 Hello. Good afternoon. Welcome. My name is Brian Jacob. I'm the director of close-up, the Center for Local, State, and Urban Policy, hosting the event today. This is one of a series of public events talks that we have throughout the year, several of them focusing on education policy issues. I'm going to just briefly thank Bonnie Roberts at close-up who has organized this as well as Sean Nelson, Laura Lee, and some other staff at Ford School who have been instrumental in putting this together. I also want to announce to folks that there's a live web stream to the University of Michigan's Detroit Center, and apparently there's an audience who is watching this now at the Detroit Center, so hello out there. And I'm glad you could join us. Also, unfortunately the date that worked for everyone here was the date of this conference called ASH, the Association for the Study of Higher Education. And so many of the people that wanted to be in the audience today are actually at the conference, so we are also live streaming this to Indiana, or wherever ASH is meeting now. So I hope everyone enjoys this. I'm going to now turn this over to Sudanarski, a faculty member here at the Ford School who specializes in higher education research, and she will be moderating the panel. So thank you very much. Thanks for being here. So we're going to go in the order that you see here. I'm going to briefly introduce you to each of the speakers all at the beginning right now rather than pop up like a jack-in-the-box every time they finish talking. So going from right to left here, we have Richard Vetter, and he is Senior Fellow at the Independent Institute and Professor of Economics at Ohio University. It's not Ohio State, so he can be here. He's got a PhD in economics from the University of Illinois and has been Senior Economist at the U.S. Joint Economic Committee. He publishes widely on higher education, and his articles and reviews have appeared in numerous scholarly journals as well as the op-ed pages of the Wall Street Journal, the Washington Times National Review. Chris Mullin, to his left, is the Program Director for Policy Analysis at the American Association of Community Colleges. He has a Masters of Education from Teachers College at Columbia University and a Doctorate of Philosophy and Higher Education Administration from University of Florida. Continuing over, we have Andy Jacob, who's a principal in ATMF Realty and Equity Corporation, a real estate and private investment company in Michigan, and he's a board member of New Horizons Worldwide, which is a computer training school operator and franchisor with 350 centers in 55 countries, and he's also a governor and treasurer of Cranbrook schools, which is in Bloomfield. Tom's Hallett is going to be our final speaker. He's CEO of the Gugazian firm. It's a Michigan law firm that pursues class actions and other cases. Tom and his colleagues served as class counsel for a class of about 3,000 current and former students in a federal lawsuit in Detroit against a for-profit school, which was resolved last year and is currently pursuing several other class actions against for-profit schools on behalf of students. So we've got a pretty interesting panel who represent a broad set of perspectives, National Michigan within the industry, outside the industry of for-profits, and we're hoping for an interesting discussion. Each speaker is going to speak for 10 minutes, and then we're going to start asking questions of the panel and start a good discussion. Thank you. Thanks, Sue. Delighted to be here. The growth in proprietary or for-profit colleges is, in my judgment, the single most important institutional change in higher education in modern times. Not only do enrollments of these institutions constitute a tenth or so of total enrollments, but a much larger proportion looking at the margin as high as a third of the increase in enrollments in recent years. Now, I was brought here, I think, to point out some positive dimensions of this important force in higher ed, and I will do so, but I have to say some things that make my friends in the for-profit sector rather uneasy. First, this sector's rapid growth is a byproduct of a highly dysfunctional and irrational system of federal financial support of higher education. Let me just barely touch on two problems with federal financial aid today. Professor Dinarski is the expert on this. First, much federal aid, notably the Student Loan Program, is tied in part to the amount of institutional fees and charges, a system that sometimes works to incentivize schools to raise those charges. If institutional tuition goes up, the subsidized student loan to students goes up as well. Second, there is almost no conditioning of the aid to on either actual student performance or unexpected student performance based on such good predictors as high school grades or college entrance examination scores. Students who are very unlikely to succeed are given as much aid as those who are much more likely to be successful. Now, it's true that for the for-profit institutions disproportionately serve students whose academic background is more marginal than average, although there's a lot of heterogeneity in the field, as we will hear later, and proponents of student college access should applaud this general mission of the for-profits since these schools are helping an underserved portion of the population get a chance at a higher education. Thus, the for-profits in a way are at the forefront of those actually doing something to achieve the higher graduation rates acclaimed by President Obama and others like the Lumina Engage Foundation. The for-profits are under frontal attack these days. We're told horror stories that undoubtedly are true in many cases of individuals with extremely weak backgrounds being enticed into schools on the basis of misleading claims about probable results. Default rates on student loans are relatively high among C students and we're told the proposed new gainful employment and state licensure requirements will help stem abuses. Yet I think an objective evaluation of the evidence and, admittedly, the evidence is extremely limited owing to a lack of good performance measures in all of higher education. But I think a look at the evidence that Isabel gives a more nuanced and mixed picture. Before even discussing it, it's important to remember there are vast institutional differences inside higher education and even looking at means or millions of data often obscure important truths. Moreover, it may not make even sense to look at a statistic that compares students in a class of institutions that includes, for example, Harvard College with students in a group that including, say, Ashford University, a mostly online university attended mainly by working adults. That said, however, most aggregate statistics that I look at that compare the for-profits with public or private non-profit institutions do not show the for-profits in particularly bad life. The last data I saw for example show the for-profits have slightly higher retention rates on average for full-time students than new public schools. And with respect to part-time students, the for-profit retention rate exceeds that of even private non-profit institutions. Although with respect to four-year degree programs, the for-profits average lower graduation rates than comparable non-profits, for other programs that isn't necessarily true. I think a more sophisticated, multivariate statistical analysis that controls for such things as student academic preparation, test scores, income, and the like, I think this type of analysis will not and does not show clearly that the proprietary institutions are particularly or peculiarly deficient with respect to student performance. You can't have it both ways. You can't push for more, less qualified and academic sense students to pursue post-secondary education but then punish those institutions that cater to these needs when they falter for whatever reason, when the student falters. Now much has been made of the fact that default rates and student loans are higher in the for-profits. What would you expect? They charge on average someone higher tuition than non-profit community colleges and for-year universities simply because unlike those institutions they're getting no public subsidies. Indeed they pay taxes. They are more willing and eager to take the very lower income students that are the most underrepresented in the college population that the administration tells us is far too small. The total cost of educating students at for-profit institutions in general is lower than at alternative schools. Another reason why we should rejoice that our debt-ridden and financially precarious governments have been able to turn over a growing percentage of the job of financing expansion enrollments to this sector. True, a disproportion portion of federal student loans goes to students at