For-Profits Fight New Rules

Do we think they should be separated out from the non-profits for this special treatment?

"The regulations require for-profit colleges, such as prominent names like the University of Phoenix and ITT Tech, to prove that students can find “gainful employment” after finishing school.

The intent is to separate credible programs from those that weigh students down with significant debt for degrees that end up being worth little. Colleges are now asked to show that the average student’s annual loan payment is not more than 20 percent of the student’s discretionary income after graduation."

Read more here: Under siege, for-profit colleges cry foul over new federal rules | McClatchy DC

 

There are plenty of small, liberal arts school and, I'd bet, a few public schools as well who would lose access to federal funds under these rules. So, by not requiring non-profit and public school to provide the same data the government is essentially saying "It's OK to award useless degrees if you are a non-profit school."

It will expand. Because schools like Keiser went non-profit and people still speak ill of it. And when we're beyond the for-profit/non-profit debate, people will find another reason to try to discredit a whole bunch of degrees en masse.

It's the American way. One can only measure success by how you are doing compared to another. So, if you can't raise yourself up then make sure you knock others down.

 

I used to advocate the position that there wasn't any real difference between for-profit and not-for-profit universities, except their tax status. I thought, at the time, they both have the same mission, operations, and pressures. What's the difference? I don't think that anymore.

All organizations are responsible to their respective stakeholders. (Stakeholders are those who invest into the organization, expect it to do things, and then expect an outcome to result.) The stakeholder(s) for a for-profit university is/are its owner(s). This might be a sole proprietor, a partnership, a limited corporation, or even stockholders in a publicly traded company. What they want is to increase their wealth; that's why they hold the stock and that's what they expect the university to do. Sure, they may want other outcomes, too, some of them altruistic, even. But you invest in a company to increase your wealth.

Not-for-profits have different stakeholders. They also don't have the increase-my-wealth element. (Although one can make a lot of money running a not-for-profit.) This allows the university to take an outlook longer than next quarter's income statement. It also allows the university to invest in itself and raise funds differently than selling stock.

Now, both types do a lot of the same things, and it's tempting to say there's not much difference, but even in their similarities they're different. Sales (admissions), retention, types of academic programs offered, and more.

It used to be proprietary schools vs. old B&M, but the 1970s saw a rise of nontraditional, yet not-for-profit, universities that out-quicked the old standards. Think National University in San Diego.

The one area I think the for-profits excel is in customer service. Response times, quality of care, and predisposition towards the customer are hallmarks of a good for-profit. But even this has a dark side. In a university, their is very much a parent-child relationship. The parent (university) teaches the child (the student) the things necessary to grow up and leave the nest. The parent also holds the child to standards. Imagine if, in families, it was the children who made the rules--or, not as dramatically--the children had a really strong say in things. Would that work out? I've found over the years that empowering the customer in the university setting is the camel's nose under the tent. If students make enough of a stink, the professor's prerogatives are quickly taken away, even though the presumption is that the university should protect its product by demanding sufficient work at a sufficiently capable level to warrant a degree.

Even though I think there ARE fundamental differences between the two sectors, in the area of employment after graduation--the utility of the degree issued--all schools should be held to the same standard. The output--the degree--should have a sufficient impact on the outcome no matter what its source.

 

hmm, while I agree that for-profits saddle students with debt, not all of them behave like University of Phoenix and its ilk. This is also a double standard, this should apply to all colleges not just for-profits. Student debt is real and it's not just a for-profit phenomenon, it is a US based phenomenon. Higher education in the US is becoming more and more expensive, and the government is partly to blame with this crisis. Here is a story about an NYU student saddled with debt. She owes 100K for an undergrad degree. Now is it NYU's fault for charging this amount? Who's fault is it? When it comes to higher education, I always say Caveat Emptor. Another NYU student who admits she is graduating from a college she could not afford. Who's fault is it? It is time we put our big boys or girls pants on and take responsibility for our own actions. It is far too easy to point the blame at someone else.

Would I recommend anyone attend a for-profit? Hell no. There are far more, and cheaper, alternatives out there. And the same can be said to pricey schools. Will I recommend someone attend NYU, University of Miami, Rollins College, Barry University, and many other private universities? Only if they are getting aid via grants will I recommend someone attend a private college. Otherwise find a cheaper alternative. I was in the same situation as many undergrad students. I initially attended the University of Miami. Why? Because I was fixated on this dream to attend the "U." Only to realize later that neither I nor my parents could afford the U. It was either get loans, or go somewhere else. So I did my homework and I applied to Barry University. Now, at the time I attended Barry tuition was almost $30,000 per year. However, I received a sizable scholarship to attend, and all in all I ended up paying something like 8K for my entire undergrad experience, and I went to a great little private Catholic university in Miami, and had tons of fun. However, I did not break the bank. Same for my graduate certificate at the University of Central Florida (UCF). My employer paid for the entire certificate. Same story for my Master's degree at Chatham, the Army paid for it. And my other academic endeavors have been funded by the Post 9/11 GI Bill. So all in all, the entire bill for all of my education has cost me around the 8K, give or take a few grand. So a great education can be had on the cheap, you just have to look for it. And in some cases, as we see with Jennifer's book, there are free colleges available. We are just too lazy to do the leg work.

