Alliance For Economic Stability, Inc.

, , 747 Third Avenue, 25 th Floor

New York, New York 10017

May 172010

The Honorable Ame Duncan

Secretary
U.S. Department of Edpcation
LBJ Education Building
400 Maryhind Avenue, SW
Room#7W3l1,
Washington, DC 20202

Dear Secretary Duncan: '

The Alliance for Economic Stability ("ABS") has previously written letters to the, Department of
Education ("DOE") advocating changes to the oversight of for-profit companies operating online
universities ("For-Profits"). in the interest of preventing waste of tax-payer funds. We believe thilt a
judicious use of tax-payer funds is in the best interest of the American people 'and the American
'economy overall.

Our attention has focused on Bridgepoint Education, Inc., operator of Ashford University, as this
institution presents a particularly egregious example of the For-Profits making questionable use of
. tax-payer funds.

Further to our former comments on Bridgepoint, we believe that the DOE should thoroughly
investigate Bridgepoint's potential violations ofDOE regulations surrounding Bridgepoint's use of
i
I
quotas for its salespeople. or "enrollment advisors." Such quotas are a direct violation of federal
regulation, which provides that compensation should not be ''based solely on the number of students
recruited, admitted, enrolled. or awarded fmancial aid:'1 This is a violation even within the lenient
"safe-harbor" of allowing regulated institutions to alter 'fixed salaries of salespeople up to two times
per year without a salary increase being considered incentive compensation perse.

A television program recently aired by PBS in the Frontline series; titled "College Inc.," featured a
fonner Bridgepoint sales employee, who stated that Bridgepoint used and enforced a quota system,
requiring salespeople to enroll a specific number of students per month or face termination of their
employment. Another former Bridgepoint recruiter wrote an email descnbing Bridgepoint's quota
system, which email was shown ,and discussed in a public DOE hearing.

Advisors to the AES have also spoken with former BridgepoiIit employees who have stated that the
company uses a quota system. A quota system for enrollment of students necessarily implies that a
salesperson's compensation is based solely on the number of students recruited. If an employee does
not meet the quota, his or her salary will be reduced, or his or her employment will betenninated. If
an employee exceeds the quota:, his or her salary will increase.

34 C.F.R. § 668.14(b)(22)(ii)(A)
 Secretary Duncan
May 17,2010
Page 2 of3

Even without such personal testimony, .one can determine that Bridgepoint shows a remaIkabl
consistent number of students enrolled per month per salesperson. The attached Table I, based u
data in Bridgepoinfs public financial statements, shows that over a span of years the number f
students enrolled by Bridgepoint per salesperson employed has been exactly co~tent, both d .
the period covered by the audit or Bridgepoint by the DOE's Office of Inspector General ("010'
and the time since that period. This consistency is irregular given Bridgepoint's exponential gro
in student enrollments and reinforces the idea that Bridgepoint is using a quota system.

Bridgepoint's most rece~t annual report discloses that the company had 1,175 enrollment adviSOR
of December 31. 2009. The report also discloses that Bridgepoint employs financial service adviso
and academic advisors who work in coqjunction with the enrollment advisors in the sales proces .
With this division of duties, the sole function of enrollment advisors is to make sales c81.ls - not
consult on fmancialor academic issues. By necessity, Bridgepoint must make decisions 0
terminations and salmy changes for enrollment advisors strictly on the basis of the number f
students enrolled, again showing that a quota system must be used, which system violates feder
regulation.

There is a distinct line of inve9tigation that the DOE may follow to ~lne the extent f
Bridgepoinfs use of a quota system as a sole basis for compensation. Bridgepoint records will soo
the date a new enrolhDent advisor begins work and the date of his or her fU'st salary increase
tenninatlon. Those who are terminated first face a series of escalating warnings, some of which
written, from the company. Those who face warnings for not meeting the quota will be assign
"leads" with less likelihood of enrollment. That is, those who are not meeting the quota will
assigned older leads that have already been worked by other, more senior employees, and ·closing
sale on these older leads will count towards the quota of the employee who initiated the lead.
foregomg is based upon information provided by former Bridgepoint employees to an AES advisor.

Mr. Howard Sorenson of the 010 spoke with an advisor to the AES and kifidly e"plained his vie s
on th~ OIG's authority in its current audit of Bridgepoint He conveyed that the OIO's statuto
authority and statutotily~andated processes for audits have limitations on theex.tent of the audit,
severity of sanctions or remedial actions, and the type of conduct that the OIG could find to be .
violation of relevant regulation. Mr. Sorenson also confmned that Bridgepoint is. only subject to
OIG audit review, and is not the subject of a formal OIG investigation or referral .to the U..
Departm6Dt of Justice.

We, of course, respect Mr. Sorenson '8 views and the QIG's expertise on its own statutoI)' authorit .
However, we believe the information pccsentcdhere suffICiently shows that Bridgepoint's reco~
lIIId conduct can be investigated in a manner that will show evidence of' violation of feder
regulation. Specifically, we believe that sufficient evidence of a quota system that violates fed
regulation exists in Bridgepoint records and can be discovered by the DOE. -
i
! We respectfully offer that the OIG may not be accustomed to conducting an investigation of the
i
we see as. necessary to uncover Bridgepoint's violation or to imposing sanctions that woul
.,i remediilte waste of tax-payer funds. We have not found record of any sanction significant
I
impacting the operations of a For-Profit in an exhaustive review. of public 010 and Department f
Justice records. The only substantial sanction of a For-Profit we found arose from theOIG's p i
I
I audit of Apollo Group, Inc. and resulted in a sanction which had miriimal impact on Apollo
 Secretary Duncan
May 17,2010
. Paac; 300

subsequent growth and which was dwarfed by Apollo GrOup's settlement of a qui tam lawsuit
broughton behalf ofthe govenunent.

Nonetheless, we tbink the OIG and the DOE have the statutory authority 10 investigate these
violations, should do so, and should impose appropriate sanctions. We think that m· otdlrr to
. remediate violations and assure a judicious useoftax-paycr funds, an appropriate sanction would be
more severe than the past sanctions arising from oro audits of For-Profits.

The DOE's most ~ data on official coholt defimlt mtes show that For·Pro1its collootively have a
cohort default :rate that i3 more than double 1ho ave·rage of public and private non-profit inlrtitutions.
Bridgepoint derived approximately 85% of its total revenue, or approximately $386 million, in 2009
alone &om tax-payer funds administered. via Title IV. BIidgepoint will collect at least $600 million
in revenue this year, going by the rate ofits most recent quarter. Clearly, addressing pobmtial waste
oftax~payer funds at Bridgepoint is an important and urgent~. .

. The For-Profits' are only able to maintain ~niinarily high profit margins through government
funding and through a misrepresentation of the quality of the education based strictly on
accreditation. This aUsrepwscmation is used in marketing to individuals who may be especially
susceptible to boiler- room sales tactics. This system .aligns economicinoentiv.es against providing a
quality cducanon. DOB sanctions which are not severe enough to :be econom!cliJIy meaningful
providQ furthc,: incentive for For-Profits to Violate foderal rego1ati.OD.

DOE Qction to address Bridgepoint's incentive oompensation scheme, which violates already lenient
federal regulation, will allow for a less. victimization'1lrone enrollmeot process, will mitigate perverse
economic incentives against quality ~n, and will safeguard agai:ilst waste oftax-paycr funds.

Ifwe can provide any infounation to assist the DOE in this endeavor. we are happy to do so.

Sincerely,

~>
Director

cc: Robert Shireman, Deputy Undersecretary

O~ce ofthe UndeISecretaJy • I

Kathleen S. Tighe, Inspector General

Office of Insp~ctor Gcneml

William Taggart, ChiefOperating Officer

Federal Student Aid
For additional recipients see Distribution List

Enclosure
 .J

American Association of Collegiate Regist.rars and Admissions Officers

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June 22, 2009

Wendy Macias
U.S. Department of Education
1990 K Street, NW, Room 8017
Washington, DC 20006

Dear Ms. Macias,

I write in response to the Department's May 26,2009 Federal Register notice, in which it
announced its intent to establish one or more negotiated rulemaking committees to
prepare proposed regulations under Title IV of the Higher Education Act of 1965, as
amended. The notice indicates that at least one negotiating committee will be convened to
develop proposed regulations to maintain or improve program integrity in the Title IV,
REA programs. The notice enumerates several topics related to program integrity, and
elicits additional ones for possible inclusion on the agenda for subsequent negotiations.

AACRAO is a non-profit association of more than 2,500 institutions of higher education

and some 10,000 campus enrollment services officials. Our members playa central role
in protecting and maintaining the academic integrity of their institutions as admissions
gatekeepers and as enforcers of the institutional academic policies on the basis of which
academic credits and credentials are earned. As key stakeholders on behalf of their own
institutions, they also have a systemic interestin the academic integrity of other
institutions because they rely on credits and credentials granted by high schools and
previously attended colleges and universities. Precisely because they have their own
compelling interest in promoting the integrity of all collegiate institutions, we believe that
the members of AACRAO are particularly reliable partners in the Department's efforts to
improve program integrity in federal student aid programs.

Over the course of the past decade, our members have become increasingly alarmed by
the dramatic rise in the number of diploma mills-from "high schools" to "doctoral"
institutions-and the frequency of applications based on fraudulent and questionable
credentials. The constant battle against evermore sophisticated fraud and abuse now
occupies a major aspect of our members' professional responsibilities. Our members'
efforts to protect their own institutions' academic credentials have, regrettably, been
rendered more difficult as questionable schools have managed to gain Secretarially
recognized accreditation and have thus become eligible for participation in federal
student aid programs. The shortcomings of Title IV gate-keeping provisions-an
accreditation system that actually rewards lax standards, reliance on at times non-existent
state regulatory frameworks, and a handful of ineffective federal requirements-have not
only allowed shoddy institutions to gain acceSs to federal financing, they have also
created perverse incentives for many previously partiCipating schoolsto vastly inflate
their offerings and pose as legitimate colleges and universities.

The billions of dollars of Title IV financing certainly enable many students to participate
in, and truly benefit from, legitimate postsecondary programs. Unfortunately, these same
federal programs, because they are so poorly policed, allow unscrupulous participants to
harm students who are misled by heavy advertising and deceptive marketing into
enrolling at Title-IV mills.Victimsofthese types of operations, the majority of whom
a
end up defaulting on their student loans; face lifetime of financial· hardship because they
are typically left with unconscionably high indebtedness and little by way of marketable
skills. These individuals are, in other words, certainly worse off as a result of their
postsecondary experience. The taxpayers, of course, have footed the bill for the billions
of dollars of defaulted loans and wasted grants. Legitimate institutions of higher
education, employers, and other reliant third~parties are also harmed by poor Title IV
gate-keeping. The lax eligibility standards currently in place harm legitimate collegiate
institutions in their autonomous efforts to ensurethat the transcripts and credentials they
rely upon are from other legitimate institutionS..Legitimate institutions are also harmed
by the ever increasing number ofineffective but burdensome requirements that purport to
target fraud, but that instead impose huge costs on good actors without stopping the bad
ones.

Foundational improvements to Title IV program integrity require legislative changes, and

weare working with committees ofjurisdiction in Congress to improve the statutory·
language and provide the Departmerit with additional and more effective tools. We are,
nevertheless, pleased with the Department's renewed interest in improving program
integrity, and urge the Administration to make a sharp break with the unfortunate policies
and practices of the past eight years. Even without the legislative changes that we are
advocating elsewhere, the Department can do a vastly better job of regulating and
enforcing program integrity. We believe that the rulemaking process that the Department
is embarking on should, at a minimum, address the following provisions:

Incentive Compensation

We strongly objected to the Bush Administration's creation of twelve loopholes

in the statutory ban on incentive compensation. Not only were the exceptions to
the black letter of the law made out of whole cloth, the Bush Administration
failed to obtain consensus on them even after it jerry-rigged the negotiated
nilemaking committee to which they w~re assigned. The current incentive
compensation regulations violate the statute they are supposed to interpret, and
should be retracted in favor ofthesubstantially shQrter, clearer, and more
effective regulations that preceded them.· Instead of arguing the legal and policy
pitfalls of the previous Administration's twelve fabricated exceptions, attached
please find our origmal comments, by which we still stand. Our concerns and our
predictions that the regUlations proposed then would lead to abuse have, sadly,
. been borne out by the Depattment'sown findings in the intervening years.
 Accreditation
Voluntary quality assurance through peer-review has proven to be an excellent
model by which institutions that are truly interested in maintaining high standards
can continually improve. Various institutional, programmatic and specialized
- accrediting bodies serve as important non-governmental linchpins in quality
assurance under our current accreditation system. While accrediting bodies have
done an excellent job with the majority of participating institutions, their
effectiveness as gate-keepers against willful attempts by well-funded operations
that target Title IV is questionable. Without intruding on the substantive
judgments of accrediting bodies on the schools that they qualify for Title IV
participation, the Department can ensure better outcomes by requiring certain
adminjstrative and financial qualifications for the accrediting bodies that it
recognizes. An area of obvious concern is to -ensure that accrediting bodies have
financial and administrative resources commensurable with the resources of
entities that they review. Current practice actually provides a perverse incentive to
these bodies to be as lax as possible, since the lower their standards; the more
schools they attract. Since there are no substantive adverse consequences for
accreditors with a history of bad judgment, the entire system is biased in favor of
erring on the side of approving, rather than denying, accreditation applications
even when substantial doubt may exist about the school-applicant's legitimacy.
The system should also be better regulated to prevent schools from shopping for
the least demanding accreditor, which in turn, creates pressures on all accreditors
to lower their standards.

Definition of High School Diploma for Title IV Purposes

Our members are particularly alarmed at the rise of high school diploma mills,
particularly on the internet. Certain statutory changes in 2006 have allowed
entities that some of our members view as diploma mills to gain accreditation,
which makes the task of providing a definition all the more difficult. We are also
aware of questionable practices in which Title IV participating institutions direct
students without high school diplomas to high schools with which they appear to
have certain business arrangements. We are concerned that, just as ability-to-
_benefit was the loophole of choice before the 1992 Amendments, fake high
schools are today's easy path to satisfy the law's requirements. We believe that a
carefully crafted regulatory definition of highschool diploma is needed for Title
IV purposes and stand ready to' provide assistance to this end.

Gainful Employment in a Recognized Profession

We believe new regulations should more clearly articulate the requirements of

this important statutory criterion for eligibility. The Department should explicitly
defer to the states in defining "recognized professions" as those licensed by the
states. In addition, the "gainful employnient" standard should be more sharply
tied to the amount of post-graduation debt and the relationship between servicing
that debt and former students' wage differential above minimum wage.
State Authorization
States vary greatly in their practices in this regard, and some states lack a
regulatory framework to license postsecondary institutions at all. The Department
should define state authorization as a substaritive review of institutions by an
agency of jurisdiction, and enumerate minimum standards and c:ertain
characteristics such agencies must display before they can license participating
schools. Schools that lack this type of licensure should not be eligible to
participate in Title IV.