for-profit schools but these schools are paying funds to our government to operate rather than receiving them. The total governmental burden per student on average is lower at for-profits than other institutions especially for-year schools. Now the Obama administration wants to impose new rules on the for-profits that knowledgeable observers believe will at least temporarily significantly reduce their growth. We'll mention two of them and come up again. The first relates of course to gainful employment. Under proposed rules students would not be eligible for federal aid at schools where a majority of the students have dept of earnings ratios at seating 8 percent of total income or 20 percent of discretionary income whatever that is. And the school can also meet these gainful employment standards by having 45 percent of the former graduates paying down the principal on their loans. And you know on the face of this this seems pretty reasonable to me and certainly the principal having some consequences for widespread abuse and non-payment of obligations is a sound one. But there is a problem which I'll come back to in a minute if I have a minute left I think I do three four. I have tenure by the way so I'll keep talking. A second and more ominous development is the attempt to add additional and costly hurdles to entering the higher education business. In addition to requiring accreditation it is proposed that online for-profit companies get authorization to operate in each of the 50 states. I think this is an absurd expensive role that will force smaller online operators out of business or severely restrict their operating authority. In a government that revels in centralized power the sudden interest in states' rights is ironic but completely in keeping I think with the general sort of anti-private enterprise orientation of the president administration. As an economic historian I have to point out that 186 years ago the Supreme Court in Gibbons versus August eliminated the state of New York's ability to use its chartering powers to restrict competition in the steamboat business. Now the Obama administration wants to turn regulation of internet based teaching over to 50 state regulators on top of the feds and national and regional accrediting agencies. I think it's anti-competitive, anti-consumer, anti-education, anti-business, anti-porpersome and minority in short this proposal is unambiguously and manifestly stinks. My main objection however to all of this is the lack of neutrality in the whole thing a basic principle in economics treat everyone the same level playing field we're sealing out one type of education. What went far less than one out of every four Pell Grant recipients earned degrees in a timely fashion at such schools as Wayne State, Chicago State, Cleveland State, Cal State, Los Angeles or the University of Texas at Al Pacino why shouldn't their students be barred from getting federal aid as well. At Chicago State the six-year graduation rate of Pell Grant recipients cannot be as high as 12% and is probably in the single digits. Why not impose standards not only regarding lowering payment but also on academic performance on all higher education institutions receiving taxpayer funds not just one portion ironically that portion that uses fewer taxpayer dollars and most clearly serves those students of the government professors it most wants to help if we're going to increase accountability fine but let's have a level playing field. Thank you. Before my friend starts I have a few copies of a study that my assistants gave me to bring up here and I have to get rid of them or I will not be left back in the office in Ohio so please feel free to pick one up it's on the industry. Well good evening everybody my name is Chris Mullin I'm from the American Association of Community Colleges where I serve as the program director of policy analysis and after that introduction what else can be said. I too was asked to kind of paint a landscape and a picture and I'm going to try and do that is with data and show really what's going on in the country in terms of enrollment and graduation and completion at a large number of public private and non-profit institutions and we'll start the discussion there. So again I was asked to kind of put it all out in data what the sector looks like and what higher education looks like and when we start to do that we start to realize that the for-profit sector is a very different sector than the rest of post-secondary education. First let's look at institutions. Now if you look at this chart from 1986-87 to 2008-2009 you see a rapid increase in four-year institutions at the for-profit level. 35 of them existed in 1986-87 the number now is approximately 540 give or take how they report to iPads but over time what we've known is is that this sector is primarily comprised of smaller institutions. If you look all the way to the right you'll see that nearly 1500 institutions of less than two years in duration exist right. We have approximately 902 year for-profit institutions and 539 four-year. Now these definitions are National Center for Education Statistics definitions. They come from from the US Department of Education it's based upon the highest degree level that the institution offers okay but what's interesting too is you look at the distribution of students so how many students are enrolled and a large number from less than 200 students are enrolled in these institutions so when you compare one institution like we'll hear about later that has might have less than 200 students to a large institution like maybe a Chicago State or somewhere that has a broader mission or a community college that has a broader mission and serves large numbers of students or provide some more academic programs it gets kind of hard right. These comparisons can get very difficult very quickly. By comparison to be as balanced as I can this is what the distribution looks like at public two-year institutions public four-year institutions and private non-profit four-year institutions okay. So there's a difference obviously and just a notice we move through this to make things as comparable as possible. There are community colleges that offer baccalaureate degrees NCSS NCES counseling is four-year degrees so there's some overlap there but when I talk about community colleges it's the public two-year as defined by NCES okay and that has implications for the number of students we enroll in things like that so these might be very very a little bit from what we you might hear otherwise but essentially like I said this makes comparisons extremely difficult. As it relates to enrollment between the fall of 1998 and the fall of 2008 there's been a lot of growth right. The for-profit sector has grown from 334 thousand undergraduate students to 1.2 million which is a percent change increase of 270 percent. Now at the same time community colleges have have grown from 5.2 million students to 6.6 million students or 1.3 million student growth so in real numbers we're serving more and more students percent's changed are growing a lot quicker. What I found fascinating when I start to look at the research and dig into the research and part of the reason I released a policy brief two days ago that says just how similar community colleges in the for-profit sector. My job at AACC is to inform our members of timely topics. I read quarterly policy briefs every three months a new one comes out this is a kind of a timely topic and therefore I wrote a paper about it to help inform our membership. But what I found interesting when looking at the other sector which kind of for me and I'm still routhing within I don't fully understand the large number of full-time students that enroll at for-profit institutions when we hear the narrative that it's the working student and and those types of things it's there's kind of like this disconnect for me and I just don't fully understand it. What we see at what would be most comparable to community colleges which are your for private for-profit to your institutions I think it's 88 percent of students are enrolled full-time. Now this is going to have implications for graduation rates. You take that with your short-term programs right and what you have are an obvious result of higher graduation rates right you're taking smaller smaller schools full-time students and shorter-term programs as compared to community college admission which is much more diverse and broad and it's really hard to say that we're just the same or we do the same thing right. When you look at undergrad enrollment and for-profit and public tier institutions by race and ethnicity you said community colleges enroll the vast majority of minority students in the nation right. I circled over there the public two-year which is our community colleges and the middles are public four-year. Now I think in fall 1990 yet it could be incorrect as for-profit