CREW: Department of Education: Regarding For-Profit Education: 11/29/10 - OPEPD Responsive Docs

Smith, Zakiya
Cc:

Subject:

Pauline Abernathy [pabernathy@ticas.org] Thursday, June 03, 2010 2:48 PM.

jkvaal@gmail.com; Arsenault, Leigh; Manheimer, Ann; Shireman, Bob; Kanter, Martha; Hamilton, Justin; Smith, Zakiya; Gomez, Gabriella

Lauren Asher; Connie Myers .

Tea Party concern about for-profit education

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FYI. See link below to Tea Party concern about the use of taxpayer dollars:

Is Corinthian College the ACORN of Education? http://www.teapartypatriotslive.comI2009112/14/is-corinthian-college-the-acorn-of-educationl

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Smith, Zakiya

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Nassirian, Barmak [NassirianB@aacrao.org] Thursday, September 03, 2009 11 :09 AM Kanter, Martha; Shireman, Bob

Smith, Zakiya; Arsenault, Leigh

Thank you

Dear Dr. Kanter and Bob,

Thank you for taking the time to meet with us. We look forward to working with you on expanding access to quality

postsecondary education for all students, .

After the meeting, I looked up the unemployment rate for the construction sector, which, sadly, stood at 18.2% in July 2009. This is nearly twice the national unemployment rate of 9.7% (http://www.bls.gov/news.retease/empsit.t11.htm). I do believe that any description of that sector as "booming" is an outright lie that violates the Department'sexistinq regulations

in 34 CFR 668.72. '

We believe that a strong statement on the importance of 90/10, the publication of multi-year cohort default rates that capture defaults that occur outside the current two-year window, and additional program reviews would be immediate steps that the Department can take to better protect students and the taxpayers.

Regards,

Bannak Nassirian AACRAO

1 Dupont Circle, Suite 520 Washington, DC 20036 202/263-0290 Direct

2021 872-8857 Fax

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Smith, Zakiya

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Steve Burd [Burd@newamerica.netJ Wednesday, September 30, 2009 5:28 PM Shireman, Bob

Smith, Zakiya

FW: Our Mutual Friend

Hey Bob _'-

You should listen to this-Diane Auer Jones giving strategic lobbying advice to the for profits. Basically demonizes you guys

From: Nassirian, Barmak [mailto:NassirianB@aacrao.orgJ Sent: Wednesday, September 30,2009 1:47 PM

To: Steve Burd

Subject: Our Mutual Friend

A moron on public display:

Diane Jones call hosted by Concept Capital replay number 8009643261

Barmak N assirian AACRAO

1 Dupont Circle, Suite 520 Washington, DC 20036 2021 263-0290 Direct

2021 872-8857 Fax

Diane Jones call hosted by Concept Capital replay number 8009643261

Smith. Zakiya

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Rob MacArthur [rmacarthur@altresearch.com]

Tuesday, February 23, 2010 1 :27 PM

'Nassirian, Barmak'; burd@newamerica.net; cdurrance@rainmedia.net; 'David Hawkins'; 'Edie Irons'; 'Elizabeth Medina'; 'Mary Houston'; 'Joshua Kuntz'; 'Kelly Field'; MMcshort@aol.com; 'Nancy G. Krop'; 'Prashant Rao'; Tom Fisher'; Smith, Zakiya

New GAO report regarding incentive compensation

GAO report Feb 23 201 O.pdf

Subject:

Attachments:

The letter came out on the zs". I am not sure how widely distributed it is though. It may affect the stock prices in the industry if the market believes there will be increased scrutiny from various parts of the federal government. In short, it documents the history of the 12 Safe Harbors and incentive compensation.

Rob MacArthur

Alternative Research Services, Inc. 203-244-5174

rmacarthu r@altresearch.com

Disclaimer

This material has been prepared by Alternative Research Services Inc., a Connecticut-registered Investment Adviser, employing appropriate expertise, and in the belief that it is fair and not misleading. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. We do not guarantee its accuracy. This information is not to be used as the primary basis of investment decisions. Copying, faxing, replicating, or quoting from this report without the express written consent of Alternative Research Services Inc. is forbidden. This is not an offer or solicitation of an offer to buy or sell any security or investment. Any opinion or estimates constitute our best, and are subject to change without notice. This material is intended for use only by professional or institutional investors and not the general investing public. The firm does not make a market or hold positions in the securities mentioned herein, nor does the firm maintain any investment banking relationships in such securities.

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Barkmeier, Alexandria

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Nassirian, Barmak [NassirianB@aacrao.org] Wednesday, August 19, 2009 11 :28 AM Smith, Zakiya

Deanne Loonin; Christine Lindstrom; leg@usstudents.org; David Hawkins RE: Scheduling Meeting with Martha and Bob

2 pm on the 1st is perfect. I assume you're at 400 Maryland Avenue? What office number?

Also, do you need anything else beyond our names for us to get in?

barmak



2021 872-8857 Fax

-----Original Message-----

From: Smith, Zakiya [mailto:Zakiya.Smith@ed.qov] Sent: Wednesday, August 19, 2009 11:21 AM

To: Nassirian, Barmak

Cc: Deanne Loonin; Christine Lindstrom; leg@usstudents.org; David Hawkins Subject: RE: Scheduling Meeting with Martha and Bob

It looks like a time between 2-3pm on the 1st would be best for Martha and Bob. Does that work for you all?

Zakiya

. From: Nassirian, Barmak [mailto:NassirianB@aacrao.orgl Sent: Wednesday, Augusf 19,2009 11:19 AM

To: Smith, Zakiya

Cc: Deanne Loonin; Christine Lindstrom; leq@usstudents.org; David Hawkins Subject: RE: Scheduling Meeting with Martha and Bob

Zakiya,

The 24th would be difficult for several of us, but we can all make the September 1 date. Could you kindly let us know what time works best for Martha and Bob?

Best,

barmak



2021 872-8857 Fax

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From: Smith, Zakiya [mailto:Zakiya.Smith@ed.gov] Sent: Wednesday, August 19, 2009 9:50 AM


Subject: Scheduling Meeting with Martha and Bon

Hello Barmak,

I'm following up on a request to schedule a meeting between some student and consumer advocates and the Under Secretary and Deputy Undersecretary.

Would your group be available to meet as early as this upcoming Monday, the 24th? Martha and Bob are both available on this day either between lO-l1am or between 1-2pm. After Monday, they are not both available again until the afternoon of September 1st. Please let me know how you would like to proceed.

Hope all is well-

Zakiya

Zakiya Smith

Office of the Under Secretary U.S. Department of Education (202) 205-9891 Zakiya.Smith@ed.qov

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Barkmeier. Alexandria

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Nassirian, Barmak [NassirianB@aacrao.org] Wednesday, August 19, 2009 11: 19 AM Smith, Zakiya

Deanne Loonin; Christine Lindstrom; leg@usstudents.org; David Hawkins RE: Scheduling Meeting with Martha and Bob

Zakiya,

The 24th would be difficult for several of us, but we can all make the September 1 date. Could you kindly let us know what time works best for Martha and Bob?

Best,

barmak

Barmak Nassirian AACRAO


2021 872-8857 Fax


F.rom: Smith, Zakiya [mailto:Zakiya.Smith@ed.qov] Sent: Wednesday, August 19,20099:50 AM



Hello Barmak,

I'm following up on a request to schedule a meeting between some student and consumer advocates and the Under Secretary and Deputy Undersecretary.

Would your group be available to meet as early as this upcoming Monday, the 24th? Martha and Bob are both available on this day either between lO-llam or between t-zpm. After Monday, they are not both available again until the afternoon of September 1st. Please let me know how you would like to proceed.