Saturation Advertising and Deceptive Marketing

Institutions should be held accountable for any false, deceptive, or grossly

misleading claims in their advertising, and the Department should pay particularly
close attention to institutions that spend disproportionate amounts-in some
cases, more than they spend on instruction--onadvertising. By our estimates, the
top nine advertisers participating in Title IV spent a combined total of more than
$1.75 billion on advertising in the most recent fiscal year for which data are
available, and are likely to exceed a combined total expenditure of $2 billion in
, '

2009. Several important aspects of heavy advertising budgets are worth noting.
First, the heaviest advertisers are hugely dependent on Title N, and receive as
much as 81% oftheir revenue from federal student aid. Our estimates indicate that
more than $1.5 billion in Title IV funds will be spent on advertising by the nine
schools in question in 2009. Second, the heaviest advertisers appear to spend
disproportionately smaller portions of their budget on actual instructional costs.
One of the nine schools mentioned above actually spends more on advertising
than on instruction. Finally, increased 2009 advertising budgets are all the more
counter-intuitive against the backdrop ofdropping advertising rates due to the
recessions. Current regulations onmisrepresentation-34 CFR 668.71-75-have
not been enforced for the last eight years, and subjecting heavy advertisers to
more thorough reviews under SubpartF would be an: effective first step in
improving program integrity;

Disclosures

Improved consumer protection disclosures would be another important step in the

right direction. Better, less distorted indicators of economic impact of schools on
'their students should be ,devised and broadly circulated by the Department.
Generating cumulative lifetime default rates~ounting all defaults as they occur,
not just those that occur within an arbitrary and narrow window as is the case with
the official cohort default rates now-would vastly improve prospective students
understanding of a given school's economic impact on its former students. In
addition, prospective students should be informed of the percentage of any
participating school's former students who leave with debt, and of the average
amounts of debt per cohort'ofstudents and cohorts of borrowers; The Department
should also publish the percentage of jristitutionalrevenues derived from Title N
programs to enable prospeCtive students to understand the extent to which parties ,
other than the federal government are Willing to spend their own money at each
participating institutlon. These important disclosures can be done under current
 authority by the Department with data that it already collects, and they can be
done as an administrative matter without any regulatory changes at all. In
addition, the Department couldamendits regulations under 668.14 and 668.15 to
mandate other disclosures such as advertising expenses compared to instructional
expenses. Current regulations on completion and placement rates should also be
reviewed and improved to eliminate the fairly obvious ways by which these
indicators are currently gamed. Finally, complicated contracts that appear to spell
out academic requirements, but thatcan reasonably be seen to be intended as
ways of maximizing student aid utilization should be examined in the course of
any rulemaking, and they should, at a minimum be required to be more clearly
written to ensure that prospective students understand what they are signing.

Definition of Credit Hour

This is a topic of particular interest to AACRAO members, who have developed

highly reliable voluntary definitions for their own purposes. While we are
opposed to federal intervention in strictly academic affairs of institutions, we
believe that non-intrusive federal minimum standards can be devised for Title IV
purposes. We believe such standards can be configured in ways that protect the
integrity of eligible programs-including those delivered through distance
leaming-without inappropriate interference in academic judgments of
independent faculty.

Satisfactory Academic Progress

While judgments about academic progress are central to institutional autonomy,

we are alarmed at the ways in which shoddy schools appear to be manipulating
institutional policies and practices with the apparent goal of exhausting each
student's maximum aid eligibility. Once again, as campus guardians of academic
progress, AACRAO members have devised policies and procedures that the
Department can use to prevent unscrupulous schools from gaming the Title IV
system. It is crucial for any new regulations on this essentially academic matter to
defer to autonomous judgments oflegitimate collegiate institutions by targeting
only abusive and fraudulent practices.

Improved program integrity is a common goal for legitimate collegiate institutions and
the Department. We believe that the Department can take immediate administrative steps,
specifically through expanded program reviews and anew policy of actually enforcing
existing regulations-such as those against misrepresentation-to strengthen program
integrity and curb waste, fraud and abuse in Title IV programs. We stand ready to work
with the Department to develop more effective and more efficient regulations at the same
time as we are working with Congress to advance important additional statutory
safeguards to protect students, the taxpayers, and legitimate collegiate institutions.

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Barmak Nassirian
Associate Executive Director
 American Association of Collegiate Registrars and Admissions Officers
One Dupont Circle, NW. Suite 520. Washington, DC 20036·1135
Telephone (202) 293-9161 • Fax (202) 872-8857 • hUp:/lwww.aacrao.org

I 9 1 0

October 7, 2002

Ms. Wendy Macias

U.S. Department of Education
P.O. Box 33076
Washington, D.C. 20033-2076

Subject: AACRAO Comments Regarding Proposed Rule for Program

Participation Agreement 34CFR 668.14(b)(22)

Dear Ms. Macias:

On behalf of the American Association of Collegiate Registrars and Admissions Officers

(AACRAO) and the undersigned associations, I am pleased to submit comments on
proposed regulations published on August 8, 2002 in the Federal Register. AACRAO is a
nonprofit association of more than 2,300 institutions of higher education and more than
9,000 campus enrollment services officials, Some 5,000 of our members are
professionals with responsibilities thatinclude recruitment, admissions, or financial aid
decisions at their respective institutions..

I write to respectfully express our opposition to certain provisions of the proposed

regulations that, if promulgated in final form, would significantly alter the incentive
compensation provisions of 34 CFR 668.14(b)(22).

General Background

Congress first enacted the incentive compensation ban in 1992 as a critical component of
new program integrity provisions in order to combat waste, fraud and abuse by a minority
of Title IV-participating institutions. By the early 1990s, with student loan default costs
escalating at an alarming rate and reports of rampant abuse and outright fraud in the
trade-school sector emerging in the media, Congress and the Bush administration both
agreed that urgent action was needed to restore public confidence in the integrity of
federal student financial· aid programs. Hearings held throughout 1990 by the Senate

1
 Pennanent Subcommittee on Investigations, chaired by Senator Sam Nunn, documented a
number of abusive and fraudulent practices and found that instances of waste, fraud, and
abuse, while confined to a small minority of schools, had caused significant hann to
students and the taxpayers. In 1990, the Department of Education's review of 1988
default data indicated that five colleges and 85 trade schools accounted for more than 30
percent of all defaulted loans in 1998. The Senate Subcommittee's staff, in testimony
before the Subcommittee, produced vivid examples of outrageous admissions practices at
trade schools that treated admissions as commissioned sales. In the case of one school
. they cited, the following items were included in the advice dispensed by the supervisor
for sales to commissioned «admissions" representatives:

Drive through large housing projects SLOWLY with door sign on. Best
times are Friday afternoons and Sunday afternoons.

Meet the managers of low income and government housing apartments.

Give group presentations.

Food stamp offices -leave referral cards.

Welfare offices -leave referral cards.

For other examples of questionable recruitment practices, please review the Admissions
Representative's Training Manual from the institution in question, attached as Appendix
A. (Originally includeciin the Subcommittee's report, Senate Hearing 101-659.)

To better demonstrate the manner in which admissions and sales incentives had
overwhelmed the putative mission of the school, the Subcommittee staff concluded:

Finally, our review of A.C.T. financial records revealed that training and
education expenses were dwarfed by advertising and sales costs. Our analysis of
corporation expenses during the period 1986:.1989 revealed that in FY 1986
instructor salaries were $72,2530r 1.3% of revenues and advertising was
$384,583 or 7~0% of revenues. For 1988, instructors' salaries increased to
$468,079, representing 1.4% ofrevenues. During the same year, Advertising
increased to $11,004,410 which was a significant 33.8% of revenues. Classroom
materials for FY 1986 were 0.4% of revenues and decreased to 0.3% of revenues
in 1989. In FY 1986 there was no salary category for Admission Representatives
which totaled $5,935,746 or 17.2% of revenues in 1989. [Senate Hearing 101-
659, pp. 190-191] .

.Subcommittee staff found such egregious recruitment practices as recruitment of

individuals unable to ever possibly attend classes because they were serving long prison
sentences and admission of individuals to truck-driving programs despite disabilities that
made it impossible for them to operate a motor vehicle .

2
 The Department's Inspector General (I. G.), testifYing before the Subcommittee, also
specifically identified the use of commissioned recruiters asa misplaced economic
incentive that led to abuse and was harming students. Citing the example of an institution
against which a Boston grand jury had returned a 12-count indictment, the I.G. testified
that the indictment charged that the school "attempted to recruit young, unlearned,
disadvantaged students through a multi-media advertising effort and used commissioned
sales agents who were required to meet or exceed certain enrollment quotas."

The Subcommittee concluded that the federal govertnnent and state agencies did a poor
job of reviewing participating schools, allowing them "to prosper on a steady flow of
federal student aid, targeting and manipulating students who are not sophisticated enough
to realize that they are signing up for nothing more that a rip-off,"

The Nunn Subcommittee and contemporaneous media reports on abusive recruitment and
admissions practices, almost exclusively limited to the trade school sector, further
documented the consequences of configuring admissions as a sales position. As part of
the changes authorized in the 1992reauthorization of the Higher Education Act,
Congress imposed an outright ban on commissioned recruiting by requiring institutions
participating in Title IV programs to agree that:

The institution will not provide any commission, bonus, or other incentive
payment based directly or indirectly on success in securing enrollments or
financial aid to any persons or entities engaged in any student recruiting or
admission activities or in making. decisions regarding the award of student
financial assistance, except that this paragraph shall not apply to the recruitment
of foreign students residing in foreign countries who are not eligible to receive
Federal student assistance. [REA §487(a)(20), 20 USC 1094]

in 1994, the Department, in regulating the unambiguous legislative language cited above,
chose only to add a $25 exemption for token gifts.

The Ethics ofAdmissions

Members of AACRAO, consisting of degree-granting collegiate institutions of higher

education, have been and continue to be satisfied with current law. Since the enactment
of the 1992 law, we have had no complaints from our members about the han on
incentive compensation. Our membership believes that college admissions is primarily a
counseling profession concerned with assisting students to attend an institution that is
rightfor them, and that any attempt to tie the compensation of admissions officials to the
number of students they recruit for their own institution would constitute an inherent
conflict of interest. Indeed, we believe that:the very possibility· that any admissions
. official may have a vested personal interest in securing the enrollment of students would
bring disrepute to the profession. The AACRAO Board of Directors has affirmed this
view by adopting the AACRAO Professional Practices and Ethical Standards, among
whose strictures is the requirement that the members of the Association shall "represent

3
an institution or Association perspective without vested interests or personal bias."
AACRAO also has endorsed the Statement a/Principles a/Good Practice (SPGPj
developed by the National Association for College Admission Counseling, a sister
organization to which some 1,700 AACRAO member-institutions also belong. Section
I(A)(l) of the NACAC SPGP states:

College and university members agree that they will ensure that admission
counselors are viewed as professional members of their institutions' staffs. As
professionals, their compensation shall take the form of a fixed salary rather than
commissions or bonuses based on the number of students recruited.

In addition, Section I(A)(5)(b) of the SPGP states:

College and university members agree that they will not use unprofessional
promotional tactics by admission counselors and other institutional
representatives. They will not offer or pay a per capita premium to any individual
or agency for the recruitment or enrollment of students, international as well as
domestic.

The Proposed Rule

The proposed regulations, published in the August 8, 2002 Federal Register, were part of
a package initially submitted to a negotiated rulemaking committee convened by the
Department pursuant to HEA Title IV PartG §492. Despite the fact that the Department
took extraordinary steps to appoint negotiators of its choosing, the negotiations failed to
arrive at a consensus on the proposed regulations on incentive compensation.
Nevertheless, the Department is unilaterally proposing to.alter-and weaken-the
legislative ban on incentive compensation in the following manner:

1. Section 668.14(b)(ii)(A) would create a safe harbor exemption for fixed

"salary" payments, even if such payments are partially based on the
number of students recruited, admitted, enrolled, or awarded financial
aid, provided that such "salaries" are not adjusted more than twice a
year. This provision violates the letter ofthe law and, if adopted, would
create a loophole that would be easily susceptible to gaming. Unscrupulous
schools could bundle sales commissions earned over six-month cycles,
marginally modify them with other performance criteria, and adjust
employees' "salaries" to reflect the changes.
2. Section 668.14(b)(ii)(B) would alIowcommissionMbased recruiting for
non-Title IV programs at institutions participating in Title IV. This
provision violates the letter ofthe law and,if adopted, would allow
unscrupulous schools to engage in predatory recruitment practices against one
segment of their "market" while also participating in federal student assistance
programs. There is also a high likelihood that students secured through high

4
 pressure sales tactics would, after a brief period of enrollment financed
through loss-leader private loans, be transferred to aid-eligible programs.
3. Section 668.14(b)(22)(ii)(D) would expand the commonly accepted
concept of "profit sharing" to allow currently prohibited payments if
these are made to allor "substantially all" employees ofthe school, and it
also fails to provide important definitions that would limit abuse.
Unscrupulous schools could find numerous ways in which to manipulate this
provision to generate commission payments to recruiters. The case of the trade
school referred to above provides a particularly instructive example. The
Nunn Subcommittee found that, upon gaining entry into the federal student
loan programs, the school experienced a one-year change of fortune in 1986,
which took it from a net loss of$90,926 the previous year to profits of
$2,449,231. The school's profit sharing and bonus plan for its two executive
officers consumed $2,242,400 in total compensation for that year. There is
nothing in the proposed rule that would prohibit a repeat of such practices.
4. Section 668.14(b)(ii)(E) would allow commission-based compensation
based on program·completion. The preamble to the April 29, 1994 Interim
Final Rule on incentive compensation provides a compelling argument against
this policy change: "The Secretary believes that even in incentive payment
structures based on retention there is room for abuse and, in fact, has seen
evidence of such abuse. Since July 1992 when the Amendments of 1992 were
enacted, many institutions have opted to change to retention-based pay for
admissions personnel. In that time, the Secretary has seen evidence of lowered
satisfactory progress standards and in extreme cases, falsified attendance and
leave of absence requests, all in an effort to keep students enrolled. In many
cases, these practices were designed by admissions personnel who were duly
paid after the student passed a retention mark. After that mark, the students
were dropped." . .
5. Section 668.14(b)(22)(ii)(F) would allow commission-based compensation
to employees who perform "preMenrollment" actiVities, provided the
compensation is not based on the number of individuals actually enrolled.
This provision violates the letter of the law in failing to include the awarding
of financial aid as a prohibited basis·for commissions, and would allow .
admissions and recruiting~ydefmition, "pre-enrollment" activities-to be
compensated on the basis ofthe amount offederal aid successfully secured
per student.· .
6. Section 668.14(b)(22)(ii)(G) would allow commission-based compensation
to managerial or supervisory employees who are not directly involved,
and do not supervise others who are directly involved, in recruiting,
admissions, or awarding of financial aid. This provision violates the letter
of the law, which bans the paymentof commission, bonus, or other incentive
payments to any person "engaged" in any recruitment or admission activity,
. regardless of whether the nattJre. ofsuch activity is direct or mediated. The
assumption that supervisors, because they are not directly involved, are

5
 therefore not engaged in recruitment, admission, or awarding aid is
questionable.
7. Section 688.14(b)(22)(ii)(J) would allow commission payments for
Internet-based recruitment and admission activities. This provision
violates the letter of the law and would, if adopted, create a regulatory
exception to the blanket legislative ban on such arrangements. The
Department cites the Report of the Web-based Education Commission, as if
this citation provides it with both a rationale for the change and the authority
to act. We note that the Commission conducted its work without the. requisite
familiarity with the workings of Title IV or the history of past abuses that
Congress had sought to curb in drafting its specific provisions. Furthermore,
its I 68-page report devotes merely three paragraphs to a discussion of the
incentive compensation ban, and moves quickly through a series of non-
sequiturs to note that the provision bans web recruiting contracts based on the
number of referrals who actually apply or enroll. We believe that a radical
change in national policy should be based on a meaningful fact-fmding effort
by the congressional committees with knowledge of, and jurisdiction over, the
Higher Education Act. We also note that the Report's brief discussion of the
ban ends with the assertion that "the Department has concluded that this
provision could only be changed through new legislation."
8. Section 688.14(b)(22)(ii)(L) would allow schools to enter into revenue-
sharing (i.e., commission-based) contracts "with outside entities for
recruiting or admission activities or the awarding of title IV, HEA
program funds, provided that the individuals performing recruiting or
admission activities or the awarding of title IV, HEA program funds, are
not compensated in a manner that would be impermissible" for
institutions to compensate their employees. This provision turns the
unequivocallanguageofthe law,which specifically bans commission
payments to any persons or entities, on its head. Congress did not, and the
Department therefore cannot, make a distinction between external entities
based on their compensation policies. The law simply bans all commission-
based contracts, largely to address documented cases of abuse arising out of
such arrangements. The proposed language would effectively allow outside
companies to be retained as commissioned sales agents, so long as other
"services" are bundled with recruitment to mask the essential nature and
purpose of the arrangement.