institutions enrolled approximately eight or nine percent of all students. Some cases their cumulative percent right the 4.8 plus two would be less than eight percent for American Indian, Alaskan natives and for Asian-native Hawaiian and Pacific Islanders but higher than eight percent for Black or African-American so I do enroll a fair percentage is what the data shows right compared to the overall share in the marketplace of eight percent. So the there's been rapid growth this decade in the for-profit sector as we are aware of. Community colleges enroll a greater number of part-time students and community colleges serve the vast majority of minority populations. As it relates to completion this is where things again continue to get a little bit different and where we can talk a little bit. In 2007 community colleges awarded 515,231 associates degrees right which is 60.5 percent of all of our sub-baccalaureate awards. For-profit senior institutions are more engaged in the certificates as we talked about before. About 35 percent of their awards were associates degrees. They can rely more heavily on certificates not saying it wants better or worse but they're different in terms of you're talking about time because what we hear often is our graduation rates are better. Our graduation rates are better. Well if you're on a short-term programs with full-time students one would hope based upon how you define graduation rates in the time of 150 percent that they would be better. Which leads us to the next slide or next conversation is that oftentimes we hear about this 22.1 percent right. Community colleges have a 22 percent graduation rate. We have a 59.7 percent graduation rate. We do so much better job. Well that doesn't include our whole mission right. Community colleges serve both for degree awarding for transfer function. We serve students who are coming back to retool for the job they're currently in. We serve students who are looking to change jobs. We serve students who are home from the summer from the four-year institutions who are looking to take a course or two to catch up or to get ahead or save money. So it's broader but that's 17.8 percent is often overlooked. So that still puts us at 40 to 60 which we'd like to be higher but acknowledging that these measures were developed for four-year institutions. HEOA 2008 has put the other committee on measures of student success to try and re-examine the best way to measure what community colleges contribute to society and further students. We are an undertaking a voluntary framework of accountability that's looking at data not only along academic progression but also workforce outcomes and we're having conversations about student learning outcomes and how do you really do that which is another topic for another day. Tuition and fees again it's very different now the cost per taxpayer thing we can we can debate and argue that for a long period of time. If you look at some of the calculations and some of the reports that are out there the way that accounting standards work for federal reporting Pell grand dollars at for-profit institutions are counted as tuition and fee revenue. So all of a sudden there's no taxpayer money going to these institutions. That's not fully accurate right. It doesn't count for loan money either. At public institutions they just counted as a scholarship or counted as another another way it's to fast and gas me and we can get more into that it's part of my brief now. But it is to say that it's cheaper now the big concern obviously is explosion in the use of Pell Grant funds at for-profit institutions and some of the practices that have followed that. The Senate Help Committee has said that this is widespread and it's examining 15 institutions we just don't know. I can't sit here and say is it the somebody who's a trained analyst that I know for certain is widespread. They found it and I think the 15 of the 15 institutions they visited so and you know how much is that really case we're not too sure but it is wasn't every single institution that they visited. But you see a large growth of 254 percent I'm not trying to point to that. No I'm not going to be able to do that. All right at the proprietary for-profit sector compared to 79 22 growth over 10 years. This is what it looks like and this is what it looks like. The graphic is sector shares right. Again community colleges educate 44 percent of all students in the country right. For-profit institutions do less and I'm getting a signal so we'll kind of move ahead. Only 25 institutions receive 40 percent of all Pell Grant funds. This is the concern right with our federal loans community colleges only 10 percent of our students take out federal loans because of the way we finance and structured we can talk about the high tuition high aid low tuition debate compared to 88 percent at the for-profit sector. But this is the one thing I want to get to before a head out is so on on the blue bars are the total unduplicated headcount for an entire year right the 0708 year and the graph on the left is for all public institutions with 18.6 million students enrolled throughout the whole year unduplicated headcount and at all for-profit is 2.6 million yet they have the same number of people falling into default 104,000. So in terms of the magnitude of people entering default it's the exact same across sectors yet the public sector serves 18.6 million students the for-profit sector serves 2.6 million students and that's a concern for because of the implications of default on the students and individuals not let alone the society right that comes afterwards. If you look at community colleges not we serve 20 times more students than the for-profit two-year sector right we had 49,000 people who borrows who went into default that 35,000 so it's not exactly flat level but it's pretty close and pretty pretty near the same. These are the default rates as we talked about or you've heard about before I'm sure we're at 10.1 percent the for-profit sector at the bottom is 11.6 for the whole sector 12.4 for less than two years 12.6 for two years and 10.9 for four years and lastly as we know coming down the way there's there's ways to get around the cohort default rate to extend the time the student actually gets into this this metric or this area and so they're moving to a three-year cohort default rate and when that happens you see the numbers change substantially so that that'll be coming the next couple years here. So with that I'm happy an appreciative opportunity to be here and talk with you and I look forward to any conversations we have. Thank you. Good afternoon my name is Andy Jacob and I am the for-profit business person that came on this panel. I'm not at all worried because we don't take any title 4 money so we didn't do any of those bad things that they just talked about. What we do in the for-profit sector is we're primarily a training company we operate 300 training centers around the world in 55 countries we're the largest Microsoft training partner in the world we are also Cisco training partner of the year last year. We've looked at the accreditation model many times we have an application in we're not sure we even want to go that route but because we turn away 10 consumer students and a consumer student to us is someone who is not attached to a corporation because we turn away 10 consumer students for every one we accept we are looking for different ways to train people who want our services but can't afford to pay for it with their own dollars. So what are the benefits of for-profit education? Well from our point of view the first and most important reason students come to us is accelerated learning programs. We can take someone and put them through our training modalities and we can get them certified or get them trained to a skill level in less time than traditional educational operators. There's more focus on the student need we're more concerned about whether the student has had a good experience we use something called metrics that matter to measure student satisfaction with both the program the environment in which we train and the instructor. Any student who doesn't give us at least an 8.5 out of a 9-point scale gets a phone call from one of our quality control specialists and determine what was really wrong with the program. Most for-profits have a very strong career and job focus and the students in surveys cite that as one of the reasons for coming to for-profit institutions and to us at New Horizons in particular. We also are very flexible in how we schedule. We publish a a public schedule of all our courses it's on a global website and we basically have any sort of training certification that you can imagine for IT and it's available usually starting if not every other week at least once a month. We have different modalities that we use to train our students we have something called mentored learning which is