 

One article said that the discretionary ratio-rule will only be applied to for-profits, while another article said it is applied to both for-profits and non-profits. Which is it?

There are a lot of variables to consider:
- for-profits v. non-profits (yet people are making money in both systems)
- debts of professional schools that offer MDs, JDs, etc (those incur big debts)
- the current dismal under-employment rate of new JD holders (that skews things)
- etc.

 

I started this thread last month, but it didn't get much attention (probably because it proved that the rules don't just apply to for-profits). The rules apply to non-degree programs at non-profits and for-profits.
http://www.degreeinfo.com/general-distance-learning-discussions/50892-gainful-employment-rule-expected-hit-profits-hardest.html

 

True, they answer to a board of directors, governors, trustees or some similar name. And some of those board members, at larger non-profits, are compensated handsomely.

I think that's a rather broad brush and I just want to throw out the fact that there are, in fact, many non-profits in the U.S. who bring in many millions of dollars and pay it back out in salaries. I can think of one off the top of my head that brought in $53M (largely through government grants) and paid out $35M. I don't feel the need to draw unnecessary attention to them here but I am happy to share their name via PM so you can look at the Form 990s.

The default position seems to be that because for-profit schools answer to shareholders that they simply must be putting profit above all else. And the "good" for-profit companies must simply be outliers. That may be true of many companies. But it certainly isn't true for all of them. The very concept of social entrepreneurship is that profit and doing public good are not incompatible missions.

The other default position is that non-profits are generally good with bad non-profits as the outliers. And again, I think that is a dangerous position to take.

American Military University governs itself much differently than Southern New Hampshire University. The former is significantly more affordable than the latter and, I would argue, employs far less aggressive enrollment tactics.

As for innovation, universities are generally limited. They can raise funds through tuition. If they are non-profit then they can raise funds through philanthropic giving. And, regardless of their corporate structure, they can make money through sponsored programs. Sponsored programs far outweigh the research grants at some universities. Best of all sponsored programming, unlike research grants, are available to schools of either profit structure. But, generally speaking, these are the revenue models for schools. And a non-profit school may innovatively pursue philanthropic dollars but I fail to see how shaking down alumni (after already shaking them down as students) is such a noble venture compared to selling stock.

If I give $1M to the University of Scranton I will probably get something named after me. And while I might enjoy the bragging rights of having all here be able to use the Joseph Neuhaus Memorial Urinal, it really offers me very little else aside from the opportunity to "give back." If I give $1M to the University of Phoenix I'm going to get stock. And if UofPhoenix does exceptionally well, I will collect a miniscule amount of that money for myself. I think a lot of people love making that sound sinister.

I guess I just don't see it that way. It's probably for the same reason that I buy my kids savings bonds. If I were a true patriot, I suppose I would loan my money to the US Government interest free. But I'm a greedy pig so I'd like some interest (at a very, very crappy rate).

The funny thing is I don't particularly care for the idea of most for-profit education providers. But I think that people fail to recognize that it is people who determine the course of an organization regardless of its tax structure. If people with ill intent take over or form a non-profit then it will likely be the Death Star of non-profits. If really good and innovative people take over or start a for-profit company then the company will follow their example.

Just consider what it might look like if Apple, Google, Facebook and Amazon started a joint university. Heck, maybe they even opted for DEAC accreditation. And say they very seriously hired from that school's alumni pool. Would we still be saying that for-profit universities, overall, were bad? Would it change our perception of the value of accreditation?

Because those companies don't award academic degrees. But they do award certifications that can often be more valuable than an academic degree. An MCSE is likely to score you a very good job while an A.S. (by itself) from a local community college would be hit or miss. Why don't we point fingers of shame at Microsoft? After all, their education wing is provided for selfish means. And they dare to earn a profit off of their students. Why is this such a great thing but the awarding of a degree in business from a publicly traded corporation is regarded as the rise of the Fourth Reich, the apocalypse and a remake of The English Patient all rolled into one? My answer? We don't point fingers of shame because those certifications deliver and don't put the student into horrendous debt (usually).

But when it comes to higher ed we aren't looking to reward the for-profit schools that are delivering on their promise. Instead, we are trying very hard to shame the few (and if you look at the employability rates for for-profit Bachelors and Masters programs, you'll see that many of them are doing quite well and that the bulk of the failures are in certificates and Associates degrees) and, while we're at it, shame the ones that are doing well in the process. Seems a bit heavy handed to me.

 

Good catch. Thanks for the clarification.

 

Yes, the rules apply to both but the standards are different. It will be more difficult for the for-profits to reach their specified levels than for the non-profits to meet their (lower) levels. I'm assuming that this is why the for-profits are squawking and (to my knowledge) the non-profits are not.

 

What are the differences in the standards?

 

It's possible that I'm mistaken on this point.:doh:

 

The non-degreed for-profit programs have a larger proportion of disenfranchised people from the lower socioeconomic strata who are less able to get higher paying jobs, thus putting many of them in the danger zone of the new income ratio rules.