We believe the proposed changes listed above are ill-a4vised at this time for the
follo\\ring reasons:

1. No Evidence of a Problem
. ' . . . . . . . .

First, it is noteworthy that the two organizationsrepresentirig the admissions profession

support the currentban, while the Department of Education~ one of whose responsibilities

6
 is to ensure the integrity of Title IV programs, is contemplating the creation of loopholes
in a law that has proven effective in combating waste, fraud, and abuse. As already
mentioned above, we are unaware of any difficulties the current ban has posed for our
members. We would ask the Department to more precisely identify the "problem" it is
seeking to address, and urge it to review recent history before legalizing practices whose
consequences are sadly predictable". ".

2. No Authority

Second, the proposed regulations violate the clear language of the law. Regardless of
whether or not the severity of the current ban is appropriate, the Department has no
authority to promulgate regulations that fundamentally rewrite the statute. The strained
interpretive effort to conjure up exception after exception, while appropriate as an
expression of the administration's policy goals for the upcoming
. reauthorization,
. can
hardly be viewed as an attempt by the Department to fulfill its obligation to implement
what the legislative language plainly states.

3. Questionable Timing and Procedures

Third, the proposed regulations have been published and could be finalized on the eve of
a reauthorization. Congress has already embarked on a comprehensive review of the
Higher Education Act, and any changes to this or other provisions can be lawfully
adopted through the reauthorization process inshort order. As there is no evidence of a
crisis requiring immediate action, we urge "the Department to make its case before the
Congress on this important policy issue. Unilateral action by the Department is all the
less appropriate because it was, as noted above, unable to obtain consensus for the
proposed regulations from the negotiating committee it handpicked.

4. Complexity of Compliance and Enforcement

. . . ." . . ,"
Finally, the proposed regulations-precisely because the Department is straining to
interpret the law to mean other than what it says~onstitute a textbook example of
unnecessary complexity. The new exemptions are so numerous that they expand the
regulatory language by more than six-fold. What is and what is not allowable will be
more difficult for institutions, for the Department, and for the courts to understand and
correctly interpret. Secretary Paige himself acknowledged the importance of providing
clear and workable rules on this issue when he assured the late Representative Patsy
Mink in writiog 00 July 24, 2001 that "aliy new guidance on this topic [will]be clear and
not overly prescriptive for institutions of higher education" [Congressional Record, .
. October 10,2001, page H,;,6468]. Yet, the proposed rule would expand the one clear
exemption in current law to twelve highly nuanced categories. We believe that this
complex proposal does not conform to the spirit of the overall requirement of Executive
Order 12866 to reduce regulatory burdens. Indeed,the proposed rules are so broad and
so vague that we believe the Department will someday find itself unable to pursue even
the most obvious and egregious violations ofthis provision.

7
Summary

We believe that these proposed changes represent a giant step backward for the integrity
of federal student fmancial assistance programs. Recent corporate scandals have
reminded the nation of the importance of the federal role in ensuring that ethical norms
govern the marketplace. In proposing a de facto administrative repeal of an existing law,
the Department would not only be acting without authority, it would be establishing a
policy that will undoubtedly result in future scandals.

Sincerely,

Jerome H. Sullivan
Executive Director

On behalf of:

American Association of State Colleges and Universities

State PIROs' Higher Education Project
United States· Student Association

8
I F~JI.- 1.6:-9" ,FR I 1 I e.e
228

OU1COIl\C CAl.l.S
·C.C&RP"- {'RtJJ.(.
p".e2

Siv~NT" XIN'e..t-S OtR4R:T'Mt,";,

. P?N"';;OVIU.S ~11I€N7'""O
229

f':./o~.' ~Q~~~05 ,/10""1-/'18 •

I\tl1 CO~!RACtS
senlle PermaMIII su~commllt ..
lhe Student. Suvicea Oepattlunt ~'ill contact ne"ly
enrolled studenu to greet them and explain to th."
Gn In'lt5tipllons'
,'hat lhe Stud_nt Services DepntClent hB$ to offer. EXHIBIT /I ~rl.a.:..
I"'" _ AMERICAN CAREER TRAINING g
II
t::
Ihe·.foflo"tng..gui<le l1nn should be adhered to: CORPORATION :
Welco~o them into the program. t
1- ~.

2. Ask it.· they au enjoying their lessons.

Ana"at any questions they may have ~ith regards ~
~.
to either their les.ons Or school procedures.
4. '.U.k. them. if, they ,enjoyed the video thdr sales
tepr~sent.tjva eho".d them ~ben they enrolled, :J
, and' vas he abh to anlnt au their questions?
5. lias' the deposit'iiven to ul:es .rep. cash or check?
6. Ask ho" th,y heard about our (ch~ol.
Have the~ start thinking about Resident Train1ng.

l':Jl¢{~
Verify t.hdr addran and telephone 1Iumber.
Get e telephone Dumber of ~ friend or "ork number
a. an alternate nu.b.~ i£ va cannot ~each tb••
a I th.elr hOllle nUrll>~r.
f.\~\' .
R.mind t.ben to let ~$ kno~ I"MEDIATE~t if they move.
~{
t~~'
'I,
~~.~
'" .
10 Remind' tb". that 1/e. an bere t'o help the... ill anyway'
11. lie, cen. to .alt. tbeir HOlle-,Study 1II0'[e enjoyable.
;{o.-~~\}~V Rt!uaIBER'TO ltEeORD ANY PROBLEMS OR.QNCSUA~ A~SRERS
t gS~~~\;~~~~~~11 ~Ol.tJKII SUP~-
~\~"
AND IRJIlC I'. tOYOQR

r
I:
r
(.

. ~ AD1\1.ISSIONS REPRESENTATIVE'S
~.
!.
TRAINING MANUAL
Revised April 1989

l;
t
r:
~
~
t!r·
 231
230
IV. Basic Responsibilities/Procedures
Background of American Career Training. COlI', (A,C,T,)
n,
A. Lltld'
Generated from newspaper advertising. referral cards. flyers. etc.• ;uc
dislti~uted EV5RY DAY to rcpxeseRtiltives. All leads receiveJ by phone will
A. founded in lune. 19S2. in Pompano Beacll. Florida be cnteled into our eompuler and solted by zip code IISsigWnont 10 each
B. sro nom a local schoo1ln South Florida to o'l~ 135 representatives in ·represenlatlve. It is die Kp{esenta1i~ responsibiliry to call each day for leads
and messages!!
wn
ovet25 statesl
C. most territories have origi.na!. rep~l\tatives hired (very little tuIl\over!) B. Ellrofl",etl# . .
When enrolling a student, admissions repre.~ntalives MUST call the nome OffiJt
. to Ro(UY and report student's name. address, lead number. and :unounl of
D.
E.
currently emplOYS over 300 pe01l1e in itS staff and faculry.

student body gfowth _ flom 50-100 S1Udents .in nome. stlldy to over 25.000 I' }I"~\. .'"u·
regisuatiort fee, ~.p~ ww gffciivUt
.. pectsl) At ~ point, • Wt::is se~ out to M
"<&iOVal" on h. ard-rQ-closo pros-
=theplacement director .
....,....t ft......._ "..._ .......... ., ...'" "'" ,..." /,u. 0°"l,,1
V
'''',.",. . (see Exhibit A·I &: A·2). thuI reducing any chance ofbuyets' remorse and
canceUadom. .
.