a self-paced learning environment that has a certified instructor in the room if the student encounters any difficulty in this self-paced program he can signal the mentor the mentor comes over helps them get through the difficult portion of the material and keeps the student focused in on a certain schedule. There's also breakout sessions periodic assessments and so on a lot of students like that because they can come in at eight o'clock one morning and spend a couple hours and come in at six o'clock the next night spend another couple hours so it's a very flexible way to get a certification. We also have online live which is basically our distance learning modality and that's becoming increasingly popular with the students it's very much like a traditional instructor led classroom except that it's virtual and of course we have iLT instructor led training. Now the interesting thing about for-profit education is that we have to push these different flexible modalities because we're really catering to the needs of the student and we don't take title four so we're not bound by the strictures in those regulations so basically we give students what they want and the interesting thing about what's happened over the last three years is that I'd say three years ago 75 percent of all of our training was delivered in the traditional format instructor led training and today 70 percent of our training is either mentored learning or online live and I think this has tremendous policy implications for where education is going in the future adding new program this is something that for-profits I think also do at a much more rapid rate than the traditional not-for-profit sector in our company the 10 most popular programs that we have today only two of which we even offered nine months ago now we're an IT we're a special case but in fields where education is evolving rapidly with regard to course content I think the for-profit sector does a much better job of keeping up with the demands of the students and the demands of the marketplace I think for-profits also do a good job with job placement now I can't speak to you know the for-profit sector as a whole except you know the statistics that are published by organizations like ACICS which accredits a lot of for-profits which report you know mid to upper 70s placements but we at New Horizons have a job placement rate that's over 90 percent now bear in mind though that a lot of our students come to us from corporations and they're already employed they're just seeking to upgrade their skills in terms of public policy considerations it seems to me that the innovations that for-profits have undertaken in the education field and the strong marketing efforts that they've undertaken over the last say decade has brought a higher percentage of people into post-secondary education and I think whether you look at the 18 to 24 year old group or the 25 to 44 year old group and it's that latter group that we serve at New Horizons there is a higher percentage of both of those groups today engaged in post-secondary educational activity than ever before and I don't think it's a coincidence that that has occurred at a time where the for-profit sector has grown so precipitously online delivery is something that is uniquely suited to the for-profit sector and really something that I think the traditional sector while they dabble in it is never going to push fully and the reason is this first of all public colleges and particularly community colleges which derive some 70 percent of their funding from state local and federal governments usually have a mandate to serve a given geographic area what we've discovered with our online live delivery is we have students really from all over the eastern and central time zones sign up for our classes I don't think that a community college in the state of Michigan for example is going to really garner a lot of students from Florida, Mississippi, Ohio and so on and still satisfy the governments that fund them to the extent that they do so there's a natural limit to how much I think the for-profit the not-for-profit sector is going to push this kind of technology furthermore when you look at traditional colleges and you can take University of Michigan as an example not to pick on them but I think it's pretty typical U of M has about 16 million square feet of buildings that are used for the campus and the educational effort they have another 12 million square feet approximately of auxiliary buildings but if you look at the 16 million square feet and divide that by the 40 some thousand students that comes out to about 400 square feet of building physical plant for each student now I know over at the raw school because I made a donation there that building costs about 800 or 900 a square foot traditional college buildings are probably upwards of 500 a square foot that's about 200 thousand dollars of investment for every student that sits in class there's obviously implicit subsidies that go into that space because they're financed with usually public money they don't pay real estate taxes and so there's really no level of playing field between for-profit and not-for-profit education the reason that this is important from a public policy standpoint is unless you look at all the cost inputs you really can't decide what the most effective way is to educate someone going forward when you want to get a higher percentage of the people involved in post-secondary education there is a limit to how much money that's there's going to be available you want to make sure those dollars go as far as as you can make them go scaleability is another factor because the for-profit sector doesn't invest so heavily in fixed assets they can scale up and scale down much more readily especially because there's a large component of online delivery going on so there are criticisms of the for-profit industry basically from where we sit you know we're not subject to those criticisms because we really answer mostly to to the corporate sector if we don't do a good job the 60 percent of our repeat business won't come back and repeat so we have a big incentive to to do it right the first time but it's interesting when you look at the spending data and and chris was mentioning on the tuition side how the tuition is so much lower at community colleges when you look at the data though from spending from 2006 2007 the two-year public colleges spend eleven thousand six hundred dollars per full-time student equivalent during that period and the for-profits schools spent thirteen thousand eight hundred and forty eight dollars so it's sort of interesting that they've spent more money per student during that period than the two-year public community colleges all in all i'm very much in agreement with rich when he says that we have to consider all the inputs all the cost inputs in order to determine who's really doing the best job and and i think from a public policy standpoint what's going on in the debate is really counterproductive to determining whether or not students are being well served by both traditional and for-profit education thank you good afternoon i'm tom howlett i'm a attorney here in michigan i graduated from michigan law school 20 years ago and uh practicing law back in michigan now for about 12 years and for the last uh five years my firm which is a plaintiff oriented firm representing people and families who uh have claims arising from misconduct of one kind or another one of the types of cases that we've been handling has been cases arising from claims of fraud and deceptive trade practices and breaches of contract by for-profit schools we hear from dozens of students each week who have concerns about something that's happened to them in a school i did tell andy that we've yet to hear a complaint about new horizons so he is not anybody that we have any concerns about but as a result of the work that we do we have gained a little bit of understanding about the problems that arise in for-profit education i want to try to touch on some of them today i wanted to just share with you the kind of model as i understand it of for-profit education it's sort of a three-legged stool as i as i view it one is uh the the uh the owner of the school has to devise an educational product to sell and it's trip it's it's frequently uh training in a career path as opposed to what the traditional public uh colleges would offer the second leg of the stool is a cred a securing accreditation from an accrediting entity and a license from a stating which you're going to operate and then the third leg of the stool is revenue which typically comes from either government loans title for funding or a private source this the slices private lender but to be a little bit more accurate although it often is salami or private lender it can be just uh i mean some schools that are out there look to employers or individuals to pay for it and we do