Wednesday, November 10, 2010

Private Schools Need to Disclose the Bad with the Hyperbole

The title says it all; The easiest one time regulation would require all schools to disclose the good with the bad, pending cases against the school, current investigations and success rates that include testing, debt defaults and promised employment statistics to name a few.

If nothing is done, the public will find out after the fact they have been sold down the river.
Take for instance this story of public plundering by a large for profit college group:

NY Times: Stanley H. Kaplan moved aggressively into for-profit higher education, acquiring 75 small colleges and starting the huge online Kaplan University. Now, Kaplan higher education revenues eclipse not only the test-prep operations, but all the rest of the Washington Post Company’s operations. But over the last few months, Kaplan and other for-profit education companies have come under intense scrutiny from Congress …

Reports of students who leave such schools with heavy debt, only to work in low-paying jobs, have prompted the Department of Education to propose regulations that would cut off federal financing to programs whose graduates have high debt-to-income ratios and low repayment rates.

According to 2009 data released this summer by the Department of Education, only 28 percent of Kaplan’s students were repaying their student loans. That figure is well below the 45 percent threshold that most programs will need to remain fully eligible for the federal aid on which they rely. By comparison, 44 percent of students at the largest for-profit, the University of Phoenix, were repaying their loans.

Kaplan is facing several legal challenges. The Florida attorney general is investigating eight for-profit colleges, including Kaplan, for alleged misrepresentation of financial aid and deceptive practices regarding recruitment, enrollment, accreditation, placement and graduation rates.

Kaplan is also facing several federal whistle-blower lawsuits whose accusations dovetail with the findings of an undercover federal investigation of the for-profit industry this summer, including video of high-pressure recruiting and unrealistic salary promises.

It's our free market, private educational system, funded by taxpayers? What’s wrong with this picture?

All these schools get most of their revenue from federal student aid. Kaplan Higher Education, for example, gets 91.5 percent of its revenue from the federal government, through Pell grants, Stafford loans, military and veterans benefits and other aid.

On average, for-profit colleges spend about 30 percent of their revenue on advertising and marketing.

Lawmakers and Department of Education officials have become increasingly concerned that too much of the $26.5 billion in federal student aid that went to for-profit colleges last year enriched shareholders and company executives, rather than helping students.

Using hidden cameras, investigators from the Government Accountability Office found deception or fraud at 15 for-profit colleges, including two Kaplan campuses. The undercover videos showed Kaplan recruiters in Florida and California making false or questionable statements to prospective students — suggesting for example, that massage therapists earn $100 an hour, and that student loans need not be paid back.

In addition, the suits allege, Kaplan kept students on the books after they dropped out, inflated students’ grades and manipulated placement data to continue receiving financial aid.

Terry Hartle, senior vice president at the American Council on Education, said, (about the public trust in private schools) “The G.A.O. investigation changed that. It’s a very different world for the for-profit college than it was even six months ago.”

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