p, ....C.T.b..
. "'''''.......... '''",,'OOO- .~,
,J>!' ~
r.,,1" If me student requc:scs an application for a Student Loan. k'sat this. time mat the
call can be transferred to Pinancial Aid. .
~~~lII;tb.tMDqlllImentsoff.dIlCIl1iO~ . ALL ENROLLMENTS ARE TO BE MAILED IN TO HOME OFFlCE Ol'l

..
O.
each rnuepteset\ted ~4 de and Bt1S.&\W' $o,gl$.
THE SAME DAY OF TBESALEUI .
...... . NOTE· • student !w 5 bus~ days to withdrllw and receive a roll refund from
'fl. nationally Q(:ctedited bY Ihe National ROIDe Study Council since Mateh,19SS lba date of ACCEPTANCBU

l' A.C.r. is t/wi YOlUlg est school to rtcdve natioMI accreditarion ill the
Enrol1mentll are accepted daily, as receivied, and are sema ·fonnal letter of
. ~cept~ wilh a copy of their fully signed enrollmem agreement .
(see Exhibbs B-1 &: B·2).
histOry c/the NJl's.C. .
2) A.C .t.1J OM qf Ollly (wo schools 10 be accepted 011 ils first
C. Commisriolls
3) . J~eph
. applicatioll .. . .
;.. Cal4reso, President ofA.C.T. currently serves on tlu A $300.00 commission wiJl be earned foe each enrollment, on :l '0/50 split until
representative is paid ~ tUn. .
N.H's.C: s Boord (lJTrI4steeS
Half of an monies conected £tom slUdent at the lime of enrollment will be p~id 10
1. Both .A.:C.T. TIavel School ~
ille Hart Scnool for. Professiorial Secretaries
are members of the Florida Association of Aectedited Private Schools and the
rep (up to $300.00). If fUn com.:nission is not. earned from initial enrollment fee.
then bal! of all sNdent', paymenu will. be paid to lep as collected until rep h~$
rce
Nor1hBroward/l!ompano Beach cnambCr of eomme • been paid in fun.

Examples, Down Payment Commission Paid

J. A.c:r.Travel Scnool is also. mcmbei: of:
ASTA.- AJt\CticanSo<:iery of Travel Agel'ils $600.00 S300.00
ion 300.00, 150.00
NTA.l'latiOOa!. TO'\r ,A.ssocial
150.00
Sec~tarie$ \a also
75.00
K. "The Hart SchoOl fot Profe8Sional il member of
professional Secretafie.s International
C0nunis3ion cbecJcs lUI: cue and mailed out each week with a detailed printout lisl~g
CIdIactivc 5tude1u willi cammlssions due. :1,. rhe eve"r 01 a rt/lmd being i:r:rlled 10 the
#NcU1II, tilt rep ma, be ~ch4r8ed bGck~ a portion of his/her commission.) .
 232 233

~UO-l· IX. m.~tC~

SET THE STAGE AND STAY IN CONTROL
A.C.T. Travcl Schooluains people in the travel indusuy.• those who walll to
. become travel agenu on,,'o'" for airlin~. eilher a.~ a licket IIgent or rcs-:rvationist.
1. Varloble Situations
Some like 10 get involved with croise·lines, others with car rental agencies. some Wilh
A. physical collUlc t
mOlels. 81~ some in the .Iour business..
B. Melll'" contact
C. :Con.siduarion qj' yolJtsel/ A 101 of people lIet sianed in the industl'y because of the many benefits: It's;t
D. ·Con.sfderarlofl of lIuylng
billion doUar Indust1)' and aJgt of people-can Me :aJl!.L-of.mO!WfjlIld have a 101 of fun
E: . Neild or doirlg it. Some people whO want 10 become travel ageotS get statted in tltisbecause of
F. Want !he "fam" uips. These aa: the uipsthu hotels, cruise lines. and airlines offer. They tile
G.ReS<llve to· buy all ~us for you 10 sell their business.. They offer "fam" trips .to encourage you 10
book. your clients on their airline, cruise ship, etC.. Then you can specialize in q>edfic
z. Five ComponeJIu of Each Sllle lhings. If yOIl want 10 specialize in the Caribbean, there' $ a lot of islands over there.
A. ~. you ~u1d take trips over there. 'The$e trips normally ate free. some involve a small
1•..· FamiliaritY with product or service
5U1'CIwge. Some people get involved in the reservationist/tkket agent mId, because
2; Recognition through advertising
3.. Sen.se qf"OJc..nes$"
they c.a g~t..msJlJWl..f.9.U!'lemselvi' as well as their families.

B. HWI
L : Determine tM needs or wants of the prospect from a benefit lXuis . Another good benefit is th3t .Io!U:~YWh'm.. We have people now Ihat
2..Tum the /t4tu1U of the product or servCce illlo benefits thOt.will we pl~ worldwide; A$ a matter of fact. we've got some now in France. British West
Indies. as well lIS all pam of the' United Stales.
serve
their specific needs(
.

C ~uCt or Sqyics;. r/
~ .
y' Another benefit is flexibility, You can work full rime or pan time. Of course, if
D. ~
,you have no job right 110";", YOll'I1 Certainly want a lull time job. If you're twing small
1. Tllition is an lfIVut/IIeilt 0°'" , chil~n, you may want 10 take a pan time position. You can also worlc from your howe
2. .• Justified .~ their' needs 1Ij'
and just book travel, ",":orking $lrictly on a commission basis.
liineo; Qose
E.
V.f
.~
~ &O;O<!.pay_Out·pteSentauon manual ~Iltlt:li Ib~llI.WU_ .... i.:..llAll,. tor trAY<:l
&gents ranges between$J.M9!lsAAd-Sf0.ooo•.Nllliooally. in'lhe airl.ine indusU')'. in-
'v ~ ate over $23.000. Of eoune, this all depends on whal area of the countty you
..",r
,.,r' come from..When you ale fillt starting out, no one expects to make a 101 of doUm, but

Remembe~
this is the national aVcrllge.
\
NellU' merUWn IJ lealu" if iJ cen't 1H turned into 4 beneIU to serve t"e
nus is cenainly a respeC1ed profession. It's a lot of fun. If you say you are a
prospect's needs.
~J!''y()IS£J. ';;ar.t9iBJW*lUInf.'..n::.ith.thHC!!Sesa. A.sk que$tionsj make the lrllvel agent or are working for the airline. it's certainly a prescigiou3 job.

proS/HctteU;01l ...hid the, won'RJ hear. Use the P.Q.P.! Yau can discover excitement. In the uavel busin~" visiling various places 4lId
When mor, than one II to be sold be slIr, to "se' lour stage" and, abOlle all, do
meeting a lot of interesting people is cetlalnly exciting.
your own ,eUlng•. Don". elrpect an ulltTain,d ptrsr;n to h able to sell.
When yourpresent4lkln if IlderrupUd, gbfJUl rtpeat what hlU bun cOl'tred
You are on yOUl way ·to bavin8 a gtCaI career opponunity. hi this industry. you
"e!o" proceeding. can eventually o~ your own business :and anybody would lib to do that.

234
ill
nus ....
11Iis is a Personal QUalification proroe fOl1ll CoC you to complete. tion help u,
evaluate your i!iUily to bel!W1 from the COUl'Se. It provideS us with inionm. regarding
your personal. educadonal1llld employment history. We're going to ask you in y;)ur we own
wor& why yOU want to set statted in the m.vel indusuy. 1£ we recommendyou•. hOpe
yOU could start today. You will be wodcint; S-lOhQurs per week on your lessons. You need
to specify what ueaof employment yOI1 are lookini for and what geographic area. We will
need some references. And some fUlandal information ()(\ SllvingS. checl<lng. VISA. Master-
cud, QI just cash on hand. We wUi need yout signanue. Then. I'll review thisfonn· 1£1
feel !hat 1can recommend yOIl for this school (a reeommendariOO is necessary for admis-
sion). 1will sign this. indicating that you ~
qualified for cnny intO the school. I'll also
l1eed that tuition deposit 1 mentiotled to you before. on the pbolW!. as well as a photograph.
This will go into the adrnissiOll S committee, who will review your applicalion and within a
period of five days you willlalow one way or the other if you have \leen accepted. ~
... _--""~
t bave hel!: a Travel Connection. Once yOIl gr:l.dilate from tbe school. you will
Ieceive One.of these every month. nus tells about job opportunities. Thereuefour pages of
jo\J oppolllndes In this one, as well IS do's and dont's for job seekers. and where some of our
recent giaduates were placed. You will notice that many were plaeed in hotels, tour compa-
nies. travel.agencies, cruise lineS, airlines. and car rental agencies. .
. We 'want to be succe$~fW-
Alter all, we're only as good as tile people work-
theinduStry~
yOIl
Ing in 1 have a couple anic:lc" hele, one from TWA. It says that !be major-
i\)' of opeclDgs that ~ t
occur, oceuriD the reservation/sales agent/licke agent field.
These pOsitions are normally (tiled by ~penenced
and ua.incd people. Deregulation
has caused a lot of uaveUel' to flock· to Uivel igentS. pdor to 1978, e.gints were not
teClUire~ 10 be be tni.ned. That has. nOW: changed. -You need computet training. I ~ve
an aniclC l\Cic thoU s-.y$, "Fly high witha good travel sclIool." Of coui'Se~ we know
""'c're.goO(\; We've beel1ln the business now, for 7 .years. We have enrolled nUmerOUll
people and have an excellent placement lecord. In an article helll outo! pompano
Beach, shaIyt\ COle out plaCMlCnt dii:Cetor states that if. the stUdent hll!l lhe right
artiwde, there is no limit to what he can do. We can normally rlCld them a posltio:1
anyw~e In thewodd they choose. .
235
I mentioned the TraveJ Talks. We have a testimonial here from Evelyn Nixon. which
says, .. A.C.T. slaff, my aU1ce~ thanks go out to all of you. I'm on my W:lY to a promising
career Wllh AmericaAl. Airlines. 1 havCl two more wcelc.s of trainiJlg 10 go. We will re"eive a
Welcome Aboard pass to go anythere we want tf) al thaI lime.,. Evelyn was a resident of
Nortll Carolina and she just became a reservationist in Hallford. Conneclicul wilh American
Airiines.
Her.: ~ allorller leiter from Teresa Joiner, who stales that, "This is a thank you
note. I would nevet have been offered thia job if my employer had not been Impressed
with my schooling."
~.gewmerDllutatmlent&:JjkO;:IDj!!,...,we get them from OUlsrandlng graduatC$ .
t)f the school. . 0 Sun-.lnerford I d,.ou. .
wit tlant,k:,. . two cIa s she m co e
t. ne~an s lener is from Budget Rent- If. . Y ~ eP~ an avews-of..
~ hour with additional.benefits. 1 like this lener from CoDlinelll Airlines which
was sent 10 Shoryn Calc. "I would like to take the opponunity to thank you and your
staff for helping I1:l to meet our hiring needs wilh such well-trained. qualified studentS,
I was certalnly impressed with your facilities and slaft.'o We have some letters from
President Reagan who comniends the National Home Study CounciJ for the success it
renders to the nation. "1lu'ough 8ludy at home, citizens of all ages enrich Iheir lives and
prepue themselves for more productive roles in their. .community and the nation."
.
We are aCCledited by the National Home Study Council. There are well over
10,000 schools In the United Sta~s, but there arc only 104 that ~ accredited by the
National Home Study Council. We were one of two sdHlolJ .in ilS history to be approved on
the tUsl application. He.ttl are photographs of some of our graduates.
Of COUJSe, the onlyquesdonl haven't answeted is, "What does this program
cOSt?" The COSI is . • . ~ majq!i~ of ~ pso.pIUal.JU!lUP.frop.t. 1£ thb
Cl"eate3 a problem, we ~o have other payment p;n,. Or, yOI1 may just be one of those
luck)' Individuals who qu3.\i.!y for a Guaranteed SlUdentLoan. If that is the c~e. we can
wave rhese payment plans. and I can ftcommend you forllcceptanee into A.C.T. with a
deposil of $25.00. .

1 h;l.ve ~me testimonials from studenls, ThIs one is from ShWY RobeIls.
Itsaj'~. "I must emph2Sis !:A.C.T. is an outstanding travel schOol and an,onewho is
contemplating II. career in UllVel. I strongly recommend this,"
 236
237
on-Ihe-job type problem solving. You are going to improve yOUi' skiUs. You're going 10
improve your speed and accuracy in typing because we hope to gel you up anolher Icn ro This is the new ekctronic typewriler you will ~ceive. Of cOlme, it has a SO.Ooo
[l.!leen words per minute, You'll be doing a lot ofl13Jlscriplion, That's impQCtam. There is word dictionary In it, it has a processing sYlitem that allows it to recaU or deidic, lext using a
no shonhand any more. II's actually transcribing. dictation, You will be also working wilh built·Jn charaCter memory. A nice typewriter. One that has Ii good ~lail value.' .
the Wang Word Processor. Of Ihe 12Q cloek hOllrs you will have 81 Resident Training, 80
plus Is going 10 be on typing. word processing and uanscriplion. Here is an anide from Oll( plaCement dl.teClor wlUen States that she just had a
tonversatJon'wiih a representative from Non:ll Temporary Services regarding our
You are also going 10 be training in ,realislic office situ~lions. You will be PTogtam.. She we;, SQimpreS$ed with it !hli! she is aIlXioua to Slart hiring setretarie.! in
leaming in office-type environments, how to handle Ihe equipment in t",",se offices, also her temporary serVice.s~Sbe has 235 locwOll$ throughout the United SlalC$:
solving ce~ain situalions. We also h,we a self-directed job searchdepanment, we'l1 be
leaching you employability skills and Professional Image. When you graduate, you wiU "IbU wiele says. "Vocational sehoob offer fast job trainir,g." This one says.
receive a diploma. You will be meeting with our pjacement department and they will "Only hall the nation's vocational schOols meet the minImum standards sct by accredit-
prep.are resumes fOr you, they'll tell you how to dress, how to handle yourself at ing agCllcies recognized by the Depanmmt of Education." If you Wllnt to chCck: OUI
'interviews. As a matter of fact. we have many on-campus interviews being conducted schools. they reUyou to check with the National Home Study Council in Washington,
, by outside companies. ' DC. You will nooCci that we JIe members ot tho National Home Study Council 'since
198'. Wt have numerous lene.rs hell! from Prcs.!dent Reagan, '
When you graduate, as we 'mentioned before, you're goingtc! be qualified for an
, entry level position as a secretary. 'a general secretary, an ~ecutlve secretary, or a The only thing I haven't told YOU is what our tuition fees are. They are
cll:rk,!typist, " Yoo can pay i1 an lip front or they have paYment pjans. Or you mllY be
eligible for a Guaranteed StudOlit Loan. It yOIl are; thia is what J need from you; I need
two ClU'ollentagreementa ~jgned, one I keep, one 1011 keep. I have a completed ques.
tiOMai.t'e, and W-.L
to
~d~ because I think
ygu.,have OYW.9UCJlUI~
I need a phOIOgtaph a1ld~ sit.'
whether you have been accepted by the school.
within a period of five days you will kilow

l'in here. actuaby• to inlerview you, ~wer your 'lUesliorls. evisJuate yoil, see jf
Y9'!would qUalifY to come intooUi school.' ,

At this time, I would liIce yOu to fill out a Pe.sonal Qualification and Prome form.
ThU will tell me whether you will' benefit from the course and whelber I can recommend
you for OUI school. Of l:ourse,all I can do is recommend you. Yoli have to be accepred
by the admissions Conunillee. '

v .loob. ~d th eISon· ualific'fon arid Profile form. U:l mil

JUSt e~pl8in a lillIe about what is happening here. A lot of women get stane in - ,
business and eventually move up the ladder. That's whal !his shows - people in
advonising and broadcasting. It's very hatd 10 fUld a good secretary, so when rhe boss
'h;u one, he's going to try 10 keep her. How does he do that? tIe gives you pay raises
and ,other benefits. '11lis anicle say' the employers might be able to fill about half of
the expected annual openings wi!h studentS who have completed secondary or post
SCl:ondary secretarial programs. 11lal's what we are • a post secondary uade school.