represent people who have tapped out 401ks or whatever to to go to a for-profit school in my experience then there are five problems that i would i would want to touch on today that arrives in the for-profit education realm and the common strand in these problems that arise in my view is a lack of transparency in other words these problems while they exist are not clear to the student who is making the decision to enroll and commit you know typically thousands if not tens of thousands of dollars to a program and the five problems i'm just going to touch on this afternoon are problems in accreditation and licensing problems with credit transfers problems with the cost of the programs problems with the sales targets that exist in the admissions process and then finally problems with actually measuring placement and enrollment in these programs with regard to the problem of accreditation and licensing students have a basic understanding that they should be going to a school that's accredited and licensed but the they don't understand the gaps in weaknesses that exist in our accreditation and licensing system here in the u.s. as an example the state of michigan has a agency that that theoretically regulates and does license more than 400 proprietary schools operating here in the state it's actually 450 schools and it's up from about 250 just 10 years ago but they only have a handful of regulators available to enforce state quality standards and resolve formal complaints in fact it's it's my understanding from having spoken to somebody at the state agency recently they actually have two people that that are responsible for for doing inspections at these schools who've been under travel restrictions due to state budget cuts so they haven't been able to visit the schools and as a result it's difficult for them to even meet their their goal of visiting each one of these schools every three years so that's the regulatory framework in our state for doing a site visit as a state regulator to see if a school is is doing its job there's similar gaps in my view in in the accrediting agencies in the united states there are at least 70 different accreditors out there recognized by the department of education who can give the the stamp of approval that a school needs to claim it's accredited and then turn around and eventually apply for title four funding if they want but the accreditation recreditation process at these entities varies widely in this breach in my view we have things like what we're encountering in one of our cases right now which is a defendant we are pursuing claims against that claims to be accredited by the international accreditation agency for online universities very official sounding name it's our position based on our research so far in the case that they have no physical address on earth we have been asking and asking the the company that claims to be accredited by this entity to just tell us where their creditor is based anywhere on the globe so we can go and ask some questions and we're still waiting for an answer and you know again from my perspective representing students that's just a problem a your typical student is not equipped to deal with when an entity is saying it's accredited you take them at face value and you have no basis to know who really is accredited them and what that means we also have a problem of credit transfers in for-profit schools and the problem really is that students only discover really after the fact that the credits that they are earning are ones that they can't use to further their education to another institution it's basically in a problem with an inability to transfer credits and this is something that's not covered clearly enough in the admissions and registration process it will be sometimes mentioned in the fine print of a catalog given to a student at some point during their registration but it's certainly not anything that is is described clearly to students during the admissions process as a result you have people for example not to pick on Ohio or anything but in Ohio who are who are currently pursuing associates degrees who applied science associate degrees of applied business either you know our sort of basic understanding would be that means that you can perhaps then go on and get a bachelor someday but it's in cosmetology or massage therapy or something like that and even though they have an associates degree it's not the type of associates degree that allows them to enter a four-year institution as a junior another problem and a significant problem is the comparatively higher cost of programs and for-profit education and it only becomes really apparent to students once the disappointment is set in with a particular program that they have been enrolled in an example of that in which we are currently dealing is a school called computertraining.edu which for 15 plus years offered six-month training programs preparing students for Microsoft certification tests they were basically preparing students to take tests that allowed them to become Microsoft certified IT people and they also represented that they would offer ongoing placement services in the IT field to their to their students and graduates basically lifetime career placement the cost of the programs six-month programs was $28,000 and in December of last year the schools in a hard economy with problems and with their private lender and other problems simply closed all their schools midstream students were enrolled in programs and there were thousands of graduates out there who were expecting to get a lifetime career placement it's no longer available. There's a problem with sales targets in admissions and this is something we really haven't touched on today but truthfully at many for-profit schools admissions reps and enrollment counselors are basically sales persons it's not unlike those great scenes in Glengarry Glen Ross with Alec Baldwin and Jack Lemon you have student you have you have people having to meet daily weekly and monthly quotas for sales the students are turned are referred to as leads perspective students are referred to as leads if you can get them in the door they're called to sit for an interview for a meeting and if you can get it convert a seat into a start you've achieved something in one of our cases we learned that one of the ways that they try to generate leads was by having a free nacho stand in a hallway of a school where if you if you as a student gave the admissions department and the name of a friend that the school could contact you get a free plate of nachos obviously in this kind of environment there's it is right for misrepresentations one of the problems that exists out there is that there are per capita payments made for getting prospective students in the door at call centers people are given a an amount of money if they can get somebody from the phone line into a physical office for for a meeting with an admissions counselor we've had a case where the admissions reps who are compensated more than their professors received training trips to Aruba Key West and other warm climbs in the middle of January here in Michigan and some of the executives at these schools are offered cash bonuses if the enrollment targets of the schools are exceeded so result one of the primary problems is what what is called negative reverse selling the illusion that there actually is an admissions process at a school when in fact there really is none this is a excerpt from an internal document in one of our cases where it's described that that the most prominent technique in admissions is negative selling reverse selling tell the person the prospective student not why you should come here but why should we let you into our school there are essays that sometimes are a requirement of the admissions process why should we accept you and this young woman says thank you for taking the time to read my essay i hope you will accept me as a student at your school well the truth in the case was as it came out in deposition testimony these admissions these essays were never read in the admissions process there you needed to have the person fill one out but they were never read by anybody so as i said they're in truth low or no admission standards this is testimony from one of our cases this is the director of placement he's asked what qualifications does someone need he says my understanding is g ed or high school equivalent and eligibility for financial aid question anything else maintain a pulse was his answer so another problem is with the final problem that i want to touch on was is with the measuring placement and employment at for-profit schools and the metrics for success of these programs are very difficult to gauge there's a real difference between graduation rate and placement rate and neither is very clear to a student enrolling in a school you can have a 10 percent graduation rate at a school that may still