Hope all is well-

Zakiya

Zakiya Smith

Office of the Under Secretary U.S. Department of Education (202) 205-9891 Zakiya.Smith@ed.gov

1

Barkmeier. Alexandria

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Nassirian, Barmak [NassirianB@aacrao.org] Wednesday, August 19, 200910:43 AM Smith, Zakiya

RE: Scheduling Meeting with Martha and Bon

checking

Barrnak N assirian AACRAO

1 Dupont Circle, Suite 520 Washington, DC 20036 202/263-0290 Direct 202/872-8857 Fax


From: Smith, Zakiya [mailto:Zakiya.Smith@ed.gov] Sent: Wednesday, August 19, 2009 9:50 AM



Hello Barmak,

I'm following up on a request to schedule a meeting between some student and consumer advocates and the Under Secretary and Deputy undersecretary.

Would your group be available to meet as early as this upcoming Monday, the 24th? Martha and Bob are both available on this day either between lO-llam or between 1-2pm. After Monday, they are not both available again until the afternoon of September 1st. Please let me know how you would like to proceed.

Hope all is well-

Zakiya

Zakiya Smith

Office of the Under Secretary u.S. Department of Education (202) 205-9891 Zakiya.Smith@ed.gov

1


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Glickman, Jane

Friday, May 29, 20094:33 PM

Smith, Zakiya; Ritsch, Massie; Shireman, Bob; Hamilton, Justin; Manheimer, Ann RE: Kelly's afternoon blog

Thanks.

Will call her now.

-----Original Message----From: Smith, Zakiya

Sent: Friday, May 29, 2009 4:33 PM

To: Glickman, Jane; Ritsch, Massie; Shireman, Bob; Hamilton, Justin; Manheimer, Ann Subject: RE: Kelly's afternoon blog

Yes.

-----Original Message----From: Glickman, Jane


To: Ritsch, Massie; Smith, Zakiya; Shireman, Bob; Hamilton, Justin; Manheimer, Ann Subject: RE: Kelly's afternoon blog

Sure, I'll call her. Was the nonprofit/higher ed advocate outreach the same -- a conference call to them ?

-----Original Message----From: Ritsch, Massie


To: Smith, Zakiya; Shireman, Bob; Hamilton .. Justin; Glickman, Jane; Manheimer, Ann Subject: Re: Kelly's afternoon blog

Pretty good. I wish she hadn't made it sound like the only outreach on .this was to WallSt, though

Justin!Jane, could you let Kelly know we did a separate call beforehand for the for-profit institutions and their assns? We focused on the nonprofits and higher ed advocates and think tanks on Thurs, since the issues aren't just about for-profits

Thanks, Massie

From: Smith, Zakiya

To: Ritsch, Massie; Shireman, Bob; Hamilton, Justin; Glickman, Jane; Manheimer, Ann Sent: Fri May 29 15:19:05 2009

Subject: ,Kelly's afternoon blog

Jane, this is what she was so busy with today ...

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http://chronicle.com/news!article/6556/education-department-makes-rare-call-to-for-profitanalysts-and-investors

Education Department Makes Rare Call to For-Profit Analysts and Investors

Washington - Aiming to calm a jittery for-profit sector, the Education Department took the unusual step today of briefing investors and analysts about its regulatory plans.

In a conference call with investment analysts and reporters, department officials described their plans to issue new rules governing incentive compensation and job-placement rates, among other topics.

Proprietary colleges have been on edge since President Obama took office, fearing that the new administration Iliouid ramp up government oversight of the for-profit sector. Their fears deepened on Tuesday, when the Education Department announced <http:L!chronicle.com!news!article!?id=6533> that it would take a "fresh look" at federal restrictions on the bonuses paid to individuals or organizations for meeting recruitment or admissions goals, and might require for-profit and technical colleges to provide more evidence that they are preparing their students for the work force.

Since then, the department has been inundated with calls from for-profit analysts, said Robert M. Shireman, deputy under secretary of education.

"I generally try to avoid talking to analysts, but it was becoming clear that there was some interest in an explanation of the Federal Register notice," he said, referring to the announcement of rule making.

"Some interest" may be an understatement. In all, 657 callers clogged the lines to hear the department's explanation. Analysts said it was rare for the department to hold a briefing specifically for them.

Whether the sector was reassured by Mr. Shireman's remarks remains to be seen. While the deputy under secretary didn't attack for-profit colleges, he didn't exactly praise them either. Asked if the for-profit sector (tprovides a useful service" that nonprofit colleges don'~ provide, he was noncommittal.

"There are effective schooois and less-effective schools in every sector, so our focus needs to be on quality regardless of sector," he said.

Trace A. Urdan, an analyst for the investment-research firm Signal Hill, who had asked the question, described Mr. Shireman's response as a "Rorschach test."

"If you believe the fears are overblown, then you read this as saying they're not targeting for-profits," he said. ((If you're otherwise inclined, you could read it as more negative than positive."

Stocks for the for-profit sector fell on Tuesday, after the department announced the rule making, but rose slightly this morning, on expectations that the call might allay the sector's fears.~Kelly Field

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Zakiya Smith

Office of the Under Secretary U.S. Department of Education (202) 205-9891

Zakiya.Smith@ed.gov <mailto:Zakiya.Smith@ed.gov>

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Barkmeier, Alexandlria

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To:

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Ritsch, Massie

Friday, May 29, 20094:25 PM .

Smith, Zakiya; Shireman, Bob; Hamilton, Justin; Glickman, Jane; Manheimer, Ann Re: Kelly's afternoon blog

Pretty good. I wish she hadn't made it sound like the only outreach on this was to Wall St, though

Justin/Jane, could you let Kelly know we did a separate call beforehand for the for-profit institutions and their assns? We focused on the nonprofits and higher ed advocates and think tanks on Thurs, since the issues aren't just about for-profits

Thanks, Massie

From: Smith, Zakiya

To: Ritsch, Massie; Shireman, Bob; Hamilton, Justin; Glickman, Jane; Manheimer, Ann Sent: Fri May 29 15:19:052009

Subject: Kelly's afternoon blog


http://chronide.com/news/article/6556/education-department-makes-rare-call-to-for-profit-analysts-and-investors


Washington - Aiming to calm ajittery for-profit sector, the Education Department took the unusual step today of briefing investors and analysts about its regulatory plans.


Proprietary colleges have been on edge since President Obama took office, fearing that the new administration would ramp up government oversight of the for-profit sector. Their fears deepened on Tuesday, when the Education Department announced that it would take a "fresh look" at federal restrictions on the bonuses paid to individuals or organizations for meeting recruitment or admissions goals, and might require for-profit and technical colleges to provide more evidence that they are preparing their students for the work force.


"J generally try to avoid talking to analysts, but it was becoming clear that there was some interest in an explanation of the Federal Register notice," he said, referring to the announcement of rule making.

"Some interest" may be an understatement. In all, 657 callers clogged the lines to hear the department's explanation. Analysts said it was rare for the department to hold a briefmg specifically for them.

Whether the sector was reassured by Mr. Shireman's remarks remains to be seen. While the deputy under secretary didn't attack for-profit colleges, he didn't exactly praise them either. Asked if the for-profit sector "provides a useful service" that nonprofit colleges don't provide, he was noncommittal.

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.. There are effective schoools and less-effective schools in every sector, so our focus needs to be on quality regardless of sector," he said.


"If you believe the fears are overblown, then you read this as saying they're not targeting for-profits," he said. "If you're otherwise inclined, you could read it as more negative than positive."

Stocks for the for-profit sector fell on Tuesday, after the department announced the rule making, but rose slightly this morning, on expectations that the call might allay the sector's fears.-Kelly Field

Zakiya Smith


Zakiya. Smith@ed.gov

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Ritsch, Massie

Friday, May 29, 2009 5:55 PM

Smith, Zakiya; Shireman, Bob; Hamilton, Justin; Glickman, Jane; Manheimer, Ann; Macias, Wendy; Mould, Jim

Toll-free replay of analyst call

Subject:

I just set up a replay line of today's Wall St call -- a feature I didn't know about til some analysts asked for it -- but I'm told the recording won't be live til after 7 PM ET. Feel free to share:

Replay: 800-945-7621

Massie Massie Ritsch

U.S. Department of Education

From: Smith, Zakiya

To: Ritsch, Massie; Shireman, Bob; Hamilton, Justin; Glickman, Jane; Manheimer, Ann Sent: Fri May 29 15: 19:05 2009

Subject: Kelly's afternoon blog


http:Uchronicle.com/news!articie/6556!education-department-makes-rare-call-to-for-profit-analysts-and-investors


Washington - Aiming to calm ajittery for-profit sector, the Education Department took the unusual step today of briefing investors and analysts about its regulatory plans.