We are looking for \be secretary with the righl scuff, who can get things done, who is
poised and polished. one who can think. one who can organize ;uld coordinate, has the
self-confidence and selfcdiscipline to be successful. Of course, if you look in the wanl
ads. this is just one page. from the September 27 Palm Bea<:h POSt, there are plenty of
jobs here, Incomes ranging from S18,000 to S24.ooo.
 239
238
'Ibis is lbe new elee:ttOllic Iypewriler you will receive. Of course, it has a 50,000,.
word dictionary in it, it hu a processing system that allows illo recall or delete lext using a
bullt-in charaetet memory. A nice typewriter: One thallw a good Ulai] value.

\J Here u an a.nlcle from our placement director which stales thai she just had a
conversation with a representative from Nore1J Temporary Services regarding our
program. .Sbe:WIIll so implCssed with it that sbe is .uWoU$ 10 SlaR hl.ring secretaries in
her lempo~ servi~ .. She has 235 l()(aliollS throughout the United States.

Thls anicle says, "Vocational schools offet fast job training." nus one says,
~MEmQ~ Y.W.CA "Only hll1£ the aation's vocuional scboob meet the minimum standards set by accredit-
~9FFIgS' . PARENTS WlTHOVT PMTNERS ing agencies r:ecognizc<l1)y the Dllpartmel11 of Education." If you WInt 10 check OUI
schools. they tell you to c,*~ with the National Home Study Council in Washington.
NSIGHBORHOOO MEETINGS
PIjAWJU{Et'S
m BNP . aro
APAR~CO~Pl.£X:

·ti>~HOUSINO
.BUSSTOPS
FOOD STORES; SUPERMARKETS
m
~,...
l:fEi
L
M
~HI-~-s~¢f--05tS
s()ClAt.SER~ .......
DC. You will notice that we membcD of the National Ho~ Study Council since
1985. We have numerous letteD here from President Reagan.

t56CfoiiffO YESM.D.
K-MART
DlSCOONr STORP's
oamsTs -YES D.D.S.
. pARKING LOTS ~TTORNEYS - YE'S
woMEN'S cures SCHOOL TEACHERS
PERSONNEl. OFFICES
ELKS
EAGLES
. BANKS
~gm~
.' OF1ICB B\J1LDINOS MOBl;!.EtlOMEPARKS
.STRIP SHOPPING dN'flUtS .... CH~CHES· .
MOBIL£ HOMES . .
AND THE LlSTOOES ON ...
Y.Me.A.
.\
t
:~
,
;.l
A
n
i!
{

PEOPLE ARE EVERYWHERE!!

,
.~

!1
'J
j1
"
,I

Ii
n
:(i
 240
241
EXHIBtI U·l
EXHlBrru.~

16. ClndUCling SatUrday sits at nuN grocery store. Put up noti~ in 3().)S mile
FROM: John Wash radius giving date. time and pllce. .
TO: All Admission Representatives
17. Leave boainess cards and brochures in alI fast food n:staW'alU$.
We all.apprec:late ihe effon and TEAMWORK dmlonsttated as wc compiled lhe
foUowing list .O( wggestions to gCl1trate additional business. Our anticipation 10 ~e your lb Drive throJlgh large housing projects ·SLOWLY with door sign 011. Be.st rimes are
number. increase halIlllRsdy been revealed in oW' 1988 projeCtions and individual quotas. Friday afternoons l\Ild Sunday afternoons.
Good luck in the new year and walCh for more exciting m:ws t.o increase your prcduct;on!
19. If 4 student is a mOtjvalslr and .• ~ type pet3on. I a$k thal we $tt up·
1. Handouts at malls: lUlOtbu meeting in bet home in about 4 or 5 days with at least 5 friends.

.2. Call cbwches, speaJt to FastOJ' M't, then to young pecple's counselols. Many 20. Always wear lapel pin. Pin can read.- Joe Doakes. AdmJ&s1on" AC.T. Travel
church groups have nights where they have a panel of ~qple in different ca.reelS School (1-800-432-3004 FL)
for young people to lisIr; questions.
II' Meet with the managers of low income and government housing lIpanrncnls.
3. Leave car sigN on ~ even when not working. OJve group PlCSCIltetioa. .

4. Use rd'eJ:fal car~ at every iDtemcw. 22. Keep In touch with the O.E.D• .board· Classes ace nomuilly held at night. Adult
Education.
5. Tal1c to waitresses· ill fast food restaurants.
~ . . 23. Put ba,,~ ~ at city lIbmries iil the travel sect.lon.
6. Use bUlboards at fitness c:enten~ laundromats, hOusing projicis, condomlnlums
U1d apann1eot projects.' . . 24.
~iue ~ized car tap from die state. Tag reads A-C~T. or CAREERS.
7. Encourage prospeq to bringlOmeoue along.. 25. Contacts in lOme of the hospitals or hotels (maids).

8. High SdIool career coWlSdon. 26•.. Il.eiltspaee in mall when "TRAVEL"bthe theme.

9. Rehabilitation cenien~ 27. find school counselors who work with High School SeniOR who have no
intemIon of gom, to college.
. 10. Cbai.a method· get Ileac! from ~h enrollment. Usc. PQP w~ references are
required. 28. . ~'lt space at local flea matbts.

11. Cont~ man&8tO of city pub • present program to them. 29. Place llt¢ralUte in pbysicWls· and dental offices (if possible).

12. Slay in touch with Sflldents and graduates showing irileIest in their progress. 30. Posting A.C.T. Syers or postelS at area eoUegc.~ and universities.

13. Uponenro.Ument,get two ldtaall}ame' and phoM numben. Then give the 31. Cu signs wOlk when you 10 into seIVice Illations.
studem 3 refeml cards.

14. Visit travel ageneie$ in your area • leave your card with the mWler.

15. DIU sylleltlS oO'et In$ide .w.msln. on the buses.

r
 242 243

.'
mquBIru.a
~.

-.
tt UNITED STATES DEPARTMENT OF EDUCATION
t !\EGlON IV
Make lip "Special Paaeti" comistlng ofbroehwes. Travel Talks. See the World f01 MAFlIETTA TOWER 8UII.OING SUITE 2ZD3 ([!iQ
I,
t
32. f1~r. On outSide of broehm'e. 1 staple. re£enal card and name card.
Talk. to coumelors from state agencies.
"TLANT". QII!OllalJt. :lN23

STUOl;NT FlN"NCl"L ASSISTANCI!

~
,; 33..
Talk to Regional Dhectors thai handle rcuainixlg and pla~ment ofpenonnel in

I
34.
plant c:l\JSings. November 8, 1988
Pte$ent our progtaS1\ to certain minodt)'orOrientcd church" that offer counseling
S9 and pidancc 10 yoq divoxc:~ and unwed molheIS. Stale P--.t ~
Mr, Josep~ Calareso Oil 11lJeS11.11iofq .
t
Reps an: usillg tbeit' commission ~~et tQ record the times called as ",cU· as how
President
r Anerican Career Trainfng EXHIBIT if --41....3.... _
rr
t
36. many rcfenals elleh stUdent gives the rep. . . Travel School
4699 No, Federal Highway
Polllpano Belch, Florida 33064
1. College.eatCU caY$ on blaek eampu$cis•.
\. s Dear Mr. Calareso:

! 3&. Contact women's clubs. On October 17-19, 1966, a review was conducted of the Guaranteed Student lOin
program aGainiste~d at your institution, The fIndings of that revfew are
BU$~ card "Oive-outSystelD" at sh¢ppu~g centers. presented in the enclosed. report.
39.
1\ Contaa '£l..duc:ational Center Direclor at milbarybasea. Work with milltlll'yand ·Findings of non-ca-lpl1ance are refereoced to the applfcable regulations and
40. c:l.~ wo~r.lwho wanl information on c3l:eers in travel or secretarial . specffy the action required .in order to comply w1th the· regulations and
statutes, Please review· the report and respond to each finding by indIcating
.

what actions have been talen. to ·date or will be taken. Your response should
poressib."\i· be sent di re<:tly to th& revf ewer wf thf n 30 days. .
r" .
~. >' 41. .Leave brochures It bea\JlY shops. . I lfOul d 1ike to express my apPTeeiat10n for the courtesy and cooperation
extended to me during th·erevi ew. If you have IllY que·s·t10ns concern! ng the
report, please call our office at (404) 331-4172. .
G) .Why POIUSO "Bird dogs" to gc, yOIl bUsiness7

43. Uncmployni,ent offices • leave ref~ c~ds. Sincerely, . I

~ !AJJ{'1~
" Food stamp offices • leave ~ft'.rrll1.card$. Vivia n II. McGee .
Inst~tulional Review Specialist
o Welflll'l offi~S -lean refead card" . Eoclcsure

cc: Ms. Victorfa Edwards. Chief, IRe, lIash. DC

Ms. Brenda Brandon, Finan".ia' Aid Dfrector

~~l
Collected June 23", 2009 by Cristina Colon Garcia of Morgan Stanley

SummerlFall Negotiated Rulemaking Written Submissions

J. Jean Public

Foreigo schools tell financial lies to get our tax dollars. Stop all funding of the foreign
schools. Why are we funding students to prepare for jobs that don't exist.

2. Leeland White,
Definition of USC 20 SS 1088
For profit schools provide 4hrs of instruction per week for 5 weeks and claim 3 semester
credit hours. Yet the law states 15 x 120 hours for the average BS degree. Huge
difference between 800 instructional hIs at UPX and vs. other Title IV schools that
provide 1,800 hrs. Reopening case 02cv0237DB in the Western District of Texas, El
Paso, which once went to the Supreme court. ED would be able to collect on its'
overpayments immediately (paying for 1,000 more hIs than students gel), but looks the
other way because for-profits pay millions in taxes while public institutions do not. The
suit is vs. Apollo Group specifically. Leeland asserts suit is being reopened due to court
fraud.

3. Augusto Failde, augusto.failde@abouledu.org

Graduate job placement: online providers of education should provide job placement slats
in each of the programs offered by the online education providers, nuberof career
counselors per program. number of corporate, government and non-profit internship
partnership opportunities per program per student ratio, alumni network support and
access.
Incentive compensation for enrollment advisors: incentives drive them to sell, but their
job should be to advise. Put tIiem on.a fixed salary.

4. Brent, ---~-- -- -

A former enrollment advisor at Ashford University. AU not motivated by students' best

interests: a) they conveniently price tuition at the exact amount that a student can quality
for in federal student loans, and if you have other benefits (e.g. Gl Bill) they go after that
too, gaming the systems as much as possible, b) AU does salary adjustments regularly as
a way to skirt the commissions issue, c) ~Il,I'ollment advisors under tons of pressure to do
anything necessary to get people to fill out their app1icatio~. Once was pressured to sign
up an old lady who could hardly use a computer, even though clearly she was going to
havc difficulty completing an *online* degree. Employee training and literature
completely masks their true business practices. d) AU has the same accreditation as
Yale, which they use to say means they are as good as them, but why does anyone pay
attn to accrediting agencies, they are so meaningless. Employers are starting to realize
that online degrees are for the most part useless and st!lP recognizing them ..

5. Parker Quilleo,
 Quilcap Corp is an investment management firm based in NYC concerned about the
sustainability of certain publicly traded for~profil schools' business models and have been
primarily sellers of their securities. Convinced that much oftbc growth comes from a
highly refined manipulation and abuse of ride IV student aid programs. Apollo spend
much more on marketing than oQ. faculty COplp. More emphasis should be but on student
default rates, rather than job placement rates or graduation rates, which are more subject
to manipulation. By default rate, they mean the real, cumulative default rate. ED should
disclose actual cumulative default rates and non-performing loan rates for every school
that participates in Title IV. Additional measures suggested: a) regulation of excessive
and misleading advertising, b) strong~r state oversight as a condition of participation, c)
better criteria for accrediting bodies, which are not adequate gatekeepers presently, d)
better definition of gainful employment, e) more regulatory focus on,distance education,
Attacbed: annual rcport, and ED-OIG/A03.-C0017 from Dec2oo3., an audit 10 determine if
CDRs provide sufficient info on Title rv defaults.

6. Mark Kantrowitz, mkant@finaid.org.

mkant@fastweb.com
Section 483(d)(3)(A) and (B) of HEA (1965) has a loophole in that there is no explicit
requirement that the www.fafsaed.govaddressbeincluded in print or other advertising.
However, have enough authority to including that requirement through regulations.
Already requires disclosure that "the FAFSA and EZ FAFSA are free forms that may be
completed without professional assistance via paper or electronic versions".
There are different overpayment tolerance levels for the various aid programs (e.g. $25
for Perkins and Pell, $100 in NSLDS but not for colleges, $300 for campus-based aid).
Would be good to rationalize all so there is a consistent unified set ofjust one tolerance
amt for overpayments, overawards and verification.

7. Danicl McCaffiey, danml@optonline.net

Raises the issue of lack of consumer protections for private student loan lenders. He took
out a srodentloan, fcll on hard .times, was ·able to pay jusi part Of the full monthly
amount, loan was put into default. SLM demanding $20K, Dan has no legal recourse
because there are no consumer rights for private student loans. Law firms have turned
him down. Reform is needed in the student loan industry.

8. Jennifer Reilly,
Please closely examine the student loan policy. Standard consumer protections, such as
bankruptcy and refinancing rights, need to be restored. She has deferred her loans twice,
, once when each of her children were born. Experience turned very negative when
consolidated loans thru AES and loans subsequently wound up at ACS.

9. Fran Mason,
Critical need to restore standard consumer protections.

10. Matthew Valero,

Was allowed to borrow S140K 10 stu ent oap.s fore the age of22. Admits to making a
huge mistake but finds it unfair that he and' his children.'should have to suffer for the next
30 years because he made a financial mistake as a teenager. Asking for restoration of
bankruptcy protections, truth in lending requirements, statutes of limitations, usury laws,
and fair debt collection practices.

11. David Gresham,

Writing to express concern over lack of standard consumer protections of student loans.

12. Jennifer Wilson,

Struggling to pay student loans, both private and federal since graduating from Penn State
in 2004

13. Sam Conley,

Stop student lo~ abuse

14. Lauren Johnson

Need consumer protection for student loans. She's a lawyer but mindlessly took out
much more in loans than she needed to in order to get through school. Between her and
her husband, have $3S0K in student debt.

1S. Erie Hatch,

Please restore the standard consumer protections for student loans so people like me can
get a fresh start in life. .

16. Mariah Miller,

Need help dealing w student Inans.

17. Sleph Wageneck,

Feels like student lenders took advantage of her and hasn't been able to even fmish her
degree from a local technical training school. .

18. Greg Reedy,

Suggests a different way to handle student loans that would be fair to the consumer.

19. Aaron Wooten,

Concerned about recent changes in the student loan collection policies. Also searching
for a lawyer to sue the programs at Hunter College, CUNY) NYSED for poor program
quality.

20. Richard Griffin,

Feels buried under student debt and wishes for some type oJloan forgiveness program.

21. Barry Culwell, barry.culwell@templeic.com (financial aid advisor)

There should be no federal Unsubsidized loans. They are merely a way for banks to
make more money mostly from students whose families have a high AGI but do not have
to
the revenue on. hand pay for their-child's ·~choo1. TIle interest in the Wlsubsidized loans
will only punish and hurt the students who are going to school fuJI time and need the