claim a 90 placement rate because they're just placing the students that graduate and and they're successful in doing that and so people don't necessarily know what questions should be asked and they're not getting clear information in the admissions process at some for-profit schools graduation rates are often not disseminated even to employees and in this depth this clip that i'm going to play for you which is just about a minute and a half long there are a handful of officers directors or employees of a for-profit school with a reported graduation rate reported to the government of 10 percent testifying under oath they do not know what the graduation rate of the school is the final person in the clip is in a a vuncular looking guy baldheaded and he'll he'll finally come out and say what he understands that whoops the graduation rate to be let me see if i can get this to play if you can be a core point of 10 percent okay is that number consistent with your general recollection of the graduation rate you know anyone being across the campus who's involved in type of a graduation rate you have an understanding as to what to do how the academy was very kind of a graduation rate for the you're indicating a number i've forwarded to you which is 10 seems slow you well 10 percent with a whole fine with the school's management accurate graduation yeah i would i would not think so what what percentage of students who start the academy for the time of your work they're graduated okay so finally that gentleman testified under oath that the graduation rate in one of the programs at his school was eight percent placement rates which i as i said were different than graduation rates which are often not known at all are also can be elusive what does place in a job mean well it's often in some in some schools interpreted as meaning employed in any job including the one that the student had at the time of enrollment so if you're in a job if you're working at the time that you graduate from some for-profit schools you're considered place in one of our cases this included a waitress at a golf club and a post office custodian each of whom are graduates of a paralegal program but they were counselors counted as being placed because they had jobs um in a case we had we asked the director of placement about these impressive statistics for a 35 year period they'd had 3,595 graduates and 3,511 had found jobs over 96 or whatever that works out to do you know whether those are accurate the director of placements testimony was i have no idea so some of the some of the rates that are even given to students are are elusive and that's why in my view the the federal government move towards some sort of gainful employment rule makes sense i just have a commend this article this op-ed piece by jeremy den in the new york times to you he is a professor at a for-profit school in denver and among other things his view is it's disturbingly easy to get accepted receive thousands of dollars in loans and then flunk out with crippling debt and no degree to show for it the business model for for-profit schools may pay off for shareholders but it clearly isn't as effective at educating students from my perspective i'm inclined to agree with that and that's why i think the the regulatory effort at the federal level right now is is a good thing thank you provocative information and comments so if any of you have questions right now we can we can take those or i can get the ball rolling if you don't have any at hand yes seems like most of the concerns you bring up yeah i think that that's probably true and the for-profit area you do have the issue of the cost of the education being substantially higher in the debt that that we're talking about a student having incurred being greater but i mean and i think from a public policy i'm certainly i'm just a lawyer trying to help individual people i'm not a public policy person i would say the one reason maybe that that from a public policy standpoint it makes sense to approach the for-profit sector first is the the loan default rates being so disproportionately high but that but i agree the problems that i'm pointing out are ones that might exist in the public sector as well i think professor better wanted to get in here yeah i love that question come to my university and i'll give you 12 hours of credit without even working uh uh not really uh uh do you get nachos for that the very dan quote was great because exactly this goes to the the student point it applies to every could apply to thousands of institutions you know what the four-year graduation rate reported by ad pads for the university of texas at alcaso is four percent not eight percent four percent now sure there probably isn't as much on average federal money going to that school per student as at some for-profits all of their sum but what about the university of what about the state of texas is a subsidy of the school which is thousands of dollars per student probably uh i think it's a universal problem i think we need a more accountability of higher ed i absolutely agree that there are uh scuts balls out there that ought to be thrown out of business and thrown in jail do whatever you want with them but at the same time let's create an equal a level playing field let's treat everyone the same and that's all i you know i'll answer briefly with all due respect i disagree with the with the sentiments expressed i don't think you're going to have those types of admissions practices or or or or to see it happening at public or nonprofit institutions i just i don't see it happening i don't i don't see anybody saying well let everybody in but i'm gonna act like you can't get in so i would with my commenters up on the stage uh why only a four percent graduating at the university of texas al-paso i haven't studied institutions i can't well i can't get to so maybe their mission policies aren't particularly pristine too you know it's possible it's possible we don't know that so we can't stay for fact and it doesn't speak to the the question let me interject for a quick question a quick point i was told to repeat the question for the people who are watching online so the the question that elias uh laid out was um it seems like a lot of the practices that were described might also operate in the traditional public uh in private post-secondary sector and so why should we be concerned about those as well so chris keep going i'll keep it short so we can answer a lot of questions well i'd like to add a little something to that um first of all i think from a public policy standpoint you have to admit that uh the quality of the students you're admitting are going to impact all the ratios that you come up with the graduation rates the placement rates the default rates um i i know this from my experience and all forms of education that if you want to improve your statistics at a school fast become more selective and and if that's what we're trying to measure here then the things that the department of education proposes are fine uh i don't think that's the point many of the many of the comments that tom have made uh has made go to what i would call federal trade commission type issues you know these are things that happen in every business we have a law now in michigan and i remember when we didn't that you have to get a written estimate at a car repair facility before you uh before you are obligated to pay them if they don't give you a written estimate they do the work you don't have to pay them there's all sorts of disclosure issues in every business that lead to poor business practices the question from a policy standpoint is what kind of education is taking place in those institutions if that's a proxy for bad education then that's a fine metric but if it doesn't go to the quality of the education and the and that the student is getting those are different kind of business issues that come up in every business situation chris want to get one more quick well i i just i don't want to be a combative here to hold the time that's not the intent i think that the education is valued for everybody but i would say along your selectivity point is an emerging trend a lot of the analysts predict that there's going to be a decrease in for-profit enrollment over at least the next year until these regulations play out and we see what happens we saw decreases from you know phoenix that decreases and what what i find fascinating i think would be great for the researchers in the audience because i know our audience here is researchers is um the role that predictive analytics play an opportunity i think that these uh the large publicly traded institutions that have like the catholic commitment and the the uo p three-week orientation we know from research that these you can predict within the first three weeks whether or not somebody's going to be successful or not so it's like this post entry admission type