The Faculty Code at “For Profits”

Five Six Troubling Things About the For-Profit Industry’s Self-Policing Standards

SIX ... Mr. Stewart ought to show the same concern for a lot of other schools that make a buck off of students. Why assume that profit is a problem? Non profits .. are hardly immune from self inteterest .. especially when the CEOs of the non profits are paid more than the CEOs of the "for profit" peers. The real need is for open and public standards,the kind of thing the Faculty Code at the UW provides but something that Western Governors' as one example, is lacking. I was especially struck that the "for profits" have bonded together to bring in outside reviewers with real academic credentials. Wonder how e can get WGU to show the same rigor?



Kaplan is one of 16 for-profit schools that have signed the Foundation for Educational Success’ Standards of Responsible Conduct.

For-profit colleges are in trouble.

Over the past few years, federal and state officials have scrutinized the for-profit college industry, which has repeatedly left its students saddled with massive student loan debt and often useless credits and degrees. Federal regulators began to take action, including introducing a proposed federal “gainful employment” rule to ensure for-profits are not consistently leaving their students with insurmountable debt. The industry engaged in a multi-million dollar lobbying, advertising, and campaign contribution blitz that helped weaken, but not block, the federal rule.

So when, in April, for-profit trade group Coalition for Educational Success announced that it would be creating a set of “bold new standards of responsible conduct and transparency” for such schools, we at Campus Progress hoped they were a “step in the right direction.” But we remained skeptical; the main trade association for the industry has long had a code, and it did not prevent widespread abuses.

Last week, leaders from the Foundation for Educational Success—a project of CES created to implement and enforce the new code—met with Congressional staffers to sell the idea that their guidelines are a solution to issues within a highly flawed industry. So I sat in to hear what they had to say.

The group’s Managing Director Penny Lee—who was hired earlier this year—is a slick spokesperson charged with marketing CES’ Standards of Responsible Conduct to a skeptical audience. (On this day, it was to Hill staffers; other days, it’s through media interviews, where she says the standards are “a way to help with the reputation” of for-profits and “demonstrate that … we can do self-policing.”) How can a group that’s spending millions to lobby elected officials on behalf of for-profit schools—to the tune of about $1.2 million in 2011—be trusted to police their own clients?

The standards leave much to be desired and have some inherent flaws. Based on CES’ remarks during the recent meetings, here are five troubling facts you should know about the standards:

1. The people who made the standards own or are being paid by the for-profit college industry.

As Campus Progress has reported before, CES has presented its standards panel as an independent body when it is, in fact, an arm of the for-profit college industry.

Start at the top, with CES’ co-chairmen Lincoln Frank and Avy Stein.

Frank is a managing partner at Quad Partners, a venture firm that is “one of the most active investors in privately-owned education companies in the United States.” Those include for-profit beauty schools, culinary programs, and other career colleges.

And Stein, who founded the investment firm Wilis Stein & Partners, L.L.C., is the chairman of Education Corporation of America’s board of directors, which operates for-profit schools across the country—and over the Internet—serving thousands of students. (The company also owns the Golf Academy of America which offers associate’s degrees to “open the door to a golf career that can last a lifetime.”)

The group boasts that, to date, 16 for-profit institutions have signed onto the standards—or about 17 percent of the career college sector. But look at Quad Partners’ and Education Corporation of America’s portfolios, and you’ll find that at least half of the signatories are schools owned by CES’ leaders.

And then there’s the advisory board, which composed the set of standards; it includes former governors Thomas Kean (N.J.) and Edward Rendell (Penn.) who are also intertwined in the career college business.

Kean is an advisory partner at Frank’s Quad Partners and has had standing ties to CES before his role on the advisory board.

During his time as governor, Rendell dramatically improved the state’s educational systems, thanks in large part to his Secretary of Planning and Policy Donna Cooper. (Cooper is now a senior fellow at the Center for American Progress, our parent organization.) He’s since taken a different stance, standing up for the for-profit industry, writing in the Philadelphia Inquirer —in response to Cooper, no less—that the standards “represent a significant protection for students.” Rendell also oversaw some state investments into for-profit Education Management Corp. while governor, including $5.75 million to help the school expand in the Pittsburgh area.

The group has also hired Patrick Lynch—former Attorney General of Rhode Island—as its compliance advisor, a role intended to ensure schools agreeing to abide by CES’ standards actually do. But Lynch is no longer working primarily for his constituents (he’s since opened the private Patrick Lynch Group) when he’s working on the for-profit-funded CES’ dime. (It’s a move in tune with other for-profit colleges, who have also hired former attorneys general as counsels.)

And then there’s outside advisor José Antonio Tijerino, the president of the Hispanic Heritage Foundation, who attended the Congressional meetings to praise the standards as a step in the right direction for minority students, who represent about half of for-profit enrollees. He noted, in response to a question, that he’s not part of the for-profit industry. True, but at least three of his foundation’s programs are sponsored—at least in part—by for-profit giant the University of Phoenix.

To the group’s credit, they have recruited a few highly regarded professionals to form the standards, including Harvard University education Professor Sara Lawrence-Lightfoot, former MacArthur Foundation President Jonathan Fanton, and Elizabeth Molina Morgan, the recently retired superintendent of Maryland’s Washington County Public Schools and a self-proclaimed critic of the for-profit college industry. Fanton and other board members were not immediately available for interviews. A good question, which Campus Progress will pursue, is whether and how much these individuals are compensated for their participation.