Proprietary colleges have been on edge since President Obama took office, fearing that the new administration would ramp up government oversight of the for-profit sector. Their fears deepened on Tuesday, when the Education Department announced that it would take a "fresh look" at federal restrictions on the bonuses paid to individuals or organizations for meeting recruitment or admissions goals, and might require for-profit and technical colleges to provide more evidence that they are preparing their students for the work force.


~'I generally try to avoid talking to analysts, but it was becoming clear that there was some interest in an explanation of the Federal Register notice," he said, referring to the announcement of rule making.

"Some interest" may be an understatement. In all, 657 callers clogged the lines to hear the department's explanation. Analysts said it was rare for the department to hold a briefing specifically for them.

Whether the sector was reassured by Mr. Shireman's remarks remains to be seen. While the deputy under secretary didn't attack for-profit colleges, he didn't exactly praise them either. Asked if the for-profit sector "provides a useful service" that nonprofit colleges don't provide, he was noncommittal.

"There are effective schooois and less-effective schools in every sector, so our focus needs to be on quality regardless of sector," he said.


"If you believe the fears are overblown, then you read this as saying they're not targeting for-profits," he said. "If you're otherwise inclined, you could read it as more negative than positive."

Stocks for the for-profit sector fell on Tuesday, after the department announced the rule making, but rose slightly this morning, on expectations that the call might allay the sector's fears.-Kelly Field

Zakiya Smith


Zakiya .Smith@ed.gov

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Ritsch, Massie

Wednesday, May 27, 2009 2:30 PM Smith, Zakiya

RE: Neg Reg update

Calls are set up at 2:30 and 3:45 (can change to 3;30 if you prefer, but my asst assumed we wanted some breathing room)

So send me some language on the calls' toplc(s) and we'll work up an invitation to send out

From: Smith, Zakiya

Sent: Wednesday, May 27,2009 12:56 PM To: Ritsch, Massie

Cc: Honevsett, Adam

Subject: RE: Neg Reg update

Ok, so I just talked to Bob, confirming what Massie and [just discussed on the phone. Two calls are good. One with the "friends/non profits" (2:30pm) and another with the higher ed associations (3:30pm). I have a list below of the first, group below. let me know if you think there are others that we are leaving out. As for the for profit groups, we'd like to leave them out of the associations call, and Bob and I will follow up with them separately. I'm about to step into a few meetings, so email me if you have questions. I sent Massie some background on the issue in a separate email, and links to those stories are below as well.

IHEP

College Board Pathways to College Peilinstitute

Ed Trust

Ed Sector

MDRC

USSA

US PIRG

New America CAP

AACRAO

National Consumer Law Center? NACAC

The Institute for College Access and Success Mark Kantrowitz-Finaid

BHEF

New America Foundation-Steve Burd/MaryEllen McGuire

U.S. Eyes For-Profit Colleges in New Round of Rule Making (Inside Higher Ed)

""Having just brought the curtain down on a series of negotiations over possible changes to federal rules governing higher education, the U.S. Education Department is starting a new round of deliberations -- and this time, the Obama administration is putting its stamp on the process by exploring several accountability issues related to for-profit higher education," Inside Higher Ed reports. "In a notice published in the Federal Register Tuesday, the department said its officials expected one rule making panel to examine possible rules to carry out changes Congress made to the Higher Education Act last summer related to the eligibility of foreignmedical and nursing schools to participate in U.S. financial

1

aid programs. But in addition to that set of issues, on which the department is required to regulate, said Daniel Madzelan, acting assistant secretary for postsecondary education, it will also explore a set of priorities that the 'new team in town' -the Obama administration -- is interested in pursuing. Several of those, Madzelan said, are 'accountability measures to ensure that the institutions that are participating in our Title IV programs are complying with basic statutory requirements."

You can read the complete May 27, 2009 Inside Higher Ed article on-line.

Additional Media Coverage

Education Department to Consider Changes in Student-Aid Rules The Chronicle of Higher Education


Sent: Wednesday, May 27, 2009 11:08 AM To: Smith, Zakiya

Cc: Honeysett, Adam


Zakiya,

We're happy to set up the call and issue invitations if you provide the groups (or types of groups) you'd like to invite.

Would 2 PM tomorrow work for a call? How many people would you expect to join? I assume you'd want participants to be able to ask questions.

Please send some background on the issue, such as the Inside Higher Ed article that's mentioned and the Register notice.

Thanks, Massie


Sent: Wednesday, May 27, 2009 10:17 AM To: Ritsch. Massie; Honeysett, Adam Subject: Fw: Neg Reg update

Hi Massie,

Can we set up a call asap (like tomorrow) to talk to some key groups updating them on this fed register notice that just went out?

The backstory is, that we wanted to do a call before it went out, but weren't quite aware that it would go up so soon. So now we are getting tons of calls and we'd like to clarify asap.

It would be similar to the calls that we did during the pre-budget rollout in Feb. Adam, I think you helped set those up, right?

I know its last minute, but I'd like to get something out to people by COB today if possible. We are going to start getting frantic/nervous/curious emails and calls soon- (bob and I already have gotten a few already). I can let you know the groups that we'd like to have on each call no later than lpm today.

2

Thanks)

Zakiya

----- Original Message

From: Jennifer Scully) Legislation <jluciano@aft.org> To: Smith) Zakiya

Sent: Wed May 27 08:44:55 2009 Subject: Neg Reg update

Hi Zakiya

I hope you are well.

We saw the neg reg posting yesterday on HEOA. Our first question was what exactly would the Dept be looking for with this new committee - but it looks like that may have been answered with the Inside Higher Ed article. Is there any other info? We were also wondering if the people to serve on this new committee have been selected yet.

Any insight you may have and can share would be great.

Thanks in advance! Jenn Scully

AFT Legislation

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From:

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To:

Cc:

Subject:

Attachments:

HoneyseU, Adam

Wednesday, May 27, 2009 2:25 PM Ritsch, Massie

Smith, Zakiya

RE: Neg Reg update Query_ Zaklya.xls

Attached, please find a query of the groups Zakiya lists below. For many of the groups, I included both our "1 's" and "Z's." Please let me know if I can be of further assistance.

Adam

From: Smith, Zakiya

Sent: Wednesday, May 27, 2009 12:56 PM To: Ritsch, Massie

Cc: Honeysett, Adam


Ok, so I just talked to Bob, confirming what Massie and I just discussed on the phone. Two calls are good. One with the "friends/non profits" (2:30pm) and another with the higher ed associations (3:30pm). I have a list below of the first group below. Let me know if you think there are others that we are leaving out. As for the for profit groups, we'd like to leave them out of the associations call, and Bob and I will follow up with them separately. I'm about to step into a few meetings, so email me if you have questions. I sent Massie some background on the issue in a separate email, and links to those stories are below as well.

IHEP

College Board Pathways to College Peilinstitute

Ed Trust

Ed Sector

MDRC

USSA

US PIRG

New America CAP

AACRAO

National Consumer Law Center? NACAC

The Institute for College Access and Success Mark Kantrowitz-Finaid

BHEF

New America Foundation-Steve Burd/MaryElien McGuire

U.S. Eyes For-Profit Colleges in New Round of Rule Making (Inside Higher Ed)

""Having just brought the curtain down on a series of negotiations over possible changes to federal rules governing higher education, the U.S. Education Department is starting a new round of deliberations -- and this time, the Obama administration is putting its stamp on the process by exploring several accountability issues related to for-profit higher

education," Inside Higher Ed reports. "In a notice published in the Federal Register Tuesday, the department said its officials expected one rule making panel to examine possible rules to carry out changes Congress made to the Higher Education Act last summer related to the eligibility of foreign medical and nursing schools to participate in U.S. financial aid programs. But in addition to that set of issues, on which the department is required to regulate, said Daniel Madzelan, acting assistant secretary for postsecondary education, it will also explore a set of priorities that the 'new team in town' -the Obama administration -- is interested in pursuing. Several of those, Madzelan said, are 'accountability measures to ensure that the institutions that are participating in our Title IV programs are complying with basic statutory requirements."