of idea right and so as some of these institutions start to become more selective they're going to try and make their money from what i read in terms of the sdc reports and their their statements in terms of the retention idea so this idea of now they provide access for some groups but they're pivoting and shifting so i think that i think in these chronicle recently wrote a report on they're really shifting the way that they operate i think and it's going to be fascinating to see whether or not those predictive models uh the responses to to interact with uh academic advisement to help these people be successful or to have only the institutions of completion rates go up i'm going to insert a question that has been um sent from the audience at the u m detroit center um so the question is mr jake have said that the for-profits can train people faster than the traditional sector um what data supports this statement that data is really um strictly from our company from new horizons i don't have any direct data that is for the industry as a whole except a study that was done i think in the mid 60s that was done by the national center for education statistics and they said back then that there was like a seven month difference based upon completion rates of associate degrees but given the rapid growth in the industry since then i'm not so sure that that would hold true today but but my comment was basically based upon our own experience and the overlap that uh we have with some of our courses with community colleges in the markets that we serve right i mean we provide contract training and non-credit training too that's very short term as well and so we we operate in the same space so it's it is hard to say the non-credit data isn't fully there yet so it's hard to hard to track besides an anecdotal institution by institution basis so i don't i don't think that can be a generalizable statement but it but it is true in certain places possible yeah this is this question is for annie jacobs uh in the next two years uh what areas does new horizons see that will be downscaled for training or education the question repeated is uh for annie jacobs uh what aspects of your business to you see being downscaled we we don't we see in the next two years that the demand for it training is going to increase dramatically um that's partially due to where we are in the refresh cycle with the microsoft products that make up a lot of our our training business but also the move to um using more and more uh internet for everything uh increasing band width requires new router technology voice over ip technology um hacking i mean we do a lot of work with ethical hacking and security things these are only increasing almost geometrically so we we see from the it training standpoint of vast growth in the business over the next few years yep back there this is a question i think for all the panelists although we've brought on by something that's big which is spending from people um anybody have any figures on what percentage the for-profit colleges what percentage of their total outlay is for marketing you know i'm wondering if your figure of 13 000 per head included marketing or whether it was just a solely very cool well that question uh relates to spending for pupil and the for-profit sector versus other schools and in particular how much is spent on on marketing and i can see rich uh flipping through his report kind of finance mechanism while he while he cheats i will i will it's hard to tell now the cost for instruction is very difficult too because we talked before about accounting standards and different things are categorized different ways so just to pull a number from the digest of education statistics and compare the numbers you can't really do because the difference is in accounting standards what the senate help committee did find was i think up to 31 percent was spent on on marketing if i remember correctly so uh we did an informal survey very informal very quick of just 12 of our colleges so by knowing them i yeah but about two three percent of our budgets comparatively the there is a much higher percentage spent on what you call marketing in the for uh uh profits there's no question about it uh 2008 2009 ipeds data is it isn't broken out exactly marketing there's a category for example student services academic and institutional support that is as much as 60 percent of total spending uh uh in the private for profit and it's more like 30 percent in the private non-profits and even lower in the public uh part of that though is not marketing part of it is other things including placement and placement uh might be argued as an important student service but i you know i i i'm talking to annie rosen and kaplan and other schools i'd say quarter of their budget goes for marketing yeah that includes those numbers also include incentive payments and stuff like that so that number of the percent decreases a lot right which is again which is what makes these comparisons so extremely difficult when you're talking about the finance data it's got another hand up over here congratulations bring a lot of these down um could the community colleges scale up look up to address that need the current student million students that are uh being in for profits and then the 20 percent growth that they're having so let me repeat the question for you so the the question is about the um whether if if indeed regulation kind of um constricted the for-profit sector could the community colleges fill in and take those students well it's important to understand that the gainful employment regulations would impact about seven percent of community college students uh currently so you know there would be some some capacity there or currently in the process now of understanding capacity or institute at our institutions uh in terms of a physical capacity a funding capacity and those things so i don't have any answer for you at this particular moment uh clearly there would be some people who who would need access especially when have public four-year institutions capping enrollments so it's a question i think that's a valuable question that we need to understand better right i want to kind of go back to some of the proposed uh changes kind of gainful employment rule um and partly to kind of summarize kind of what is the essence of that again i know uh professor better started to do that but also i'd like to hear the perspective of the panelists on what uh are the potential problems with the proposed rule and what would be a better rule if one could decide and that's for now kind of assume that it could be applied equally across uh for profit and not for profit uh institutions okay so we're asking right as asking that um the the panel uh tell us what they think of the gainful employment rule as currently proposed in a particular if it were applied to all institutions um what do you think are its its strengths and its flaws uh what's your dream list where i'm there are some problem there's some significant definitional problem i think sue probably knows better than i do of what they are of for example because of the heterogeneity of the the types of institutions how do you treat uh certificated programs vis-a-vis two-year programs vis-a-vis four-year programs in assessing uh something like this where you have quite a different mix in the different kinds of school that's just one example of a problem that you get into when you try to set a uniform rule of i'm often wondering why you don't carry the program on if you were if you're worried about the federal outlay of money being the federal government not getting its money back which is essentially what's partly at stake here why aren't you looking at pelgrims too of in a more dramatic systematic way and looking at people who receive pelgrims who which are grants not subsidized loans in in in many cases uh oh why aren't you putting more emphasis on pelgrims than on loans uh pelgrims are a greater amount of emphasis that's another concern i have but the biggest concern i have is and let me use the university of michigan as an example since you're of a big shot here brian uh or at least you you started the session so i'm assuming uh i'm trying to up his profile yes uh and we have a world watching this on the internet his vita is available on request uh the university of michigan is university viewed as one of the greatest public universities in the united states uh someone's saying the greatest its success arguably has come largely because it has been very successful in turning customers away its success has come because it's turned down people the poor profits have a different way of measuring success and their way of measuring success is how many people can we take now they're taking them for great pecuniary reasons but they're taking them none the less and so to them are taking in less qualified students as a virtue and not a defect and i