There’s simply far too much outside influence from the for-profit industry on this panel for it to seriously police such schools.

2. The goal is transparency—and not accuracy—when it comes to colleges’ data. And that means bad colleges can be on the “good practices” list.

Representatives from CES stress that they’re not an accrediting agency and therefore won’t be checking to see if data reported by colleges is honest. That’s a troubling thought, because false data has become a widespread concern in the industry as more reports of misinformation surface.

Stephen Burd of Higher Ed Watch summarizes some of the abuses succinctly, calling on the Department of Education to use its new regulations to “crack down on schools that mislead students into enrolling.”

Such practices were what prompted Career Education Corp.’s CEO to resign earlier this month; the school had supposedly been reporting false data on students’ job placements to both prospective enrollees and regulators.

So I asked Lincoln Frank during the meeting about Career Education Corporation—one of the top for-profit behemoths which includes Le Cordon Blue and American InterContinental University—which was recently slammed for reporting false job placement data, prompting the company’s CEO Gary McCullough to resign.

Despite major inaccuracies and issues within the Career Education Corp. family of schools, it will remain on the list of schools in compliance with CES’ standards, Frank said. That’s because it still meets the set of standards and, Frank said, is making CES’ goals “a core part” of their strategy moving forward.

In a September press release announcing the standards and distributed to Congressional staffers last week, the group offers a lengthy and ironic quote from McCullough:

“We wholeheartedly agree that students deserve clear, accurate information about the program of study that interests them. … Additionally, the third-party audit requirement provides this agreement with teeth to back up the principles we espouse.”

The goal, Frank maintains, is simply to “put in the hands of students the information to make a decision on their own,” and not to the vet such data. But there’s a serious need for ensuring accurate data: Recent figures indicate that 45 of Career Education Corporation’s 49 campuses had job placement rates below 65 percent—the minimum required Accrediting Council for Independent Colleges and Schools.

Despite the clear flaw in thinking, CES’ leaders continue to tout the standards as a “Better Business Bureau” of sorts, offering a stamp of approval to those who simply throw a job placement number onto a website for students to see. Really, they imply, any number will do.

3. Much of the “voluntary standards” are already existing federal or state laws.

As if to imply that complying with laws is a “voluntary” move, the majority of CES’ standards simply reiterate current legislation or some small variant.

CES Managing Director Penny Lee—the president of government relations firm Venn Strategies and a former top advisor to U.S. Senate Majority Leader Harry Reid—told Congressional staffers during two meetings on Thursday that the code of standards “goes above what is required” of schools and “puts a marker out there for all of higher education.” (That’s another theme in the group’s promotion—the notion that all colleges and universities will decide to sign on, not just for-profits.)

The standards ask schools not to base employee compensation on recruiting practices (common at some schools until recent federal regulations barred it), not to misrepresent their programs or students’ success (again, now clearly prohibited by federal regulation), and to provide loan counseling when students enroll and graduate (long required by federal law).

When asked about the issue, Frank said about two-thirds of the standards are based on current laws. Examples of expectations not repeating laws include enhanced standards for training—like asking all associates to individually attest to complying with the standards—and providing students 21 days to withdraw from a school they don’t like without penalty.

Giving students an easy—though rather short—way out of a program that is clearly wrong for them is a strong idea, but the standards on the whole do little to reform the troubled industry.

4. You won’t know what’s wrong with non-complying schools.

Lynch, the former Rhode Island attorney general, is tasked with ensuring that schools signed onto the standards are in compliance. Colleges will be required to hire an independent auditing firm to review the school’s practices against the standards; the firm will provide a written report to the foundation.

But the auditor’s reports won’t be public record, Frank said. CES will instead make a “thumbs up, thumbs down” status available, simply denoting whether the school complied or not.

This raises some concerns though—to a consumer, there’s no way to distinguish between a school with a minor infraction and a school with serious, widespread problems. And if schools can inflate their job placement rates and still listed on the group’s website, what is the point?

When I talked with CES’ Lee after the meeting, she assured me that the group is working to address concerns with the standards and maintained that the document is constantly evolving, including efforts to make more information available to the public. She provided some specifics—off-the-record.

5. There’s virtually no consequence for breaking the code.

And it doesn’t matter how poorly the college is performing, they likely won’t suffer much by not being on the foundation’s list.

A school that agrees to abide by the standards but doesn’t is simply removed from the group’s “best practices” list—likely. Schools with less serious issues can be given extra time to remedy problems before being removed.

In essence, there’s virtually no consequence for schools who fail to meet the simple standards, save for not having your institution’s name listed on a website.

What the for-profit industry needs is more than another sub-par, self-policing list of standards. The industry requires substantial reform, and there should be serious penalties for failing to offer an adequate education for a reasonable price.

As we’ve said before, the Wall Street collapse shows that self-policing isn’t the answer. Not for big banks and certainly not for higher education. Fortunately, a year’s worth of public debate on the federal “gainful employment” rule has led to greater scrutiny of the industry by the media, the public, and state governments. More potential students are aware that these schools often provide poor quality education at a high price, and enrollment at some low-quality schools is down.

Simply put, for-profit schools that receive billions in taxpayer dollars must deliver better services or shut their doors.

Brian Stewart is a journalism network associate at Campus Progress.

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