You can read the complete May 27, 2009 Inside Higher Ed article on-line.

Additional Media Coverage

Education Department to Consider Changes in Student-Aid Rules The Chronicle of Higher Education


Sent: Wednesday, May 27, 2009 11:08 AM To: Smith, Zakiya

Cc:' Honeysett, Adam


Zakiya,

We're happy to set up the call and issue invitations if you provide the groups (or types of groups) you'd like to invite.

Would 2 PM tomorrow work for a call? How many people would you expect to join? I assume you'd want participants to be able to ask questions.

Please send some background on the issue, such as the Inside Higher Ed article that's mentioned and the Register notice.

Thanks, Massie


Sent: Wednesday, May 27, 2009 10:17 AM To: Ritsch, Massie; Honeysett, Adam Subject: Fw: Neg Reg update

Hi Massiej

(an we set up a call asap (like tomorrow) to talk to some key groups updating them on this fed register notice that just went out?

The backstory is that we wanted to do a call before it went out, but weren't quite aware that it would go up so soon. So now we are getting tons of calls and we'd like to clarify asap.

It would be similar to the calls that we did during the pre-budget rollout in Feb. Adam, I think you helped set those up, right?

I know its last minute, but I'd like to get something out to people by COB today if possible. We are going to start getting frantic/nervous/curious emails and calls soon- (bob and I already have gotten a few already). I can let you know the groups that we'd like to have on each call no later than 1pm today.

2

-

GAO

I!o.. __ , -A=o,-' untDbliitlJ *Irrtl!grl!y • ReBabill1y

United States Government Accountability Office Washington, DC 20548

February 23,2010

The Honorable Tom Harkin Chairman

The Honorable Michael B. Enzi Ranking Member

Corrunittee on Health, Education, Labor, and Pensions United States Senate

The Honorable George Miller Chairman

The Honorable John P. Kline Ranking Member

Corrunittee on Education and Labor House of Representatives

Subject: Higher Education: Information on Incentive Compensation Violations Substantiated by the U.S. Department of Education

In 1992, Congress banned schools participating in federal student aid programs from paying commissions, bonuses, or other incentive payments to individuals based on their success in enrolling students or securing financial aid for them. 1 Congress instituted this incentive compensation ban to eliminate abusive recruiting practices in which schools enrolled unqualified students who then received federal student aid funds. In 2002, the U.S. Department of Education (Education) issued regulations-commonly referred to as "safe harbors" -that allowed for 12 activities or payment arrangements that schools could use without violating the ban against incentive compensation. As of January 2010, Education was reviewing these safe harbor regulations as part of a negotiated rule making process to maintain or improve federal student aid programs.

The Higher Education Opportunity Act (HEOA) mandated that GAO conduct a study on Education's enforcement of the incentive compensation ban in light of the safe harbors and report on the number of violations substantiated by the Secretary of Education since 1998, the nature of these violations, and the names of the institutions involved. 2 As agreed with your offices, this report provides information on violations of the incentive compensation ban substantiated by the Secretary since 1998. We will provide additional information on Education's enforcement of the incentive compensation ban in a subsequent report.

[Schools participate in federal student aid programs under Title IV of the Higher Education Act of 1965 (HEA), as amended. The ban on incentive payments was added to the REA by the Higher Education Amendments of 1992, Pub. 1. No. 102-325, § 490.

"Section 1124 of the Higher Education Opportunity Act, Pub. L .. No. 110-315, Aug. 14,2008.

GAO-IO-370R Higher Education

This report is based on our analysis of Education data, program reviews, and audit reports related to the incentive compensation ban from January 1998 through December 2009. As required by the mandate, our analysis examines incentive compensation cases initiated and substantiated by the Secretary of Education since 1998. For the purposes of our report, we defined cases initiated during this time period as program reviews begun by Education's staff or any outside audit report received by Education for eventual resolution on or after January 1, 1998. S We defined substantiated violations during this period as those cases in

. which a violation of the incentive compensation ban was noted in an Education final determination letter by December 10, 2009, the most recent information available at the time of our review.' We also limited our analysis to violations found at schools located in the United States." Education maintains a database of incentive compensation findings and gave us data on schools within the above time period. We assessed the reliability of those data elements needed for our study by (1) examining the data; (2) comparing the data to program reviews, audit reports, and final determination letters; and (3) interviewing Education officials. Based on this assessment, we determined the number of schools that had violations identified and substantiated by Education since 1998. We determined that the data on violations at these schools are sufficiently reliable for the purposes of this report. In addition to' our data analysis, we reviewed relevant laws and regulations, and conducted interviews with officials from Education, Education's Office of the Inspector General, and various higher education associations. While this report provides data on violations substantiated by Education, it does not examine the penalties associated with these violations or assess the overall impact of the safe harbor regulations on Education's efforts to enforce the incentive compensation ban.

We conducted our work from December 2009 through February 2010, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings.

In summary, we found that between 1998 and 2009 Education substantiated incentive compensation violations at 32 schools. Of the 32 schools with substantiated violations, 17 schools were found to have violated the ban in the 5 years before final safe harbor regulations were published on November 1, 2002, and 15 schools were found to have violated the ban in the 7 years afterward. Many of the violations involved payments by schools to their staff in the form of bonuses or commissions for successfully enrolling students in the school, while a smaller number involved payments to third party contractors or noncash rewards to staff for successfully enrolling students. In addition to finding violations at 32 schools, Education entered into settlement agreements with 22

~hroughout this report, we use the terms initiated and identified interchangeably ..

"For the purposes of this report, we refer to violations substantiated by the Secretary as violations found or substantiated by Education, using the words found and substantiated interchangeably.

'In addition to violations by U.S. schools of the incentive compensation ban, Education data also. noted two separate incentive compensation violations at one foreign school Foreign schools approved by Education can administer and disburse funds for federal student aid programs to U.S. citizens and certain noncitizens, such as permanent residents, eligible for Federal Family Education Loans and enrolled in a certificate or degree program at that school. Both of the violations identified at the foreign school were substantiated by Education.

Page 2


other schools. Education does not have data on the total number of school reviews and audits initiated by the Secretary and outside auditors for potential violations of the incentive compensation ban during the time period we reviewed." For this reason, it is unknown whether the total number of reviews and audits conducted each year has changed over the course of this time period and what percentage of these cases have resulted in substantiated violations.

Background

U.S. Department of Education and the Incentive Compensation Ban

Education is responsible for overseeing federal student aid programs authorized under

Title IV of the Higher Education Act of 1965, as amended.' In this role, it is responsible for . enforcing the statutory ban against incentive compensation which prohibits schools that receive Title IV student aid funds from providing " ... any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any persons or entities engaged in any student recruiting or admission activities or ill making decisions regarding the award of student financial assistance ... "s

The ban applies to all schools, including proprietary (also known as private for-profit), public, and private nonprofit schools.

Safe Harbor Regulations

On November 1, 2002, Education published regulations-commonly referred to as the safe harbor regulations-that allowed for 12 activities or payment arrangements that schools could use without violating the statutory prohibition against incentive compensation. 9 These arrangements include: (1) adjustments to employee compensation that are not based "solely" on the number of students recruited, admitted, enrolled, or awarded financial aid; (2) compensation to recruiters who enroll students in nontitle IV eligible programs; (3) compensation for contracts with employers to provide training; (4) profit-sharing bonus plans; (5) compensation based upon program completion by students; (6) compensation for pre-enrollment activities; (7) compensation for managerial and supervisory employees; (8) token gifts; (9) profit distributions; (10) compensation for Internet-based activities; (11) compensation to third parties for nonrecruitment activities; and (12) compensation to third

6For the purposes of our report, we focused on the total efforts to monitor compliance with the incentive compensation ban. While Education notes that approximately 5,000 audits have been conducted at schools each year and these audits have checked for incentive compensation violations, Education does not have data on how many program reviews examining incentive compensation issues have been conducted each year. As a result, data on the combined number of program reviews and audits initiated for potential incentive compensation violations since 1998 are not available.

'20 U.S.C. § 1001 et seq.

820 U.S.C. § 1094(a)(20). The ban does not apply to the recruitment of foreign students residing in foreign countries who are not eligible to receive federal student aid from the U.S. government.

967 Fed. Reg. 67048.

Page 3


parties for recruitment activities. For more detailed information on the 12 safe harbors, see enclosure 1. When Education published the regulations in November 2002, the agency applied the safe harbors to both ongoing and new reviews and audits. 10

Program Reviews and Audits

Education department employees conduct program reviews of schools to monitor compliance with federal laws and regulations. The reviewers examine school records, interview institution staff and students, and review relevant student information, among other things. Program reviews can be conducted on-site at the institution or off-site, in which case institutions are asked to submit copies of selected records to officials at Education. ill addition to program reviews conducted by Education employees, independent auditors conduct annual compliance audits of schools, and Education's Office of the Inspector General staff conduct their own audits and provide information and referrals to Education." Education is required to resolve program deficiencies identified in both program reviews and audit reports and may impose penalties on schools found in violation." As part of the resolution process, Education generally sends a program review or audit determination letter to the school describing the violations found and any corrective actions the school must take to address the finding. In addition, at any point during this process, Education may also choose to resolve a case through a settlement agreement, which often finalizes the case without an acknowledgment of wrongdoing.

Between 1998 and 2009, Education Substantiated 32 Incentive Compensation Violations, but the Total Number of Schools Examined for Potential Violations Is Unknown

Between 1998 and 2009, Education found that 32 schools had violated the incentive compensation ban, but the total number of incentive compensation reviews and audits conducted over this time period is unknown." Prior to the implementation of safe harbor regulations in 2002, 17 schools were found to have incentive compensation violations over a period of 5 years. After the implementation of safe harbor regulations, 15 schools were found to have violations over a period of 7 years. Although our data analysis presents information on incentive compensation violations substantiated by Education, it does not

"Although these regulations were published with an effective date of July 1, 2003, as required by section 482(c) of the HEA (20 U.S.C. § 1089(c)), the Secretary of Education used her authority under section 482(c)(2)(A) of the HEA (20 U.S.C. § 1089(c)(2)(A)) to allow institutions to implement the regulations as of Nov. 1, .2002. In a memo dated Nov. 19, 2002, Education officials stated that the safe harbor regulations should be applied to ongoing cases. Education did not apply the safe harbor regulations retroactively to closed audits and reviews that had final determinations prior to Nov. 1, 2002.

"Institutiorts that receive Title IV funds must submit an annual audit to Education. A certified independent auditor must prepare the audit.

t2In certain circumstances, Education may fine a school or suspend, limit, or terminate a school's participation in Title IV programs.

lSOne of the 32 schools had three separate incentive compensation violations. All of the other schools had one substantiated incentive compensation violation. In addition, 4 of the 32 schools had multiple campus locations where incentive compensation violations were also substantiated by Education.

Page 4

GAO-IO-370R Higln.er Education

reflect the total number of schools for which reviews and audits were initiated by Education and outside auditors for potential violations of the incentive compensation ban because this data is not collected by Education. Consequently, it is unlmown whether the number of incentive compensation cases changed over the course of the time period reviewed and what percentage of these cases resulted in substantiated violations.

Figure 1 shows the number of schools with incentive compensation violations substantiated by Education from 1998 through 2009. Many of the violations involved payments by schools to their staff in the form of bonuses or commissions for successfully enrolling students in the school, while a smaller number involved payments to third party contractors or noncash rewards to staff for successfully enrolling students. For more detailed information on the nature of the violations, as well as the names of the schools, see enclosure II.

Figure 1: Number of Schools with Incentive Compensation Violations Substantiated by Education from 1998 through 2009

Nllmber of schools found in violation

6

5

._-- Safe Harbor

4

r-- r-- Regulation$
Published
-
r-- - - -
- I--- r--
- ,------ ,----- 3

2

o

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Year

DAUdit D Program review

Source: GAO analysis of Education data, and program review and audit reports.

Notes:

As required by the mandate, our analysis focuses on schools where violations of the incentive compensation ban were identified and substantiated by Education since 1998.

Final safe harbor regulations were published on Nov. 1, 2002, and were applied to both ongoing and new reviews and audits at that time. The safe harbors were not applied retroactively to closed reviews and audits that had final determinations prior to Nov. 1, 2002.

Education did not find any schools in violation of the incentive compensation ban in November or December of 2002, or in 2006.

The one school that had three separate violations is listed once. under 1998 because all three violations were substantiated in that year.

Page 5


Education data also provide information on the type of schools that have violated the incentive compensation ban. From 1998 through 2009, proprietary schools had more substantiated violations than other types of schools. In total, 19 proprietary schools, 12 private nonprofit schools, and 1 public school had substantiated incentive compensation violations. !4

In addition to the 32 schools with substantiated violations between 1998 and 2009, 27 schools were identified by Education data, program reviews, Office of Inspector General audits, or independent audits as having potential violations of the incentive compensation ban during this time period. While Education is currently reviewing a few of these cases, in the others Education either found no incentive compensation violations or reached settlement agreements with the schools.

• As of December 2009, three schools under review had not yet received a final decision or a determination letter from Education. !5

• Two other schools identified as having potential violations were found by Education to have not violated the ban." At the first school, Education found that it was not a violation of the incentive compensation ban for teachers to receive commissions for students completing certain parts of the program. At the second school, Education found that commissions paid to a third-party representative based on the number of students submitting information cards following an informational presentation was not a violation of the incentive compensation ban.

• Additionally, Education entered into settlement agreements with 22 schools." Many of the settlement cases involved incentive payments made to school employees based on the number of students enrolled. Generally, these settlements state that the agreements do not constitute an admission or acknowledgment of noncompliance or wrongdoing by either the institution or Education.

Agency Comments

We provided a draft of this report to the Department of Education for review and

comment. Education did not provide formal comments on this report, but did provide some technical comments that we incorporated, as appropriate.

"Educanon data show that prior to the publication of safe harbors, 12 proprietary schools and 5 private nonprofit schools had substantiated incentive compensation violations. After the publication of safe harbors, 7 proprietary schools, 7 private nonprofit schools, and 1 public school had substantiated violations.

"These cases without a final decision involve two private nonprofit schools and one public school.

"Education did not find incentive compensation violations at two proprietary schools, Education made these determinations in 2000 and 2007 ..

!7While there were 22 schools that entered into settlement agreements, 1 school had 2 separate settlements, bringing the total number of settlements to 23. Of the 23 settlements, 1 took place prior to the publication of safe harbors, and 22 took place afterward. The settlements involved 3 proprietary schools and 19 private nonprofit schools.

Page 6


We are sending copies of this report to appropriate congressional cormnittees and the Secretary of Education. In addition, the report will be available at no charge on GAO's Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (206) 287-4820 or iritanik@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in enclosure m.

Sincerely yours,

Katherine M. lritani, Acting Director

Education, Workforce, and Income Security Issues

Enclosures - 3

Page 7


Enclosure I

Department of Education (Education) Safe Harbor Regulations

The Safe Harbor regulations, found at 34 C.F.R. § 66S.14(b)(22)(U) provide that the activities and arrangements schools may carry out without violating the incentive compensation ban include, but are not limited to, the following activities and arrangements:

(1) The payment of fixed compensation, such as a fixed annual salary or a fixed hourly wage, as long as that compensation is not adjusted up or down more than twice during any 12-month period, and any adjustment is not based solely on the number of students recruited, admitted, enrolled, or awarded financial aid. For this purpose, an increase in fixed compensation resulting from a cost of living increase that is paid to all or substantially all full-time employees is not considered an adjustment.

