For-Profit College Spokesman Disputes Federal Regulation Attempt

September 6th, 2010

The following was provided by Jorge Klor de Alva of the University of Phoenix, the largest for-profit university in the world.

American higher education is everywhere in the media today. Although it has long been a source of pride, critics today are assailing it in unprecedented fashion. Most agree it is too expensive for students, too costly for taxpayers, too ineffective in both retention and completion rates, and too unwilling to share data on itself so that it can be made more accountable.
But no part of higher education is being subjected to more intense scrutiny than the for-profit sector.

For-profit colleges and universities, the fastest growing segment of American higher education, are being accused by the media, the Department of Education, Wall Street’s short sellers, and Congress of deception, greed and a failure to comply with regulations. These accusations rest on only the barest of evidence, relying primarily on anecdotes. In fact, two Government Accountability Office studies this year, one covering thousands of schools since 1998, found only 37 for-profit institutions in violation of Departmental regulations. Despite this weak evidentiary base, the minimally supported charges have managed to shave billions of dollars off the market value of the stocks of the publicly held firms that own the largest colleges and universities, thereby leaving many Americans poorer as billions were lost by pension funds and 401k accounts. This situation, which some have called a “witch hunt,” is so clearly against the nation’s interest that I decided to focus Nexus’ inaugural study on it.

This study points to reasons why policy makers and legislators should step back from supporting some of the regulations proposed by the Department and the Senate HELP Committee. One such regulation, labeled “gainful employment,” is so potentially hazardous that it is not just likely to result in the exclusion of hundreds of thousands of students seeking to enroll in areas such as teaching, nursing, and public safety, but if it were applied to all institutions of higher education would remove so many programs from eligibility for federal financial aid that it could lead to the possible closure of 40% of community colleges, 90% of Historically Black Colleges and Universities, and 45% of campuses where Hispanic students constitute more than 25% of the students.

By using the University of Phoenix as a case study, the document shows with specific data why the proposed regulatory reforms will end up doing more harm than good, undermining the only sector of higher education that can grow sufficiently to accommodate the millions of students the nation must educate to remain globally competitive-at no cost to taxpayers. At no cost because, as the study details, the interest students pay on their federal loans plus the taxes paid by the institutions are greater than the Pell Grants and all of the other government subsidies received by the students and the institutions. Consequently, in the absence of a robust for-profit sector helping the nation reach President Obama’s degree attainment goal of 2020, this goal will cost the nation nearly one trillion dollars.

Instead of regulations with such negative consequences, the study concludes with the importance of pursuing a reform of higher education focused on something that would truly benefit taxpayers, namely to require all institutions of higher education to measure the learning outcomes of their students and to publish those results regularly. Then at last taxpayers would have the data needed to distinguish good from bad performers, making for the efficient disbursement of local, state and federal education subsidies.

In summary, the accompanying document means to update anyone who is trying to make sense of how an Administration, whose explicit goal is to get everyone to attend at least one year of postgraduate instruction, is so intent on dismantling what has proven to be the most important and effective innovation in making access possible for the general public since the Morrill Land-Grant Act of 1862 made access to practical higher education possible across the land.

About us: As an independent, nonprofit, nonpartisan organization, Nexus Research and Policy Center is organized to conduct educational research-such as in the fields of the learning sciences, assessment and measurement-and to prepare action-oriented analyses of pressing policy issues facing states and the nation regarding the improvement of educational efficiency, effectiveness and degree completion success, especially on behalf of underserved student populations and the institutions that provide them access to higher education. In particular, Nexus seeks to do research and promote policies that improve the for-profit education sector and that contribute to a better understanding between the for-profit and traditional sectors of higher education.

Sincerely,

Jorge Klor de Alva, President

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