money to live on. as well as students have no other financial aid available to them.

22. Cynthia D. Warner. Student Loan Justice coordinator:

for state of California)
Need an end to the draconian anI! unethical collection practices, restore bankruptcy
protection, caps on amounts and statute of"limitations. Attached: an adversary complaint
from when she filed Chapter 7 and a new study on how the requirement for an adversary
proceeding is counterproductive.)

23. Karla Parsons,

Need conswner protection from student loans. Borrowed $1 OK for a 3rd year in an
accounting major. Program was canceled. First class in new program was cancelled.
Went of Federal SSI to help maintain herself and·child, but WFC defaulter hcr student
loans. Now owes $18K and can hardly pay because.was, never able to finish the degree.
Please look into changing the student loan "business".

24. Jennifer Lemar

Just start taxing students as a % of their income after they graduate for 10-15 years asa
way to pay for their education, instead of making them deal with cut-throat lenders?
Unless she can file for bankruptcy protection in the future, wilt never be done w student
loans.

25. Vera A. Livingstone, Esq,

Her S70K in student loans has ballooned to more than S300K. Has been paying them in
order to restore her credit. Unfair that SLM can capitali:t..e interest the way that they do.

26. Nancy Reike,

Victim of the student loan industry

27. Tom Clark,

Ideas for improving student loan issues

28. Louella Parker,

Student loans that default due to hardship should perhaps be spared for late fees and
abusive collection practices.

29. Valerie Witte,

Please restore ~nsumer prot~tions for student loans.·

30. Vinjan Novacek,

Forgive student loans and start over

31. Jeff Taylor,

Problc.r;n with existing student loan repayment issues
32.
Bailout the students from their 108ns.

33.
Restore bankruptcy protection from student loans.

34. Donna Lee,

Prote;ction from student loans

35. Mona McCormack

Student loan problems

36-60
Requesting consumer protections regarding student loans, student awareness of monthly
payments and total repayment dollars, etc. Requests to curb abusive collection practices.
Stop lender relationships with.schools.·

Ip oma mills that give a bogus education. Points to Glendale

62-64
More student loan complaints and suggestions.

65. Glen L. Johnson,

Recent, satisfied graduate of Ashford University's online program. Started a blog,
http://distancetips.com to discuss the finer points of pursuing a degree online.

66-67
Student loan issues

68. Wyjuana Montgomery.

H~ppy graduate of Ashford University

69
student loan issues

70. Donald Pal\Iler,

Happy gr~uate of Ashford University with·an MBA.

71 -81
More calls for student loan refonn

82. Sherry L. Price,

Happy grad of Ashford University.
83-89
More calls for student loan reform. One specifically for the disabled.

90. Alicia Burkholder,

Happy grad of Ashford U. Ashford accepted transfer credits that were 10 yrs old.

91 -92
student loan reform

93
Happy Ashford grad

94. Fran Mason (see #9) on student loan issues again.

95 - 108
student loan reform

109
Happy Ashford grad

110
student loan refonn

III. Linda Bums,

Eliminate the tech school and so-called 1.U1i versities that are for-profit and just allow
anyone in. Their credits are not accepted by stale universities and they pass everyone just
to collect money.

112 -116
student loans

117 Happy Ashford student

118 - 120
student loans

121 already included as part of 106

Student loans the main concern, but also the low program quality of Chiropractic schools

122~126 . . .
student loans

127
Happy Ashford Grad

128
Happy UPX grad

129. Gregg Castille, gjohnsr@comcast.net

Without federal funding would not have been able to attend college. Now want to
acquire an MBA. Please keep in mind the less fortunate individuals, working people
being pushed by employers to get more education to advance, funds and resources ned to
be there· for all.

130. Nancy Martorano, nancymar@pcom.edu .

FAFSA simplification. Changes/improvements to processing systems needed. Current
process falsely warns grad students that they have reached aggregate loan limits.

. 131. Michelle Rodriguez, rnrodriguez@publicadvocates.org

ED should consider regulating on: a) the statutory ban on incentive comp should have
been absolute, without the safe harbors. It is a root cause of waste, fraud and abuse by
Congress. b) qualifications for accrediting bodies; proliferation has been too easy and
allows for forUm-shopping and a bias towards approval. Accreditors should bear
consequences for approvals ofinstitutionsthat cannot meet robust program standards. c)
gainful employment - think about what the standard should be, and how it should relate
to program expense, debt burden and post-program income. Dept. should consider
investigating student perceptions. d) consumer information and protection. Specifically,
default rate disclosure, ratio of average debt burden to graduates' salaries. e) disclosure of
marketing expenses for firms that exceed a % of revs. f) FTC should enforce on
misleading advertising.

132
student loans

133 Deanne Loonin, dloonin@nclc.org

National Consumer Law Center (NCLC) anonprofit orgspecializing in consumer issues
on behalf of low income people
. See www.studentloanborrowerassistance.com.
a) program integrity: the for:":profit educationsectot preys on vulnerable students/ dreams
of betterment through education. b) deceptive marketing practices, outright lies about
programs/courses offered, grads don't find employment in the fields they are supposed to
have trained for, have federal + subprime private loans as well. c) existing laws have too
many loopholes and enforcement is too lax. Institutions should be held accountable for
outcomes and should have to report them thru a standardized definition ofjob placement.
More upfront disclosures needed for students. Regular audits. Penalize schools that
don't meet standards. Provide public a,CCeSS to the data.·

134 -135
student loans

136
Satisfied Ashford student .
 137. Lori Madsen, Imadsen2@verizon.net
Fonner COCO collector fot delinquenfstudent loans. Had tons of trouble collecting from
Everest campuses in several cities. Students·often could not fmd employment in the
fields they were supposed to have trained for. Often they dropped out and had no
intention of completing their programs.

138. Robert MacArthur, rmacarthur@a1tresearch.com

Alternative Research Services, 203-444-5174 .
Complaints against UPX:incentivecomp, refund problems, etc.
See Consumeraffairs.com

139 -140
student loans

141. Barmak Nassirian, nassirianB@aacrao.org

American Association of Collegiate Registrars and Admissions Officers
Objects to incentive compand safe harbor "loopholes". Accrediting agencies not
adequate gate-keepers. High school diploma mills on the rise,must define appropriately.
Gainful employment in a recognized profession must be defined as a profession that is
lic.ensed by the states. State authorization varies greatly between states, need to
standardize. Top 9 advertisers who receive Title IV spent $1. 75B on ads last fiscal year,
and are expected to spend $2B this year. Consumer disclosures need to improve. Need
stricter definition of credit hour. Shoddy schools manipulate measures of academic
progress. ED needs to prevent schools from gaming the Title IV system. Attached:
American Career Training (A.C.T.)RecruiterTraining Manual.

142
Happy Ashford grad

143. Russell S. Kitchner, Ph.D, RKitchner@apus.edu

Associate Vice President for Regulatory and Governmental Relations.
Proposes a discussion about distance educatiqn. genuine need for a regulatory template
and an associated common data set that together will yield an effective and cost-effective
method of accommodating the conswner protection objectives of state regulatory
agencies, while also helping to mitigate the potentially overwhelming regulatory burden
borne by online institutions- public and private, for-profit and not-for-profit. ED's
current role in recognizing the regional accrediting agencies and its relationship with
CHEA represents a strong precedent in this regard; Given the increasingly understaffed
nature of many state higher ed boards and coinmissions and the often outdated legislation
and administrative rules with which those agencies mustoperate,ED guidance and
leadership would be mosthelpfulin adding art appropriate degree of coherence to the
currently disjointed state regulatory environment.

144
. Positive comments on Ashford's contribution to a town
 20073 Year ·20063 Y.ar 2005 2 Yeor 2005 3 Y_
Com n School Unofficiol Rale Unofficial Rale Official Rab! Unofficial Rale
AmeriCAn Public I
~f.£L !tnjy'~!!L~ §}'!1!.n:!__ ___3.d~ _ _ N~ _
--_®_--
~ql""._~ __:!tnjy~~!1!~!!i<_ __~~9J' _ __ .J91."L_ __?1.'L _
Westom Intemafonal
________Up~~~.~ _ 1 18.5% 26.5% 36.9% 11.4% ___ 1.8}~ _
~~-----~~~~~~~~--
University of the
:::I::: ::: 13~:f2o::: ::jL4Y,::: :::~·fr~:: ::~I~:: ---~.!I~---
Rocl<ies ___ .1 ...J ..Q·p~ __ .L O.;Q~L __ --_Q.Q!~-- 0.0% __ .J.§!! _
·-----·-Arneri~;-·----

InierContinenbli
9£S~ ~~~~_~~ _ ___ .1 _ ___ .1.0,51! _ __ ~!!J.% _ __.J~~ __ ."':'1°,j'!l>__ ___ ~1J!' _
AI other '(I) __ 1i.6~ __ _~t02'!l>__ ___ _
-. _. _. ---~--- ---~.~~,._­ l.O,~
COCO --- v;'rio~$l'i
40 15.0% 29.6%
---'~~-­
27.2% 10.2% 23.3%
---1--- ---"2:5%'-' ---5']%-'- -'-3.7%'-- --2:3'%--
i9~L/.:::::~~t!:tI~~:: :::3·~~r::_
py. D!'Y..ryQnj~"'jJy _
Western Career
:::1:::
:::].~::: ::mjL:: ::J~~:: ==~&~=~ ___ 13,~

________C9~9~ ~--- __ ...J__ .~. 1~~ L __ ~~4~ __ --~~~~--.

__10.d'!l>__ ...J 1.6,~ _
-------_~~~£~I~~ - ___ .!._ . ...J .I:~:!i_~_L __ ~LO~ __ __ .J~J..~ __ ~_~&~ __ ...J fl,~. __
Chamberiilin College
._._~ __ ~f~~~~ . ___ __~ .~ ~~~ __ .L __ f,j~_,_ ___5"2::~ __ .. _9&°1__ ___ 2~!i _
/<e1.rGrodua1e
Scho<iIor·
._. ~_~~a]L~~ _ . . 2.7%. ___ _
________R9~~U~~~~--- ---~--­
1·~!i
'. 4.7% 3.5% 1.7%
___ 1.. __ ----0.2-/;--- ---0-:5%--- :::~·~C: ::Q~1:: ___ J!.~!i _
EDMC Art InstiMe. (0)
-- -...,.- - - -8;';';' Maciiei!l--- ._-~--­ :::::r.~~::: ::j~5J.::: ._ •.JH'L_ __ ~d~ __ • __ 11,5~ _
---.§.._- 13.0% . '25.0% 21.9% 12.0% 23.2%
::::::::~~~~~~~~::: 1 --'7.7%-~- --16'4"%-- --"152',1,-- .--3i"%-:- ::::TI!)],:::::_
__ ._. ~@~~~~.~1OC
ITT Ted1nical
__ :::I::: ::::H¥!::: :::5]1C: :::~.[%::: ::n:~=: ___ 1·!l~

ESI InsUtu~'(o) . ___ ~ ...J l',~_'::'_L_~i.1JL __ ---2p~~-- __E''L_ ._.!:J~~ ..

--·-----oin~we~~r---
__ -,tn, _ __ .. __
-_._----~~g~-------
:=:~:=:±=:il~:=: ---~.~~-- __Jd~ ._.2·?'~
UNC v.....:,.·(7) __ ' _
~~7JI __ .JH~ __ __~:Z.<l~__ ._ .. .t1..:.'1..!0 _
-_·---·-ar.MdC~~----
~QP_E U_njy.!~~ _ 1 •__ __ , .1.~~ 2.9% 2.7% __ H'L. ___ "';·9~ __ •
~LRt- "§~~rJ!rn:.e.,!-ity
unlYersa ,I echniC81
__ :::I::: ___ J·91L __ ::j[oY~:: ::J9I~:: __ ~,!'L. ---~.~~---
___1. __ . • H1!, __ __ l~8~ __
--~~:--I'--~'::---
UTI InstillJl.<I' 16.1%
-------~-~nl~Wi~
. Avvr3go' 10.4% I 19.6%
9.2% I---l~:~--
For-Profit InSlilulion
_______ :...vt~!'J!.<t~~':!liL_ ._.~,~ L._fL2~ __ 18.6% __!l,Ql!__ j fl'~ _
~5~ __ j=:=~~=:
Private '4 Y8Br
___ "';.J~ L. __6.l!'_._ __ ~d~__ ___ ~~~ _
--------~t~~~~;~·-- ___
________V{!!9~!!d.~~'!.ll_e__ ___ ~·!l".& L_J~2~ __ __.J~,!'L_ __!~~ __ ~ E,~. __
Pubic 4 Yelr
. __ ~·~:!! L_}.J!' _
--~~:--I---~:~---
-------~~~~t~~-Re-- ---~.~--
Weighted Averag. 6.7% I 11.8% 5.2% I 9.2%
ComDanv Most Recent Rate ReDorted Color
COCO 09's will likely be something lower than 08's 78.1 % Accreditor's standard is 65-70%; Calendar year 2008 rate; from 2009 10-k

DV 88.1% Latest three term average for student graduating in June 2008. Oct 2008, Feb 2009
EDMC 87.3% -2008 86-90% for last five years
Graduates who completed degree in calendar 2008 and found employment by April 30,
ESI 77% 2009; from 0209 transcript
L1NC Most likely lower than 2008's 77% 0209 transcript
Graduates from October 1, 2007 to September 30, 2008 and found employment by
UTI 8$% time of reporting - December 1, 2009 .
 Comoanv Rate Notes
APEI 82% of students that make it to 3rd class graduate.
APOL Associates - 26% within 3 years; 31% >3 years
APOL Bachelors - 36% 6vears; 39% >6 years
APOL Graduate - 55% in 3 years; 63% > 3 years
BPI 44% on colleQenavigaator - probablv sliahtlv hiaher
CECa Does not disclose

COCO- Won't disclose, but cited national accreditation

standards of -70% completion rate (lower for longer
coco·.· Estimate: 50-70% depending on program programs).

From Heide:"We start the calculation from second course

.. on since for us the first course is part of theadmissions
process. We then take the 1997-2002 cohort (a weighted
average for those 6 years, as total number of graduates l.
CPLA 49% after first course graduate total number oflearners from cohorts 1997-2002)."
DV ,. 31.1 %in 09 K; this is Federal definition ..

EDMC· . Does not disclose

ESI Does not disclose; 40-44% college navigator
Average length for diplioma program is 12 months and 15
L1NC. 55%-65% months at associate level
LOPE 49% on colle!=je·navigaator
STRA 15% on College navigator
UTI -70%
 Source Additional Notes

2nd Annual Academic Report

..

From K: Supplemental Reports. As of June 30, 2009, fourteen of our colleges were on reporting to
their respective accrediting agencies, primarily with respect to the completion, retention, and/or
placement rates of their students. In certain of these cases, the periodic supplemental reports are
required only with respect to particular programs at an institution, and not to the institution's overall
completion or placement rates, We are working to improve these retention and placement rates in the
idE!ntified programs at these schools.

",

200910K
 Verticals Degree Level Mix Funding Mix

--
Ameriean Public Education lAPEl)

:2l::OSE~.
20CSE eBrr I.brg'n

0 6-tOE R...... CAGR

oe.,oe EPS CAGR
$~48.1
26.4%

38.0\.%
SCbpgl. Ownfd'
M'~pl,1bi::;Vrr......uy
Arneric:I.n W:1hry Unhoer&r.y

Bushleu'
.
11_
13.0~
SO<U~ty.
-Global
SbJdlu
.19.0", . ~
8e1tnce&
~.¥ .
8IIduiotS

llllolV
20.0%
IUlwy TuItion

....
40.4'" T_ AssIstance
10.0% privata 81.0%
grlnt f ....oIlmtfIt Wk' 100% '.0% ~
..... &
tkmantael
e_n U%
. MOlt R!StrJ1 3 yw CPR' Moat Atcpm a ¥til' CDR' l .....
(f/:Amlir. Pubio UMt, S}stNTI- 3 3% 07: Mil. PLtJic UrW. System 0.0% 4 22.oll

public-Safety, National &.

" .... Master,
t-!otmJand SG.cufity 20.0%
21.0%

--
Apollo Group IAPOL)

2CtOE. R'It.""
:2OfOE E8tT M;rgirt
J5.015.1
~.a~
Behoof. OwMd'
Th.lWoIlni:y of Fooel'«
W..WnlrJ.......tiorta!UniVllnlCy
Ijls1~ SchoaI. (n'lM Noh Nb>:Ifl

~~g A~~d
Mem.rS\J[l.:v.fl5it:Yre.-"'j
{)6.-10E R... CAGR 21.1'Wi
08-10=: EPS CAGR 35.L~

• . llllelV
Dnil,.. frro'mtDl Mil" TO% E t .... ol.1Y . • ..._ .....~ L.... ,.

Nat BsnoS jl XII' COR'

(11: WtsWm Ir.t.. l.Jni-....a:y - 26.5"
Mo., B.Rfl12 Vt!t CDRj
Q; WnU.711tL UQ-MUy.18.5%
..."
EdlK;.1Ion HnIUIQ,.
71.allf.

01: UOP· \&.9% 07: UOP· 9:3lJli