(2) Compensation to recruiters based upon their recruitment of students who enroll only in programs that are not eligible for Title IV, HEA program funds.

(3) Compensation to recruiters who arrange contracts between the institution and an employer under which the employer's employees enroll in the institution, and the employer pays, directly or by reimbursement, 50 percent or more of the tuition and fees charged to its employees; provided that the compensation is not based upon the number of employees who enroll in the institution, or the revenue they generate, and the recruiters have no contact with the employees.

(4) Compensation paid as part of a profit-sharing or bonus plan, as long as those payments are substantially the same amount or the same percentage of salary or wages, and made to all or substantially all. of the institution's full-time professional and administrative staff. Such payments can be limited to all, or substantially all, of the full-time employees at one or more organizational level at the institution, except that an organizational level may not consist predominantly of recruiters, admissions staff, or financial aid staff.

(5) Compensation that is based upon students successfully completing their educational programs, or one academic year of their educational programs, whichever is shorter. For this purpose, successful completion of an academic year means that the student has earned at least 24 semester or trimester credit hours or 36 quarter credit hours, or has successfully completed at least 900 clock hours of instruction at the institution.

(6) Compensation paid to employees who perform clerical "pre-enrollment" activities, such as answering telephone calls, referring inquiries, or distributing institutional materials.

(7) Compensation to managerial or supervisory employees who do not directly manage or supervise employees who are directly involved in recruiting or admissions activities, or the awarding of Title IV, REA program funds.

(S) The awarding of token gifts to the institution's students or alumni, provided that the gifts are not in the form of money, no more than one gift is provided annually to an individual, and the cost of the gift is not more than $100.

(9) Profitdistrlbutions are proportionately based upon an individual's ownership interest in the institution.

PageS


Enclosure I

(10) Compensation paid for Internet-based recruitment and admission activities that provide information about the institution to prospective students, refer prospective students to the institution, or permit prospective students. to apply for admission online.

(11) Payments to third parties, including tuition-sharing arrangements, that deliver various services to the institution, provided that none of the services involve recruiting or admission activities, or the awarding of Title IV, REA program funds.

(12) Payments to third parties, including tuition-sharing arrangements, that deliver various services to the institution, even if one of the services involves recruiting or admission activities or the awarding of Title IV, REA program funds, provided that the individuals performing the recruitment or admission activities, or the awarding of Title IV, REA program funds, are not compensated in a manner that would be impermissible under paragraph (b)(22) of this section. [Section (b)(22) prohibits the payment of any commission, bonus, or other incentive payment based directly or indirectly upon success in securing enrollments or financial aid to any person or entity engaged in any student recruiting or admission activities or in making decisions regarding the awarding of Title IV, REA program funds].

Page 9.

. GAO-IO-370R Higher Education

Enclosure II

List of Violations Substantiated by the Department of Education (Education)
Table 1: Violations Substantiated by Education
Date Review
substantiated School name Location method Description of violation
10/28/1998 Euro Hair School Corpus Christi, Tex. Audit The school paid its director incentive
payments.
11/18/1998 Professional Hair Design Greenville, S.C. Audit Documentation describing the specific
Academy' nature of the incentive compensation
violation was not available.
11711999 Huntington Institute Norwich, Conn. Audit The school paid the Director of
Admissions bonuses totaling $5,799,
based on potential student leads.
2/17/1999 The Hair Design School Jacksonville, Fla. Audit Documentation describing the specific
nature of the incentive compensation
41211999 Graceland College Lamoni, Iowa Program The school paid a third party contractor
review commission payments equivalent to a
percentage of the students' tuition (60
percent at initial enrollment and 40
percent at re-enrollment). The
payments totaled nearly $6 million.
4/19/1999 Johnson & Wales Providence, R.I. Program The school was paying its admissions
University review personnel commissions or bonuses
based on their success in securing
enrollments.
9/23/1999 Liceo de Arte, Disenos y Caguas, P.R. Audit The school paid its enrollment officers
Comercio car allowances based on their success
in securing enrollments. The car
allowance amount was directly related
to the number of enrollments secured
by the enrollment officer.
2/24/2000 Culver-Stockton College ·Canton, Mo. Audit The school awarded bonus payments
totaling $2,575 to two admissions
counselors for achieving a targeted
number of enrollments.
5/24/2000 Rochester College Rochester Hills, Audit The school gave incentive payments to
Mich. its admissions representatives based
on recruiting performance.
10/3/2000 Nielsen Electronics Charleston, S.C. Audit The school paid a bonus to one
Institute recruiter.
121812000 Computer Learning Alexandria, Va. Program The school assigned annual salary
Centers" review ranges based on the average number
01 students a recruiter enrolled per
month and increased employees'
salaries if they achieved a target
number of enrollments during an
evaluation period.
3/22/2001 Cheryl Fell's School of Niagara Falls, N.Y. Audit The school paid a total of $200 in
Business referral fees to three students for
enrolling other students. Page 10


Enclosure II
Date Review
substantiated School name Location method Description of violation
7/26/2001 Precision Technical Sacramento, Calif. Audit The school paid an employee $2,975,
Institute based directly on success in securing
enrollments.
8/212001 CC's Cosmetology Tulsa, Okla. Audit The school paid commissions to staff
College based on the number of students
enrolled.
1/24/20.0.2 National Aviation Clearwater, Fla. Audit The school paid referral fees to third
Academy of Mississippi parties, totaling $3,000..
9/12120.02 Averett University Danville, Va. Audit The school had an arrangement to
share revenue with a third party, based
on the number of students who
enrolled in a study group program.
10/16/20.02 Texas Careers San Antonio, Tex. Audit The Laredo campus of this school
provided payments to 128 students for
the referral of other students to the
campus. The campus paid a total of
$3,225 in referral bonuses over a 2-
year period.
2/13/20.0.3 High-Tech lnsmute" Phoenix, Ariz. Program The compensation program of High-
review Tech Holdings' (the school's parent
company) telemarketing department
provided bonuses to those engaged in
student recruiting activities based on
success in securing enrollments ..
2113/20.0.3 The Bryman School of Phoenix, Ariz. Program The compensation program of High-
Arizona" review Tech Holdings' (the school's parent
company) telemarketing department
provided bonuses to those engaged in
student recruiting activities based on
success in securing enrollments.
7/21200.3 Newbury College Brookline, Mass. Program Documentation describing the specific
review nature of the incentive compensation
8/14/20.0.3 Pittsburgh Beauty Pittsburgh, Pa. Program The school awarded commission
Academy review payments to employees based on
success in securing the enrollment 01
students who were eligible for Title IV
program funds.
8/21/20.0.3 Ohio Valley College' Vienna, W.Va. Program The school paid a total of $3,0.0.0. in
review bonuses to admissions staff over a 2-
year period for meeting or exceeding
recruitment goals.
3/19/20.04 Hays Academy of Hair Hays, Kans. Program The school paid a total of $10.0. to an
Design review employee for the recruitment of one
student.
3/22/20.0.4 California Recording San FranCiSCO, Calif. Program The school paid a total of $2,445 in
Institute review bonuses to an individual for
suocessfully securing enrollments. Page 11

GAO-IO·370R Higher Education

Enclosure II

Date

substantiated School name

Review method

Description of violation

Location

10/19/2004 Erie Institute of Technology"

Erie, Pa.

Program review

The school had an incentive program which provided $300 cash payments to admissions representatives if the school reached its enrollment goal. The program also provided $100 gift certificates to individual admissions representatives for reaching individual recruitment targets, and $25 gift certificates to individual admissions representatives for each application they secured above their individual recruitment target In addition, the school rewarded staff with social outings for achieviing recruitment goals.

3/18/2005 Concordia College Selma, Ala. Audit
6/2/2005 Lipscomb University Nashville, Tenn. Audit
5/4/2007 Mount Olive College Mount Olive, N.C. Audit
11/20/2008 New York Institute of Old Westbury, N.Y. Audit
Technology The school paid a total 01 $25,263 in incentive payments to 4 counselors for the recruitment of 95 students.

The school paid bonuses totaling $62,500 to admissions staff based on team and territorial goals.

The school had an employee incentive plan worth approximately $5,000 for securing enrollments.

Admissions advisors at the school's online division received compensation above and beyond their normal compensation based on the number of students enrolled.

4/17/2009 Theological University of SI. Just, Trujillo Alto, Audit
the Caribbean P.R.
4/30/2009 Meridian Career Institute Sarasota, Fla. Audit
10/2/2009 Denmark Technical Denmark, S.C. Audit
College Documentation describing the specific nature of the incentive compensation violation was not available.

The school paid nearly $2,000 in commission payments related to student recruitment.

The school paid bonuses totaling $52,500 to 17 employees based on their recruitment of approximately 137 students. In addition, the school paid $22,750 to 10 executive council members and other faculty and staff who facilitated a recruitment program that exceeded recruitment goals.

Source; GAO analysis of Education data, program reviews and audits.

Note: For four of the schools, the violations were listed in Education's database; however, the related program reviews or audit reports were not available at the timed our study. As a result, we were unable to provide descriptions of the specific nature of the violations at these schools.

'Professional Hair Design Academy had three incentive compensation violations found during 3 separate audit years. However, all three violations were substantiated on Nov. 18, 1998.

Page 12


Enclosure II

"The following Computer Learning Center locations were cited in the Final Program Review decision: Alexandria, Va.; Anaheim, Calif.; Cherry Hill, N.J.; Chicago, III.; Garland, Tex.; Houston, Tex.; Hurst, Tex.: Laurel, Md.; Los Angeles, Calif.; Lowell, Mass.; Madison Heights, Mich.; Manassas, Va.; Marietta, Ga.; Paramus, N.J.; Philadelphia, Pa. (branch campus); Philadelphia, Pa. (main campus): Pittsburgh, Pa.; Plymouth Meeting, Pa.; San Francisco, Callf.; San Jose, Calit.; Schaumberg, III.; Somerville, Mass.; and South Plainfield, N.J.

"High-Tech Holdings, Inc. owns and operates two schools: High-Tech Institute (currently Anthem College) and the Bryman School. Incentive compensation violations were identified at each of these schools through a corporate-wide program review. However, Education issued separate final program review determination letters and catalogued the violations separately in their database.

dThe following High-Tech Institute (currently Anthem College) locations were cited in the Final Program Review decision: Phoenix, Ariz.; Sacramento, Calif.; Brooklyn Center, Minn.; Nashville, Tenn.; and Marietta, Ga.

"The following Bryman School locations were cited in the Final Program Review decision: Phoenix, Arlz.; Aurora, Colo.;. Orlando, Fla.; Irving, Tex.; and Las Vegas, Nev.

'Ohio Valley College is currently Ohio Valley University.

"The incentive compensation program at Erie Institute of Technology was also implemented at Toni and Guy Cosmetology and Great Lakes Institute of Technology, both located in Erie, Pa.

Page 13

GAO-I0-370R Higher Education

Enclosure III

GAO Contact and Staff Acknowledgments

GAO Contact

. Katherine M. Iritani, (206) 287-4820 or iritanik@gao.gov.

Staff Acknowledgments

ill addition to the contact named above, the following staff members made important contributions to this report: Melissa Emrey-Arras, Assistant Director; Claudine Pauselli, Analyst-in-Charge; Colleen Moffatt; and Kris Nguyen. Also, Jean McSween provided guidance on the study's data analysis; Jessica Botsford provided legal advice; Mae Liles assisted with report graphics; Susan Aschoff provided writing assistance; and Ronni Schwartz and Kim Siegal verified our findings.

(130991)

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GAO-IO·370R Higher Education

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Smith, Zak.iya

From:

Sent:

To:

Pauline Abernathy [pabernathy@ticas.org] Wednesday, June 16, 20102:46 AM

Kanter, Martha; Shireman, "Bob; Kvaal, James; Yuan, Georgia; Gomez, Gabriella; Arsenault, Leigh; Hamilton, Justin; Madzelan, Dan; Manheimer, Ann; Dannenberg, Michael; Smith, Zakiya

Lauren Asher

FW: Embargoed: Statement on proposed higher ed rules TICAS neg reg statement 6_16_1 O.doc

Cc:

Subject:

Attachments:

college access

'success

STATEMENT OF PAULINE ABERNATHY

Vice President, the Institute for College Access & Success

Contact: Edie Irons 510/318-7902 Gretchen Wright 202/371-1999

EMBARGOED until 12am EDT June 16, 2010

Proposed Education Department Rules Would Curb Financial Aid Fraud and Abuse

Final Gainful Employment Definition Needed by November 1

"Today the U.S. Department of Education proposed important new regulations aimed at ensuring that taxpayer dollars are spent appropriately and effectively on federal student aid. The rules cover 13 of the 14 'program integrity' issues that were part of a negotiated rulemaking process begun last year.

"Weare especially pleased that the proposed rules bring the Department's policies back in line with federal law banning 'incentive compensation.' For the past eight years, a dozen loopholes have allowed schools to pay their employees and contractors based on the number of students they enroll, how many students take out loans, and other practices clearly prohibited by law. These loopholes have. led to high-pressure and deceptive sales tactics that can leave vulnerable consumers with staggering debt and no way to pay it back.

"In the past few years, large for-profit colleges have come under increasing scrutiny and paid large settlements over charges of improper incentive payments, false claims of job placement rates and salary figures for their graduates, and other recruitment-related abuses. Recent investigations have found career colleges that aggressively recruit at homeless shelters or falsify test results to make unqualified students eligible for federal grants and loans. These new rules will help protect both consumers and taxpayers from such exploitation.

"Other topics covered by the new proposed rules also have significant implications for students, colleges, and taxpayers,

. such as how schools are required to verify students' eligibility for aid and when aid must be disbursed. The proposed rules also include some new disclosure requirements for career education programs. We will address these and other issues in more detail during the 45-day comment period.

"Secretary Duncan said today that the Department will issue the draft regulations on the remaining program integrity issue, the definition of gainful employment, shortly. We urge the Department to do so in time for these rules to be finalized by November 1 and go into effect in 2011. Students and taxpayers shouldn't have to wait yet another year to be protected from career education programs that over-charge and under-deliver. Under federal law, career education programs may not participate in federal student aid programs unless they 'prepare students for gainful employment in a recognized occupation,'but there is currently no definition of gainful employment. Last month we and more than 30 other organizations that advocate for students, higher education, consumers, and civil rights sent a letter urging Secretary Duncan to propose a meaningful definition of gainful employment to effectively protect students and taxpayers."

1

# # # #

A n independent, nonprofit organization, the Institute for College Access & Success works to make higher education more available and affordable for people of all backgrounds. The Institute's Project on Student Debt works to increase public understanding of rising student debt and the implications for our families, economy, and society. For more information see www.projectonstudentdebt.org and www.ticas.org.

2

.t '

college access

success

STATEMENT OF PAULINE ABERNATHY

Vice President, the Institute for College Access & Success

Contact: Edie Irons 510/318-7902 Gretchen Wright 202/371-1999

EMBARGOED until12am EDT June 16,2010

Proposed Education Department Rules Would Curb Financial Aid Fraud and Abuse Final Gainful Employment Definition Needed by November 1

"Today the U.S. Department of Education proposed important new regulations aimed at ensuring that taxpayer dollars are spent appropriately and effectively on federal student aid. The rules cover 13 of the 14 'program integrity' issues that were part of a negotiated rulemaking process begun last year.

"We are especially pleased that the proposed rules bring the Department's policies back in line with federal law banning 'incentive compensation.' For the past eight years, a dozen loopholes have allowed schools to pay their employees and contractors based on the number of students they enroll, how many students take out loans, and other practices clearly prohibited by law. These loopholes have led to high-pressure and deceptive sales tactics that can leave vulnerable consumers with staggering debt and no way to pay it back.

"In the past few years, large for-profit colleges have come under increasing scrutiny and paid large settlements over charges of improper incentive payments, false claims of job placement rates and salary figures for their graduates, and other recruitment-related abuses. Recent investigations have found career colleges that aggressively recruit at homeless shelters or falsity test results to make unqualified students eligible for federal grants and loans. These new rules will help protect both consumers and taxpayers from such exploitation.

"Other topics covered by the new proposed rules also have significant implications for students, colleges, and taxpayers, such as how schools are required to verify students' eligibility for aid and when aid must be disbursed. The proposed rules also include some new disclosure requirements for career education programs. We will address these and other issues in more detail during the 45-day comment period.

"Secretary Duncan said today that the Department will issue the draft regulations on the remaining program integrity issue, the definition of gainful employment, shortly. We urge the Department to do so in time for these rules to be fmalized by November 1 and go into effect in 2011. Students and taxpayers shouldn't have to wait yet another year to be protected from career education programs that over-charge and under-deliver. Under federal law, career education programs may not participate in federal student aid programs unless they 'prepare students for gainful employment in a recognized occupation,' but there is currently no definition of gainful employment. Last month we and more than 30 other organizations that advocate for students, higher education, consumers, and civil rights sent a letter urging Secretary Duncan to propose a meaningful definition of gainful employment to effectively protect students and taxpayers."

# # # #

An independent, nonprofit organization. the Institute for College Access & Success works to make higher education more available and affordable for people of all backgrounds. The Institute's Project on Student Debt works to increase public understanding of rising student debt and the implications for our families, economy, and society. For more information see www.proiectonstudentdebt.org and www.ticas,org.

Smith, Zakiya

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Pauline Abernathy [pabernathy@ticas.org] Thursday, July01, 201012:48 PM

Hamilton, Justin; Arsenault, Leigh; Manheimer, Ann; Kvaal, James; Kanter, Martha; Madzelan, Dan; Smith, Zakiya; Gomez, Gabriella; Yuan, Georgia

Jennifer Webber; Jose L. Orengo; Debbie Frankie Cochrane

FW: Huffington Post Op-ed by LaGuardia Community College President Gail Mellow: "Racing to the Bottom With For-Profit Colleges"

Cc:

Subject:

FYI--I thought you'd be interested in reading LaGuardia Community College President Gail Mellow's op-ed in the Huffington Post (link and text

below) in which she discusses the implications for community colleges of the rapid growth in publicly traded for-profit colleges. Pauline

http://www.huffingtonpost.com/gail-mellow/racing-to-the-bottom-with_b_63 eee3.html

Racing to the Bottom With For-Profit Colleges

By Gail Mellow, President of LaGuardia Community College Posted: June 29, 213113

Much attention has ,been paid to "Race to the Top," the Obama Administration's multibillion dollar grant competition that promises states desperately needed funds if they implement systemic reform in their K-12 schools. The funding is robust, the goals are admirable and the challenge has engaged lawmakers and school districts to embrace critically essential changes in the way they educate youth.

Unfortunately, we are headed in the wrong direction - a "Race to the Bottom" so to speak - when i~ comes to funding our nation's public colleges and universities. Government support for public higher education has been decreasing every year over the last 15 years, but is shrinking even more rapidly during the Great Recession. As a result, tuition keeps rlswg. Faculty are being furloughed, and course offerings are being cut, making it hard for students to stay on track towards graduation. Most importantly, community colleges across the nation, including mine, are being forced for the first time to close admissions~

And having to shut our doors is especially damaging to our nation's future because community colleges educate almost half of all undergraduates, and are responsible for the start of 213% of all American born do.ctoral degrees.

Exacerbating matters is that just when a college degree is becoming the basic credential for entry into the middle class, billions of taxpayer dollars are being diverted to a questionable and expensive new player on the higher education scene: for-profit, investorowned colleges. These institutions, with heavy investments in marketing, have enjoyed explosive growth. They also made enormous profits for their shareholders, with stock prices outperforming the S&P by about 4se percentage points for the .1ast two years.

Of courseJ as we've learned from the banki.ng industry, what's good for investors may not be good for the average American. That is certainly the case with the for·-profits. Their startling growth has come at great cost to their students, taxpayers and public colleges.

Students who attend for-profits pay about seven times more than students attending a publicly-run community colleg~. For-profi.ts are masters at tapping government programs, such as Pell Grants and subsidized student loans, to help students pay their bills. While they educate about 9% of Americans, they receive 21% of Pell money and federally subsidized student loans.

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For students, the bottom line is much worse. They leave for-profits heavy in debt and at great risk of defaulting on their loans. Almost one out of four bachelor's degree recipients from a for-profit graduates with more than $413,131313 in debt, compared to 6% of public students. With such heavy debt load, the default rate for for-profit students is simply extraordinary. Nearly one-quarter of studehts default after four years, compared to less than 113% of borrowers from public colleges.

When students default,the for-profits come out unscathed. Taxpayers guarantee the loans, protecting lenders and the colleges. But students in default have their wages garnished, are ineligible for future student aid, and stand virtually no chance of ever securing a mortgage.

More than leaving students crushed under punishing debt, for-profits also don't make heavy investments in actually educating their students.

Less than one-third of every dollar they spend goes into instruction, While the bulk is allocated for marketing, executive compensation, and shareholder profits.

DeVry University, not even the biggest of these for-profits, had income of $1.4 billion, spent over $2513 million on advertising, and made a tidy profit of $165 million in 213139. Yet almost 913% of its operating money came from public tax dollars.

Moreover, without full-time faculty, for-profits are able to cut corners, while students lose out on having the opportunities to engage with professors over the course of their academic career. Serious questions have also been raised about the value of the credits earned and degrees conferred at the for-p.rofits. Students seeking to transfer too often are told their credits won't count and news reports have drawn attention to the worthless degrees granted by some of the shadiest players in this market.

Our nation's public colleges and universities also end up being harmed by the rapacious growth of the for-profits. The explosion In their enrollment wasn't by government design. Because we do not have a clear vision of what higher education in America should look like, the for-profit colleges rushed into an unregulated marketplace, garnered the interest of investors, spent heavily on advertising and grew by drawing on publicly-funded grants and loans. These national giants are sapping the public dollars that should be invested in our nation's community colleges to build labs, hire faculty, and purchase computers.

Perhaps some balance among investments and results will come from the just announced hearings being convened by Senator Tom Harkin to examine federal education spending at the forprofits, and the request for investigation into these institutions made this week by Democratic lawmakers to the Government Accountability Office. But these moves represent just a first step. If bur nation is once again going to lead the world in the highest proportion of colleges graduates - America now ranks tenth and we are falling fast - and if we are once again going to be the engine that powers the global economy, we need a national commitment to what we know works.

Indeed, America's startling growth in the 2eth century was the result of government's investment in public higher education. The G.I. Bills, Pell grants, funding for scientific research, the extraordinary.creation and growth of community colleges all propelled our nation to lead the world economically, socially, politically, and culturally.

Today, we need a similar investment. The question is where's the funding going to come from in this time of record high deficits? I would argue that maybe it isn't a matter of new spending, but spending those dollars more wisely. The public dollars that go to the forprofit colleges would be far better spent by increasing the capacity of our public colleges, especially her community colleges, to better serve more students. The over $1.3 billion that the top five for-profits get in Pell grants alone

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- not to mention the overall $26.5 billion the for-profits took in federal money last year - would be a good place to start.

***

Dr. Gail O. Mellow is President of LaGuardia Community College (of the City University of New York) and co-author of Minding the Dream: The Process and Practice of the American Community College.

Pauline Abernathy Vice President

The Institute for College Access & Success www.ticas.org and www.projectonstudentdebt.org TICAS: 518.318.7988 Direct: 518.318.7983

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