 

I am not favorable to for-profit universities/colleges; however, the new rules are stupid. First of all, a college degree does not guarantee employment. It is an open path to find more better opportunities. Now, the for-profit colleges/universities are going to cheat the system by working around it. I have heard that some colleges/universities pay employers to employ their graduates for 6 months, then they are fired after that. So, the graduates could file for unemployment benefits. While the colleges/universities can update their report o government that all their graduates gain employment upon graduation.

 

Indeed. And I think a huge problem is that college has been touted as a vocational pathway. And, for some professions, it is. But a person with a B.A. in Popular Culture is quite likely going to make less money than the apprentice plumber. I still don't see what would be so wrong with the person with the B.A. to become an apprentice plumber. It just seems some people have some oddly classist attitudes and think that going to college elevates them above the skilled trades. A shame and a wasted opportunity if you ask me.

I hate to break it to you, but non-profits have been doing this for years. King's College in Wilkes-Barre used to tout an average salary for graduates of its business programs somewhere between $42,000 and $45,000. It didn't make sense. There are really very few jobs in Wilkes-Barre, PA for recent college grads especially in the "softer" business disciplines (i.e. Business Admin versus Accounting).

Come to find out that they were hiring their grads for 6 month to 1 year term positions, paying them in the 40's and then sending them on their way. And they were doing it with a lot of their graduates. And you know what? King's isn't the only school to do that sort of thing. I have no way of knowing whether they are hiring so many former students to purposely inflate numbers or if they are just trying to give their grads a chance to shine. And really, we don't know that about for-profits either. It's just that the little liberal arts colleges get the benefit of the doubt while the for-profits are assumed to be scheming even when they do the exact same thing.

Granted, they weren't doing it so as not to lose access to federal funds. They may have been doing it so that they could boast high employment numbers and high average salaries for recent graduates.

There's this quote from Patch Adams where Robin Williams confronts Philip Seymour Hoffman. It's actually one of my favorite movie quotes (even though I didn't really care for the overall movie).

Robin Williams says to PSH "You know, I forget how young you are that you think you need to be a prick to get things done and that you think it's a new idea."

I think this is fitting.

Because what I see is a lot of people basically acting like for-profit schools have introduced this sleaziness to a sterling system that is, and always has been, above reproach. Did they?

Because the sleazy business men came from that sterling system. And that sterling system has the some sort of people, good and bad, running their shop and trying to bring in money.

Or, maybe the system wasn't so clean and these "new" and "bad" things the for-profit schools are doing were not their own creations.

 

Community colleges, which offer a lot of non-degree-granting programs, also have a higher proportion of economically disadvantaged students. However, 99% of the schools expected to fail under these rules are for-profits because their students tend to have higher debt loads than CC students. Yes, we all know that CCs are cheap because of state and local funding.

 

The rules applies to all programs at for-profits and to certificate (non-degree) programs at non-profits. The Department of Ed chose to define the term “Gainful Employment” in the law to fit their own agenda.

The term “Gainful Employment is only used in 20 U.S. Code § 1001 to describe schools that are for-profit: “any school that provides not less than a 1-year program of training to prepare students for gainful employment in a recognized occupation.” The term is not mentioned in the law when describing non-profits that offer degree programs.

It’s unlikely that Congress had the DOE’s convoluted rules in mind when they wrote the law, but nonetheless, a judge upheld the DOE’s interpretation and their right to issue regulations.

 

Yeah, but politicians also said that if we drug test welfare recipients we'd save a whole bunch of money and that really didn't pan out. So, maybe it will cause a whole bunch of schools to fail. Or, I think more likely, a few of the smaller career schools will drop off. This is probably going to kill the local and regionally based places and leave only the big players in the arena.

These schools are businesses. And businesses either adapt or fail to changing market conditions. CEC is closing a whole bunch of its schools (incidentally, the ones most likely to fail under these rules). Capella is branching out into subscription rates to diversify its revenue stream from Title IV funds. Oh, hey, remember Everest? The giant collapse that everyone said marked the beginning of the end for for-profit schools? Yeah, well, Heald College ended up closing but Everest and WyoTech continue to live on under the non-profit formed by Corinthian's former executives. So the schools where the problem started now live blissfully exempt from these new rules.

But let's remember too that this is only for Title IV access. So this rule isn't going to impact the for-profits that simply avoid that well all together. This rule will come and it will be business as usual at Patten University and the American College of Education. And schools that rely heavily on GI Bill and military TA are still going to have access to those monies as well. That may be the next battle. But given how the issues at the VA have been well known for the last 15 years or so and how the public seemed to be more outraged at the treatment of a lion than the treatment of this nation's veterans, I wouldn't expect any political steam behind that charge just yet.

Still, the University of Phoenix cannot fairly be compared to community colleges. It can be fairly compared to private non-profit universities where the debt load is comparable, however. But under these rules UofP and SNHU can award an equally worthless degree and only UofP is going to get in trouble because of it.

 

As a proud veteran myself, I say this to you: Bravo! Bravo! Well said. :You_Rock_Emoticon: