For-profit schools face new challenge

http://staugustine.com/news/local-news/2010-11-14/profit-schools-face-new-challenge

For-profit schools face new challenge
State looking into consumer complaints

The hits keep coming for Florida's embattled for-profit education industry.

After months of undercover investigations, lawsuits and scrutiny from congressional committees, the formerly fastest growing sector of higher education is facing yet another speed bump.

Florida Attorney General Bill McCollum last month launched a full-scale investigation into a handful of for-profit schools with regional outposts in Northeast Florida.

The probe started with five schools -- the University of Phoenix, Argosy University, Everest University. Kaplan Inc., and MedVance Institute -- but was expanded this month to eight. Added were Keiser University, Sanford Brown College and Concorde Career College.

Spokeswoman Sandi Copes said the investigation was spurred on by a host of consumer allegations of deception and potentially fraudulent activity at some of the schools.

The ongoing national scrutiny of proprietary education also was a driving factor, Copes said.

"The federal climate definitely played a big part in the investigation," she said.

An August study by the Government Accountability Office exposed sketchy dealings by admissions officers at 15 national for-profit schools, including a number of those listed in the Attorney General's Office probe.

"The decision was made to take a look at this after seeing the GAO report and considering all the money that's coming into these schools," she said.

For-profits enroll about 9 percent of the country's college students but account for close to half of student loan defaults. The national percentage of for-profit students who pay the principal on their loans also lags far behind the rate at public schools, according to federal data.

A breakdown of the number of consumer complaints for each of the schools wasn't available Friday, and Copes declined to estimate how many complaints were filed in total.

Subpoenas were issued to each school requesting internal documents related to the enrollment of students, hiring of teachers and staff and college accreditation.

Attorneys general in other states have taken a case-by-case approach to investigating for-profits in their regions. This appears to be the largest investigation into proprietary education by a state attorney general.

The future of the investigation, however, remains unclear.

Attorney General-elect Pam Bondi, who takes office in January, has declined to say where she stands on the issue of for-profit education. The director of her transition team, Carlos Muniz, also declined to comment on the investigation.

"Given our distance from the investigation and the relevant facts, we really don't think it would be appropriate to comment at this time," Muniz said via e-mail.

For their parts, most of the schools have adopted a wait-and-see stance for dealing with the probe.

Keiser University, a Fort Lauderdale-based for-profit that was recently embroiled in a tense legal battle with Florida State College at Jacksonville, issued a statement Friday saying school administrators were made aware of their inclusion in the probe through the media and the attorney general's website before they received a subpoena.

A university spokeswoman declined to say how the school was handling the late addition. She also wouldn't speculate on whether she felt the lawsuit against FSCJ, which was dropped Wednesday, might have led to the college's inclusion in the probe.

Kent Jenkins, a spokesman for Corinthian Colleges Inc., the parent company of Everest College in Jacksonville, said there isn't much the schools can do other than comply.

"We'll cooperate with everyone," he said. "We don't have anything to hide. Anytime someone wants to come and look at our records, we'll open them up."

The Florida investigation comes shortly after the U.S. Department of Education rolled out a series of proposed regulations that use loan repayment data and debt-to-income ratios to determine if for-profit colleges should qualify for federal financial aid.

Some schools are already dealing with the repercussions.

The Apollo Group, parent company of the University of Phoenix, announced last month that new enrollments could fall off by about 40 percent in the latest quarter due to the school changing its enrollment procedures based on the new federal regulations.

Deutsche Bank's Thoughts on Gainful Employment and For-Profit Education Stocks (ESI, EDMC, CECO)

Deutsche Bank's Thoughts on Gainful Employment and For-Profit Education Stocks (ESI, EDMC, CECO)
Read more: http://www.benzinga.com/analyst-ratings/analyst-color/10/11/589188/deutsche-banks-thoughts-on-gainful-employment-and-for-pro#ixzz14iEdp9Jo


Deutsche Bank is out with a research note this morning, where it reviews the Department of Education's hearing on Gainful Employment (GE [FREE Stock Trend Analysis]).

The analysts said that, despite expectations, Thursday and Friday's public hearings on Gainful Employment (GE) did not involve any exchange between DoE officials and speakers. The purpose of the hearings, as confirmed by a DoE official, was to not exclude anyone from the discussion on GE, and reinforces the relative unimportance of the hearings vs. the DoE's private meetings.

The analysts remarked that one of the most often raised issues about GE was its retroactive nature; many feel that introducing a rule that holds schools responsible for past student cohorts is unconstitutional. If the DoE accepts this argument, it would have to delay implementation three years to 7/1/2015 or change the look back period for the repayment rate.

The analyst said, “While most of the public For Profits participated in private meetings with the DoE, a handful of schools also had representatives speak at the hearing including ITT Educational Services, Inc. (NYSE: ESI), Education Management Corporation (NASDAQ: EDMC), and Career Education Corporation (NASDAQ: CECO) [via] Le Cordon Bleu.”




Read more: http://www.benzinga.com/analyst-ratings/analyst-color/10/11/589188/deutsche-banks-thoughts-on-gainful-employment-and-for-pro#ixzz14iEuUPPv