costs, putatively nonprofit colleges actually have much higher margins than for-profit schools.

How do we know that? It's tough, because nonprofit schools typically report all their profits as expenses. Basically, they take excess revenues coming from undergraduate education and distribute them throughout the college in subsidies for research, graduate education, low-demand majors, low faculty teaching loads, excess compensation or featherbedding. In other words, rather than rewarding investors, colleges pay themselves.

Given this surplus-into-costs alchemy, there are just a few ways to get at schools' real costs. One is the buildup method, in which you calculate all the inputs required to educate undergrads, from market-rate professors' salaries to photocopying costs. The second is to get the best internal accounting of actual college expenditures you can, which a few states furnish, and estimate costs from that.

Using both methods reveals that it costs roughly $8,000 to educate an undergraduate at an average, residential college.

Now look at your college bill, including room and board: An average of almost $37,000 at a private four-year university, and $16,000 at a public equivalent.

So what's the profit? The average tuition and fee charge at a private bachelor's college, minus institutional aid, was $13,515 in 2008. Subtract $8,000 from that, and just from tuition and fees the school made about $5,500 per student, a margin of 41%. Add donated money like endowment funds, which are often intended to help undergraduate students, and the margins become even bigger.

Profits are similar at public institutions â€" only what schools don't get from tuition they make in state subsidies.

This is where Washington's policies come in.

Colleges have been able to achieve these stunningly high profit margins by radically increasing the prices they charge students. Inflation-adjusted tuition and fees have tripled in the last 30 years.

Politicians have enabled schools to charge these skyrocketing rates in the name, ironically, of helping students. Indeed, inflation-adjusted federal aid to students has quadrupled since 1980, going from $35.4 billion to approximately $146.5 billion. Meanwhile, total student debt has leapt ahead of total credit card debt, blowing past the $800 billion mark.

In other words, the feds have been blasting helium into the college-cost bubble, enabling profits â€" which, if driven by undistorted demand, could be good â€" to balloon at the expense of students and taxpayers.

Fortunately, since Washington has been a big part of the problem, it can be a major part of the solution. One relatively easy thing it can do is change financial aid rules that give schools sizable advantages over students when setting after-aid prices. Basically, when students apply for aid the feds give schools students' total financial pictures, enabling colleges to change their after-aid prices on a student-by-student basis. Students have no such insider knowledge about schools.

The politically tougher, but essential, move would be to phase out the big subsidies to students that enable schools to raise prices with impunity. That means reducing everything from Pell Grants, to cheap student loans, to tuition tax deductions.

The outcry would be that this will hurt students, an objection that would probably issue loudly from the people raging against the financial machine. But it would do the opposite, forcing schools to keep their prices in line with the real cost of providing education, and saving both students and taxpayers big bucks. And that is what everyone should want.

That's some pretty silly misdirection. The difference between traditional (both public and non-profit private schools) versus for-profit schools is that actual education and degree awarding occurs at the former. Trying to paint them all with the same brush is like lumping actual medicine together with new-age hoodoo cures, and then decrying the costs associated with the whole schmear. And even that comparison only works if the government was funneling untold millions directly into the hoodoo racket.

Containing the cost of higher education will be impossible until the government stops handing a sizable chunk of taxpayer-funded aid to schools that charge exorbitant rates in exchange for valueless degrees.

[FayeforCure]

More Junk Education coming your way!

Protecting Academic Freedom in Higher Education Act - Vote Passed (303-114, 16 Not Voting)

The House passed this bill that would overturn an Education Department regulation defining credit hours and rules education institutions must adhere to in order to operate in a state. The bill is intended to ease regulations on the for-profit education industry.

Rep. John Mica voted YES......send e-mail or see bio

Sign up at Congress.org to get your Megavote report on your congressman.

I'm sure Every Republican voted to deregulate credit hour standards, and other rules protecting the consumer from predatory for-profit schools.

Republicans do not like the Consumer except to milk us for every penny.

[cityimrov]

There's nothing fundamentally wrong with the idea of for-profit schools.  I've actually entertained the thought of opening one so people who are lifelong learners can have a place learn. 

The problem is, in this industry, for every 1 nice school that opens, there are 500 bad ones that open that gives the nice one a bad name.  I can't prove it but I'm guessing that most these schools are started by people who want to make a quick buck rather than provide a quality education.

[Tacachale]

Awful, awful news.

[hooplady]

And fercryinoutloud, don't train a bunch of folks to be lawyers and then fall short on your promises that they'll find employment.  What will they do with their newfound skills and spare time?  Hmmm....

http://www.actionnewsjax.com/content/topstories/story/Law-students-file-lawsuit-against-Florida-Coastal/iIrF_5iQdUutrx1ZfsDFqQ.cspx

[Ocklawaha]

Florida also has some excellent 'for profit' school programs. The trouble here is deeper then a simplistic private v public or profit v nonprofit, it's more of about producing the product that was promised. Locally Keiser University has been sold to Everglades University, a not for profit educational corporation. I have a daughter that did everything she could to be an unemployed welfare case, Keiser University actually changed her from a former high school drop out to a professional Radiology Technician. I was amazed at their strict requirements within this program, NO skipping class for any reason, for example. The teachers would call, they had her involved 24/7, and always pushed her hard. Funny because this same girl started her 'revival' at Florida State College Jacksonville, where they were not only vague, they didn't know who she was. She did finish a couple of semesters at FSCJ, but with a small child, the time-frame for a degree was painfully long. Every time she went to the administration for assistance, she ended up lost or crying.

I think this is important as it parallels my own experiences with Florida state colleges. For me the administration at what was then FJC and UNF did absolutely ZERO to assist me with a program that would get me where I wanted to be, one counselor, in answer to which classes I would need, actually told me, 'well, you just need to sign up for some classes!' Duh!

My experiences at Jones College locally and Cal-State Fullerton, and at Oklahoma State University were completely different. ANYONE at either school could take you by the hand and walk you through the maze, there was NEVER, any question as to what your program, classes, goals, or their assistance would be. 

In the end, my daughter was IMMEDIATELY scooped up by one of the groups where she did clinical's, and today her name has a handle. My hat is off to Mr. Keiser, and to Everglades, Jones, CSF, and OSU... Florida public schools? Not so much!

While I have no problem weeding out the thorns from the wheat, to condemn all private, all for-profit, all ______ fill in the blank, is shortsighted at best.

[kells904]

While I have no problem weeding out the thorns from the wheat, to condemn all private, all for-profit, all ______ fill in the blank, is shortsighted at best.

+1