10.0% 8 ......... c..1 10.0"-
. lS~lft1cIti4.a.,.
""'·hr1'Y:JllOI;~·r.r_CIVJ'

Bridp'epoint Eduoation (BPI)

BmIlil:llIIl;
200*: .q............ &441.6
2OO9E EBIT ~iUiin 25.3% H..""
5.7% Sod.. e.cb.8!Ol1

.~•
!<Wab; :·Sd.nc.
C&-1OE ~,...CAGR 61.4% U.O%
Da-loE. EPS CAGR
QoIlOt cn'pUmlrt Mix;
1J.0S4
99~
". . '.'

Molt R!fIlI1t 3 Yw CPR; . NR'S !ls!nl2 'tttr epR'

07: AIJ'lb'd U........q - 17.4% Ul:~Vri"o'Ilnit)o-13.3%
01: tJn!IItnitf of ho RIlCIdill& - 0.0% ~: U,iw:1ljy of tho Roc~ • 0.0% 1".,% Prl_
Edu~on Doc.tDraJl. MatH's 'ElnptoyeT PlY M.lbIfy Loans
20.0% oth.rl.1~ •.• % $O.OlS 4.0% 1.0%

Cllnlor Education (CECO)

2wnDd'
:r9~~::".
School'
11,705 • . Amarican IntwContinuntal Unlvorllolty
'2009= eB~T Mergirl 11 ..G% Colorada TKhnlcal Unr.-.,sity Visual Comm. PellG,.."u·
t7."%

•
~
8rt¥cli1'\'a~11!gllo
I.. Cordon B*J . ="~:I~.
()8..1CE.RevCN3R 10.~ IOtdwl /l4r.ac:Semr·
V8-1QE EPS CAGR 30.4% ~.,..,S~ Bulin... . .
arookeln~ 4!L0t.4 euc:nwy,IrtJ l1lIerYloons
Cash 118%
Brvll!l"lear.~ BadteiOIS,
'O.llYo 62.6%
C~CoJe;gI
Masten. CECO
Harl~ Cclege of OMig!'l
Doctol'lJ
Teml1Qfogy BBlance
~.AcE.my Dfo...i;o & Toc.'1. ".0% Sheet
"'S:EEC·~6chllcla ..
7.0%
H.... Other 1.5%

MOlt R.E!tJt 3 " " CPR;

IGtiIJtoM"i1ngo1'li5dloole.

MpH B!mt2 Ytit COB'

I!::dU~CIt1o
U:lI% '....
07:CECOWA·18'.6'JE 07: ~CO WA· S.lS'"
at: AJU· 1$1.1% m: AlU - 10.~
Corinthian COUegos (COCO)
BnLl!IlIIlIl: School. OwMd'

-
2010e. R••• nu. $1,625.8 Enr.'VStCoIIege
2010E EelT Margin ~d.l% EvarntlM'titul:II
Ev~~t Unlv"rlloi!:y

QS..1Q£ RovCAGR 23.31Ml

WyoToch
DI~lo~~;~.n""8
oa-tOt EPS CAGK M.G"" P..'G ....10
Nasters1.0% na. IV loani Z3gA.
·"Culm Enrolmmt Nix' 20% E 6&0%
.Mott Berf 1 Vue CQR-
07: COCO W'" - 29.&%
MOD ReHor Z YtuCDRi
a7: COCOV,IA-1$:0% ..."
Clachelars
•
PrtvateLoans
2.OY.
07:E. . . . "NA-t5.7'J11i
~CId'"
07:EWfMtWA-'21.1% •
07: WjDT.ehVJA-l9.9% 07:WroToohWA.lo.2% om. Cull COCO Balanoe

... ..
..,. " "
32..0"- 1.O%).~ ~~t

Gape" (CPLA)

-
~ SCbpg, 9wnIlt
2OCl9E R....."". $333..4 CaPllIl1lUr~
InrorR'RllttonT~oOI~
"
2009E EBIT ~:n li.D% Pel Grants
8.1.%

~~£ .'·0%:::OYO'P8Y
08-10E Rev CAGR 21,5%
Edueafon Elu$lnols .
21.0% .
Q8..iOE EPS CI\GR 39.3% 17.0"

.QnI!D!£!nlkn.QI;Mbj- 100% . 10.-Il-%

Psych.ology
Most Broop[" Yf.. CDR;
07: C. .:. Ur.MniCJ - 5.5%
Most Bmtr'" yHf CpR'
07: CWlt:lro U~...., - 2.5%
18.0%

P,hate
..."
001"

,.."
~..".

For-Profit EducatIon Industry Kelly A. Flynn, CFA

Company Summaries ~One Pager" Business & Professional Services Analyst
CREDITSViss~
(617) 556-5752
.. Kelly.Flynn@Credij·Suisse.com

Nola: Ae.l\llllt.;and nlirTl<lt8. for vtrtiellts and dtgr. . 1MY1iI1 mill: reftoot. 6t1Jd«rt popu~tion <l-t FY06lJ1nd unln.. QIh.rM.. noted. FtAnding mix ...tim.w. .r'1d -aatuillts arlJl for' FYo9 no .. .,llmated by Cld Sul~•• urJn~ cf--.irwis.e l'1o-ted.
So'lli;l': Comp:arrr irtfr:Irmation and Credit Sl,J~ .,..tlml'bl•.
 Verticals Degree Level Mix Funding Mix

--
OeVry (!lV!

:mICE ~
2O:~E E:BIT

08-10£ Rev CAGR

oe-'1~ EF'S CAGR:
~.Wgin
11.803.6
U.4'lt

28.5%
33.6%
Icbqpl. Owrwd'
o.vryUnivirliity
R... .........,
aa'ftMo1ain~.ofN1,Ir'!rtg
ApaIg~~.
WM.~
.
Can.reoa.g.
BElQk8r PI.at'(l$Glonal EdtJedon
Busl~s
-46.7% Bachtlo~
'0<'.'"
. , ... 6%.
Actv.notd Acadmca (ClftIIn, Nllt1 KhoaI'l 12.,0'% "
Techn~ogy DQl:l;or.l1 nUelV
CnllDl CJv'pllm.m Mht' &10% E DVBBlanoo
....1% . 5.1% n."" Sheet
"'Rlt BtceP' i1 '(I-cRn'
07; Wtsltm CaJeerCoitliglo -:;l4."'"
MoURmmt2v"rCpB'
07: Wnttm C..... Caloge • 10.2% ........
17.1%
~.O%
E,"p~'al'Pay
0l::DeVryU~-17.1% crT: 0.", UMws/ty. ~UI" • 1.0"'.
01: ,I.p;lIo Cd:~. WA· 21.0% a1: Apollo eor:~6 WA.· 7.2"fi C.rttkal. StaiR GrantsJ OUwr
(11: OIa.~a:n • ...1CA Q1: CMlmb...i'a:n - 29% 11.A. 3.0%
07:K.IIer-4.7'Ji aT: Kelf.:'-2.7'"
01;~-O.S% 07: R.cu-O~1JIi

Education Management CorpOlatlon (EDMg

~ SCbooIt9wn!d'

-
2010E Revenue .$2,448.9 A1r¥J-r UrJnrll~ 8UllntlS
201<JE EBrr Margil'l 15.<4% Trt-Mlnll-l±t:l.rIea and LG_ E';Iu~on
Pen Gl'Jn'l$ . EDMC" Balanc;e
Brown M.ol:Jl- Col\$ge .12..0% 4.0%' Technology 7.11% 8tleet
&outh UMrerRy culinary 9.0% 1.0"". Assocl_ .0,.%
D5-10E Rev CAGR 2D.6%
.BachtlarJ: 11.0% Privati-Loans
f».1CEEPSCAGR 3t.l% 8ehav1oltll . 17.0% .
8<_ ~IaAits
me IV
11.0%
Onl!rw 'CrJ'9f!rtW'!( Mil' 11.0%' 21.0%

....-
25% E Loan, wle-GmQI
.Mo,t Bec:!013
07: ecwc WA -14.6%
yHf CDB' Most RtftIJ12Y)KCpR"
07: EOMC WA - 9.0%
.......
SCiences
7.0%
iO.~'" OIIlo,

'17: Brcwn I.tacIOI ~.;.. 25.C~

07:&olJtlUni""rsity-1B.""
or: ero-m W~Ici. C:~ 13.o",
Q7: South U~;",s'" - 7.1%
p 1SJW. •
OltMrt.D% D~ gc:;....

._.
C1l: lMArtlnstit.ltCl$· 13.5% 07: Tht Artlnstfl.JI•• • 7.1%
07: N~OI' Ul'lt.'.:.rty - 5,=3% 01: Npy Vl1iv1floiy - 2.6%

ITT Educational Services (ESI)

-200!£ R.Hnl»
ZKi9E EBIT M~
$1.326.0
35.5 Technology Bustn... s .

e
o~.
..... U%tlU'~ha
2.0%.
: peI'G""'''
13.0%
06-10:: RiW CAGR 25_5'11.
08-10E EPS CAGR 3O.711jlj
. . DralUng& nde'" Lome. PrJv.. I. La.11
DQ:5Igll n.o% 1.0%
OnII'S Ern'!!. Nla' -c5% E
22.0%
CUh
MOfl Btslnt.:J )'fIr CD"' Mon R.cms 2 bar cpR' 4.0%
07: mTed'I.~t WA·2",1% 01: In ToKh.1rm.. WA·l1.6'% ESI Balanoe
07: Dmlll Wubstclf Ccllogo·~. '\% 07: Oanill Webater Coli. - 2.7% Othor Shret
Crtml~Ju.Uc.. ",.,ters !!I.chelo,.. ~6.0%
111.0'"4 U'"It 8,3~
"0%

--
Uncoln Educallona' SotYices (tINCt

2OO9E' R..--,~.
~ Ee.lT WilIr\::i'l

06-1££ R,., CAGR

.oe..-1OE EP5 CAGR
$52-4.0
14.9%

25.3%
SCi,N
kboc!tOwDlct
~T.ch"U1~s~
l.noc*'I CcIeg. alliKh.,:'o;y
N""""'Ar.~QiHel:coa.
8_C_
Bll"I:'\ r~ of TKhnc60gy
C _ C.....
SOttlhwuturn College
HoatthSdMctI
18.5%
k.llornotIV.
T~:::'aY

..' t:• .
77.9%

nu,1V Wlans
Pc!!IGIiI'1I3
'5'.0%
PItR1e lO$n&
U%
....,
UNC 8aI81lce

PnUnt Enrollment Mix' <5% E Gl.Cphona Inn of Elnuty htI w Sci. ,S~III&d '1.0% . 1.0r.
Tr&deU·.O% tl!ltoGronts&
'Mott Rec!TltJ y... rCpR· MYII B,ptm: Z Xtar CDR- CUh
01; LiNe WA - 25.7% 01:!JNC WA·l3.-4%
• Bu$.\ntS.5&
InrormaUon Bae:htlof'S Auoda~5
0<11..
6.5%
to.O%

. Ho.piellity TedI\oIoGY 1.1% 2t..09.

Benites 8Jtli6. 9.0%

Grond c..nyon Education (lOPE)

I!I1iI!I!WI; .ohm 0wn!KJ'

2009c RiMIOlJe .$26:3.8 Ciruw:lCany£X\U~
2CXJ:ilE EBI! MargJr. 20,5%

EdS~~~"". Bus"'. . ~i:~:. • • .

!ll2iYlII;
oa-loe Rev CAGR 66.3% Private Loans
0&-1OE EPS CAGR 141,4% a.o.,.."
80<l101ors T1""IV
2Zl% 55,a" 71.5%
calih1o.O'~
g.-lot E1J:oIlm9"'LI,· 90;4 E

Wat Rmml3 n - CpA·

07: Gr.n:::S Canron u~ • 2.9%
"5711 rtp;pt 2 ¥tIC COR:
01: G<snd esn,on....-..,. - I.""
""""-"'"
0"',
1.0'.1,

Ubttal He:t~ Do<:touJ 2.5%

Ans/O"',
7.0%
U%

Stroyer Education (STRA)

-
.!lll:I£!lwIIIl Behpp'lIOwnld'
200SieR.....,..,. .$5t1,0 8",.,~ MlIIt.,.
21X19EEBJT~n' 33.6""
21.0%
. . .ocI....
PriVII.. Loans
:.:~~~
oe..l0E RelY CAGR 27,0%
1~ni1a1!an' U'J\.
D&-10E EP6 CAGR 29.5¥J .. ' .....
~1"I1·15.1"'·
TlUelV
On.... EfUCmml MI.· 60% E $.0% Emptoy.rPay
78.0%
11.1%
.NonRtc§3Y!I[Cpa· Mon R!S"J12 ymCpR' C....
·.07, 8..,.. u........... _13."" 07: SCnj'W lJnIwr1iity. e.O%
• 3.0%
01h<.
4.0",4

-Un1vernl T8Chnk:~II"'rtitute (UTlt

2010E R........-:I:... $411.8

150001. 0'Mttd'
UnIvel'&8I TeocmQrll'lS*-

.-
201.oe. E61T ~ilIrgi\ 9.0% N~"KIlllII"i..~ln5it1./'!'$
N...... lHd'w:ica Innwt.· Aulo & Truck RalIItItd

~._".
NA6CAR TedlricaJ mth.1e P.IIGrents
14Jr.4

O$-10E R.... CAGR 9.6% TItIeJIVL~ PrlV8t8'

oe.10E EPS CAGR 69.6% 64.0",4 Loan~
~.D%
.Onllll! Euol!m'D1 MI.' 0% C.,II
14.0 1,4
Mo,t BI"m ])',1[ cPR;- Molt RICtoS 2 DE CpR' Motorcycle, Mlrl.... &
07: un W~ 1~.1% m: UTIWA:. 5.6% Qttl.rProgr...... zs.lt%
 NCLCfJ the Ih~~itutefor
college .&
.. PUBLIC
N!\J'IONAL
CONSUMER
LAW
CENTER""
access. success IADVOCATESI
M~J(INC ftl$Il:rSREAL.

Q&A on Gainful Employment

April 2010

Q; Will defining gainful employment hurt good schools offtring quality programs?
A. No! Schools that provide meaningful education and training that students can afford will
.benefit,· while schools that do not will have to improve their programs or lower their prices in
. order to remain eligible to participate in federal aid programs.

Q. Will ithurt minority and low-income students by reducing their access to college?
A. No! To the contrary, defining gainful employment will help poor and minority students by not
subsidizing UIiscrupulous schools offering programs that leave students deep in debt with no
ability to repay. For example, one major for-profit school is making private loans directly to its
students while telling investors it expects nearly 60% to default.
The for-profit sector made the same claim' about college access when Congress first proposed
limiting federal aid for schools with high student-loan default rates. In fact, the cohort default
rules did not reduce student access but did reduce students loan defaults. Similarly, defining
gainful employment will protect students and taxpayers from being ripped off while prompting
some schools to improve their programs and/or charge less ifthey want to continue receiving
federal aid.

. Q. Why not give the industry and Department more time to study the issue andjointly develop a
proposal?
A. The Department repeatedly solicited input during the three month long negotiated rulemaking
process, and the for-profit sector never offtred a single proposal for defining gainful
employment. .Instead, it focused its efforts on arguing that the Department did not have the
statutory authority to define gainful employment. Existing law has long required certain
programs to prepare students for gainful employment, but without a definition, the Department
cannot enforce the law.

Q. Does federal law require onlyjor-projitprdgrams ('to prepare students for gainful
employment" ?
A. No, the law applies to any vocational program ofless than two years, including those offered by
nonprofit and public colleges. Most community colleges offer such programs, but have nothing
to worry about. This is because fewer community college students borrow, and those who do,
.borrow much less than students in other sectors. As a result, most community college programs
would easily meet the gainful einploymen(tests currently under consideration. By contrast,
students attending for-profits have the highest average debt levels of any sector and are the most
likely to default on their student loans.

Q. Would improving consumer disclosures be a better solution?

A. Without a defmition of gainful employment, the Department cannot enforce the law or protect
students and taxpayers. With students attending for-:profits now accounting for such a large and
rapidly growing share of federal student aid, enforcing this statutory requirement is more
.' important than ever before. .
 t/lelnSl:ifutefor
NATtQNAL
CONSUMER
coJlegeo .
LAW accesso<:SUCcess
:c EN T ERe

Protecting Taxpayers & Students:

Incentive Compensation & Gainful Employment Regulations
April 2010

Last spring, the Obama Administration initiated a negotiated rulemaking process to update and
strengthen regulations intended to prevent the exploitation of students and protect taxpayer
investments in college financial aid. Based on input at public hearings around the nation, the
Education Department identified areas' needing revision, including incentive compensation and
gainful employment.

While these financial aid regulations apply to public, nonprofit and for-profit colleges, the stakes
for students and taxpayers are highest in the for-profit sector:
• Nearly half of student loan borrowers who entered repayment in 2007 and defaulted by
2009 attended for-profit schools (44 percent), even though Only 7 percent of students
attend these schools. I • . . . . . '
• Nearly one in four Pell Grant dollars went to students attending for-profit schools in
2008-09 (24% or $4.3 billion), almost double the share a decade earlier?
• Students at for-profit institutions are more likely to borrow, and to borrow much more,
than students in other sectors:
o At for-profit institutions, 96 percent of bachelor's degree recipients had student loans
in 2008, and their average debt was $33,050. At public and non-profit colleges, 65
percent of bachelor' s degree recipients had loans, and their average debt was $22,750.
o At for~profit institutions, 98 percent of associate's degree recipients had loans in
2008, and their average debt was $19,700. At public and non-profit colleges, 40
percent of associate's degree recipients had loans, and their average debtwas
$10,900. 3

Incentive Compensation: To protect students from high-pressure and deceptive sales tactics,
. federal law has long banned colleges from providing "any commission, bonus, or other incentive
payment based directly or indirectly on success in securing emollrnents or fmancial aid."
• The Bush Administration undercut this prohibition by allowing such payments if they
were not based "solely" on the number of students recruited or aid received.
• Since this change in 2002, egregious examples of overly aggressive recruiting have
emerged. One for-profit recently paid $78 million to settle a whistleblower False Claim
Act lawsuit and paid an additional $10 million to the Department ofEducation to resolve
. claims over improper incentive compensation to recruiters.
.• The Obama Administration proposed making the regulations consistent with the statutory
ban on incentive compensation, ~hile providing colleges with public guidance to help

1 TICAS analysis oru.s. Department of Education three-year Cohort Default Rate data for FY 2007.
2 U.S. Department of Education, Office of Postsecondary Education (OPE), "Pelt End of Year Report," 2008-09,
1998-99, http://www2.ed. gOY /fmaid/prof/resources/data/peII-data.html
3Calculations by TICAS on U.S. Department of Education, NationalCenter for Education Statistics (NCES),
National Postsecondary Student Aid Study (NPSAS), 2007~08,http://nces.ed.gov!surveys/npsas/
 them comply and allowing them to pay employees based on performance umelated to the
number of students enrolled or amount of aid awarded.
• A group non-federal negotiators, including representatives of public, non-profit and for-
profit colleges, met throughout and between negotiating sessions to debate arid discuss
new regulations for incentive compensation. Theirshared agreement formed the
backbone of the draft regulations discussed by the larger group of negotiators, but the for-
profit representative changed position and blocked consensus on the revised regulations
in the final minutes of the last session.

Gainful employment: In order to be eligible for federal student aid programs, federal law
requires most programs offered by for-:-profit institutions, and any program of less than two years,
to "prepare students for gainful employment in a recognized occupation." Yet the current
regulations include no official definition of "gainful employment." As a result, some
unscrupulous schools are recruiting students for expensive programs that do not train people for
jobs that pay enough to cover the cost of attending the program. Such programs leave students .
deep in debt they cannot repay, and cost taxpayers millions of dollars in Pell Grants and