think that if you're going to have gainful employment rules you need to reconcile this problem that we have namely that in higher ed we don't know how to measure anything the university of michigan isn't really any good or not i have no way of knowing because they don't provide us any good information to let us evaluate that just to speak to the gainful employment question that led off uh the response again the gainful employment provisions as i understand it is a way to operationalize this term gainful employment that's been on the books for a while and so they're looking how can we define that right it's nice to say there's gainful employment so their scope and what they can address is is nearly fit to those institutions that are responsible to provide gainful employment right so dear point spread it out everywhere that's kind of taking one idea and and running all over the place with it those of us who work with data i've been fortunate to in my life to be able to work with workforce data and understand that the workforce outcomes of students and moving along no it's very difficult there's a lot of considerations at AACC we're on our voluntary framework accountability if you anybody who's looked at you know ui wage data or data from sole proprietors from ssa or military and trying to link all those and put them together it's extremely difficult so it's a it's an admirable task i guess to operationalize something that's kind of just been out there for so long but but it can be it can be challenging i think the problem with loan default measurements are the same in education as they are in any other business the higher the debt load the lower the income of the borrower the higher the default rate that's just axiomatic whether you're a home owner or whether you're a student with a student loan that doesn't necessarily talk about program quality when congress authorized the higher education act in 1965 they could have said look as a condition of getting a student loan you have to undergo a credit check we have to make sure that you can pay us back they didn't do that they didn't do that because they want to maximize access to post-secondary education the problem that we have here from a policy standpoint is how do you determine which program is doing the job and which one isn't and to use a proxy that relies heavily on demographics and other statistics to try and measure that i think is a failed proxy there are other parts of the game for employment regs that to me should should be completely unobjectionable including requiring uh institutions to provide prospective students with graduation and job placement rates and that is something that definitely does not go on and why the graduation rate of a school should should not be completely transparent when you're going through the admissions processes beyond me and you know so i'm hopeful that something like that certainly will go through and then i guess also just to maybe expand the the answer you know the game for employment which is the one that's getting the most attention and the most uh public discourse and the most uh marketing directed at it by the by the for-profit schools and full page ads in the new york times and what have you um yet you know there are also other changes that are a foot that will be implemented uh that i think are great including eliminating a bunch of safe harbors in the incentive compensation realm that uh you know will i think put a stop to some of the problems that really do exist at some for-profit schools including a safe harbor for example that allows managers and supervisors at for-profit schools to get bonuses as long as they're not that relate to enrollment as long as they're not directly involved in the admissions process uh giving bonuses to incent to internet-based companies that drive students or prospective students drive leads to schools but aren't then involved in the admissions process having incentive-based compensation of those internet companies is currently a safe harbor that doesn't violate the rules that's being eliminated and then eliminating token gifts is being eliminated which will end the free nacho program i think i'm going to put in a question so i'm going to abuse my my privilege up here so uh i've mostly studied the traditional pro-secondary sector much less the for-profit sector and i was struck um tom when you were listing the five problems that you see in the for-profit sector that so many of them had come up in um discussions of the traditional sector so shopping for accreditation also occurs in in the non-profit sector for example issues of credit transfer so articulation agreements between community colleges and for four-year colleges are a huge problem in most states and students at community colleges have difficulty taking their credits to to BA institutions employment outcomes we know very little about them in their traditional sector as well and of course private colleges are quite expensive so i missed the fifth one but in any case you get the point right so there are a lot of the same problems in the traditional sector and my the way i'm starting to think about it is that perhaps the problems are quite similar but in the for-profit sector it hits the student directly in the pocket because they're paying for it and we don't notice it in the public sector so much because essentially a taxpayer is paying for it you know so the fact that it's so cheap at a community college or at a you don't believe it but it's actually cheap here relative to say harvard is because the public sector is subsidizing it and so the risk is spread out across everybody and no one student necessarily sees and pays for the bad outcomes so discuss who you asked everyone i suppose there's a question in there yes yes anyone well you're absolutely right so it's an asymmetric information i don't know what it is but connoisseur has fancy terms to describe it um it's a question of visible versus invisible costs uh students see what they're writing they're writing check they see feel the pain uh the taxpayers a whole do not feel the pain at least that they know but they don't know what the pain is uh from the losses on these loans and so forth so there's a tendency where there's a bunch of people who are visibly lost losing they get agitated they hire my good friend at the end who i'm sure is a great lawyer who will win the millions of dollars uh they do a lot of of things because they're very upset uh but the losses to the rest of the public to uh in the traditional sector are invisible they just aren't aren't aren't aren't seen and christin in your answer can you also respond in part there's a question from the um detroit center which is how much um uh is contributed per student in public funds so how much the state federal and local entities contribute to the cost of community colleges that that varies across states in 25 states there's local property tax contributions and there's different schemes that come down and what not um so it's really hard to to to say exactly um kind of an average i can't you know i can't say off the top of my head i reason why i stay away if i cost per fte calculations generally is um is fte's are are accumulated credit hours and um it gets tricky when you start to think about total costs and comparisons um due to due to the way the differences right we talked before about the capacity and the gas being how things are counted and not counted um it's not easy there's there's been a lot of cost studies on the shio state higher education executive officers just talked about cost per student and for instructing students that it's one and a half times at an upper division undergraduate that it is for teaching lower division undergraduates including people at community colleges so the cost is less but in terms of actual number itself i can't tell you off the top of my head okay that is sauce for the goose is sauce for the gander and the problem with education is uh as we've all talked about is there's a lack of data there certainly is a lack of disclosure probably across all the institutions and there's a lack of good metrics to evaluate program quality that are delivered in a way to the consumers that they can understand what they're getting for their dollar and until those things are rationalized and solved across the entire industry for profit and not for profit you're not going to have a rational educational policy i'll use my brief comment just to respond to your question i do think there is one difference and chris talked about it and i think it was the one bullet point that you weren't remembering that i attached on that is the sales targets and admissions and that i think is the real the real distinguishing aspect of for-profit schools and the fact that an admissions person's job depends on converting someone from a sit to a start is sort of the game changer in for-profit schools that justifies uh different regulation