. defaulted student loans.
• The Obama Administration has proposed defining gainful employment to ensure that
students and taxpayers get their money's worth, and that students have a fait shot at being
able to repay their student loans after graduating.
.0 Defining gainfulemployment willprevent students ami taxpayers from getting ripped
off, not limit access to quality programs. Just as it has before, the for-profit sector is
falsely claiming that any changes will deny students a~cess to vital programs. When
Congress first proposed limiting federal student aid for schools with extremely high
student default rates, the for-profit sector also claimed it would reduce student access.
However, the cohort default rules did not reduce student access and did reduce loan
defaults.. Similarly, defining gainful enJployment willsimpiy require some schools to
improve their programs and/or charge less.
o A recent analysis by UBS concluded that many schools could afford to lower prices
and still make a healthy profit given their high operating margins, including a 37%
operating margin at ITT, 34% at Strayer, and 28% at Apollo. UBS found that any
impact from the Department's gainful employment proposal would be more than
offset by for-profits' gains from state budget cuts for public colleges, which create
lucrative opportunities to recruit students to for-profit institutions. 4
• The Obama Administration has welcomedsugge$tions for how best to measure gainful
employment. . . ..
o During the three-month-long negotiated rulemaking process that began last fall, the
for-profit sector never offered any proposals for defining gainful employment.
o The Education Department plans to issue a draft regulation in May, after which there
will be a public comment period. After comments are received, final rules will be
issued by November 1,2010, and the new rules will begin to take effect July 1,2011.

4 UBS Investment. Research, Education 101,. March 18, 2010,·by

.Andrew
. . Fones.
 MEMO

TO: Interested Parties

FROM: The Institute for College Access & Success
DATE: April 15,2010
RE: Charles River Associates Report on Gainful Employment prepared for the
Career College Association

The Career College Association (CCA) recently commissioned a study of how their
institutions and programs would fare under an Education Department proposal for defining
gainful employment. l As a condition ofparticipating in federal student aid programs,
federal law has long required most programs offered by for-profit institutions and any
program of less than two years to "prepare students for gainful employment in a
recognized occupation." Yet there is no official definition of "gainful employment." With
enrollment in these programs rising rapidly-now accounting for nearly 1 in 4 federal Pell
Grant and federal student loan dollars-the Obama Administration has proposed defining
gainful employment.

. Using data provided by CCA.and·no(publidyavailable, Charles River Associates (CRA)

found: ' '

• Students from for-profit colleges are much more likely to default on student loans.
According to their own analysis, even after controlling for demographic differences
among students, for-profit college students are twice as likely as other college students
to default;
• Few for-profit programs would be affected by proposed defmition. Their own
analysis found thatonly a small minority of for-profit programs currently do not meet
the proposed 8-percentmedian debt-to-iiicomeiatio test; and,
• No loss of student access to college. Their study indicates that other colleges would
be well positioned to absorb the students who might have enrolled in programs that
failed to meet the test-'and would serve them much better.

Their own findings therefore further support the Adtpinistration's proposing a clear and
enforcable definition of gainful employment that will prevent taxpayer dollars from being
used to subsidize programs that leave students worse off than before~eep in debt and no
better prepared for· gainful' employment.

Twice as Likely to Default

Demographic factors, such as income, gender, race and family size, playa role in the
likelihood of defaulting on federal student loans, but they do not tell the whole story. CRA
controlled for these and other factors to determine the effect of a student's school on the
likelihood of defaulting, and found that students attending for-profit colleges were twice as

1 "Report on Gainful Employment," prepared by Charles River Associates for the Career College
Association, April 2, 2010, including Executive Summary dated March 29, 2010.
 likely to default as students at other colleges? Even if all students at for-profits completed
their academic programs, CRA estimates that about 12 percent oftheir students would still
default on their student loans, compared to about six percent at community colleges after
controlling for demographic differences.

FewPrograms Would Be Affected

Using CCA data on student graduation, tuition charges; and indebtedness for more than
10,000 academic programs, CRA found that 82 percent of for-profit school programs
would currently pass the Department's proposed 8-percent median debt-to-income test.
The Department's proposal is intended to ensure that the majority of graduates of a
particular program are able to repay their loans without hardship, and more than four out of
five for-profit programs would meet this standard. The Department has also offered two
alternative ways for colleges to demonstrate that their programs are sufficiently preparing
students for gainful employment, butthe CRAreport does not estimate the effects of these
alternatives. It is possible that some or many programs will meet one of these alternative
gainful employment standards, narrowing the share of affected programs even further.

No Loss of Student Access

Colleges with programs that cannot demonstrate that they are adequately preparing
students for gainful employment llilder any of the proposed standards will have several
options. They could improve their program quality so that students are better prepared for
employment opportunities, or they could reduce what they charge so that students are
better able to repay what they borrowed to attend the school. This is similar to what
happened when the Department first began enforcing sanctions for very high cohort default
rates. In response, many schools adjusted their practices to lower their default rates so the
schools would remain eligible for federal student aid, and the 'share of students defaulting
on their student loans decreased substantially.
. . .

Even ~f some schools choose to elinllnate,. ratherthan change, a program, students

. currently enrolled in these programs will
have plenty of options, including enrolling in
public, private non-profit, or the vast majority of for-profit programs that meet the
Department's proposed standards. While enrollment has increased in all college sectors,
state budget shortfalls and shrinking endowments have limited many public and nonprofit
colleges ability to increase enrollment. Given that the vast majority offor-profit college
programs currently meet the Department's gainful employment standard, and the sector
says it has the ability to rapidly expand enrollment, students will still have plenty of
options, but at a lower cost and greater Qenefit. Taxpayers and the economy will benefit as
well from lower student default costs and a better-trained workforce.

2 Figure 7 in the CRA analysis shows that studentS atprivatenot-for-profit 2,.year or less institutions were
less likely than for-profit students to defauh, but more likely than students at other types of colleges. We
exclude them here because only one percent of students in the Beginning Postsecondary Students
Longitudinal Study (BPS: 96/98/01), which CRA used for its analysis, attended these types of colleges.

2
Bergeron, David

From: . Shireman, Bob

Sent: Tuesday, March 30,20108:05 AM
To: Bergeron, David
Subject: Fw: Fwd: the best thing ever to happen for proponents of gainful employment
Attachments: image001.gif; EDU 3.18.10 UBS.pdf

We can talk before or after your fbi.

From: Nassirian, Barmak <barmak@aacrao.org>

To: Pauline Abernathy <pabemathy@ticas.org>; Lauren Asher <LAsher@ticas.org>; Steve Burd
<Burd@newamerica.net>; David Hawkins <dhawkins@NACAC.ccim>; Deanne Loonin <dloonin@nclc.org>; Luke
Swarthout <Luke Swarthout@help.senate.gov>; Shireman, Bob; Dannenberg, Michael; James R. Kvaal
<James R. Kvaa!@who.eop.gov>; Rich Williams <rwilliams@pirg.org>; Angela M. Peoples <Ieq@usstudents.org>;
Michelle Cormier <CormierM@aacrao.org>; Arsenault, Leigh; Gomez, Gabriella
sent: Thu Mar 18 12:13:582010 . .
Subject: Fwd: the best thing ever to happen for proponents of gainful employment

The UBS analyst who covers for-profit education, Andrew Fones, put outa 16-page report today entitled, 'State BUdgets
Offset Gainful Employment.' In it,·he espouses the case that the for-profit education companies have all sorts of tailwinds.
More importantly, he attempts to analyze how gainful employment would affect the companies and his conclusions are
incredibly benign. By his reckoning, he says the worst-case scenario for 2011 earnings per share under gainful
.employment would be: ITT Educational Services would see earnings decline 3%, Corinthian Colleges would see earnings
decline by 3%, DeVry would see earnings decline by 14%, Strayer would see earnings decline by 16%, Career Education
would see earnings declin~ by 19% and Apollo Group/University of Phoenix would see earnings decline by 34%.

WHY ARE THE FOR-PROFIT EDUCATION COMPANIES WORRYING ABOUT GAINFUL EMPLOYMENT? If this is the
worst case scenario, then all of their lobbying laments are much ado about nothing.

Chart 4: Scenario 1: Upside and Downside to, FY2011 EPS Estimates

Cummt .. Vei~_ Downside
2011 EPS , 2011 EPS
. .. --- -- - - ~.
2011 EPS %
coco $ 2.12 $ 3.41 61% $ .2.05, -3% $ 2.73· 2!
OV $ 4.60 $ 1~62 66% $ 3.94- -14% $ 5.18 2(
ESt $ 13.78 $ 18.55 35% $. 13.35 -3% $ 15~95 11
CECO $ 3.45 $ 418 39% $ 2.80 -19% '$ 3.79 11
8TM $ 11.80:$ 16.04 36% $ 9.85 1,GO}'
-" . . r(le
¢:
''I' 12.95 1t
APOl $ 6.18 $ 714 25-% $ 4,00 -34% $ 5.91

Source: UBS estimates

91
 Bergeron, David

From: Bergeron, David

Sent: Tuesday, March 02, 2010 5:53 PM
To: Dannenberg, Michael
SUbject: RE: What is Gainful Employment? I What is Affordable Debt?

Thanks. A couple of people have sent me this. I'm not sure that any analysis of the
proposal would find problems with either (1) the analysis or (2) the policy. Ourproposal~
as revised based on input from various quarters, will address most of the concerns raised and
provide for a long phase in period .. So~ Mark's analyzed an approach that we've moved from
not withstanding the fact that no one wanted to negotiate this at the table. If Bob hasn't
shared the most recent version of what we are working on, ask John Kolotos of my staff for
the latest. I think we've made good progress including getting a way to get REAL incomes for
graduates including those that are self-employed by working with SSA.

From: Dannenberg, Michael

. Sent: Tuesday, March 82, 2810 10:34 AM
To: Bergeron, David
Subject: FW:What is Gainful Employment? / What is Affordable Debt?

Hope you';re enjoying Bogota. See below. Kantrowitz...

From: Pauline Abernathy [mailto:pabernathy@ticas.org]

Sent: Tuesday, March 82, 2818 10:32 AM
To: Shireman, Bob; Arsenault, Leigh; Dannenberg~ Michael; Madzelan, Dan
Cc:Lauren Asher; Debbie FrankIe Cochrane
Subject: FW: What is Gainful Employment? / What is Affordable Debt?

I am concerned this is going to create a firestorm if not responded to immediately.

(I haven't read Mark's paper yet -- could he have misunderstood the impact of using medians?)

-----Original Message-----
From: Kantrowitz, Mark [mailto:Mark.Kantrowitz@Monster.com]
Sent: Monday, March 81~ 2818 9:55 PM
To: lasher@ticas.org; Baum, Sandy; tom@postsecondary.org; nassirianb@aacrao.org; Steve Burd;
Rich Williams; Deanne Loonin .
Cc: Kantrowitz, Mark
Subject: What is Gainful Employment? / What is Affordable Debt?

It took me a month to write this paper because of all the analysis~ but I think it adds some
clarity on the gainful employment issue. In the rush to propose a definition of gainful
employment, the US Department of Education was unintentionally a little bit too harsh~
yielding a definition which ltJould have eliminated almost all for-profit colleges. (If that
was the Department's intent, there are simpler ways of doing it. ;-) Some slight adjustments
are all that is needed to make the proposals more effective at separating the wheat from the
chaff. .

Barmak: You may not like this, but I think the two affordable debt provlslons~ with my
proposed modifications, should be applied to *all* colleges~ not just for-profit colleges.
92
The laCk of a profit motive at non-profit and public colleges is no excuse for graduating
students with excessive debt. I actually hear from more borrowers with debt problems who
attended a certain non-profit New York university than from borrowers who attended for-profit
colleges.

Mark

-----Original Message-----

From: Kantrowitz J Mark

Sent: Monday, March 01, 2010 9:29 PM

To: FINAID-L@LISTS.PSU.EDU

Cc: Kantrowitz J Mark

Subject: What is Gainful Employment?

The Higher Education Act of 1965 requires for-profit colleges to provide "an eligible program
of training to prepare students for gainful employment in a recognized occupation" but does
not currently define gainful employment.

During negotiated rulemaking for Higher Education 2009-10, the us Department of Education
proposed defining gainful employment by establishing an 8% debt-service-to-income threshold
based on median student debt for recent college graduates with income based either on Bureau
of Labor Statistics 25th percentile wage data or actual earnings of the college's graduates.
Loan payments would be based on the standard 10-year repayment plan for the unsubsidized
Stafford ldan program. For programs that failed to satisfy this standard, "the US Department
of Education proposed an alternative that requires a loan repayment rate for recent college
graduates of 90%. The loan repayment rate measures the percentage of borrowers actively
repaylng their loans. It is a dual to the default rate, but includes borrowers who are
delinquent, in an economic hardship deferment or in forbearance along wi~h borrowers who are
in default.

I have prepared a report analyzing the implications of the proposed policy change.

The full report can be found at

http://www.finaid.org/educators/20100301gainfulemployment.pdf

Some of the key findings of the report include:

1. The 8% debt-service-to-income threshold will preclude

for-profit colleges from offering Bachelor's degree

programs and would eliminate many Associate's degree

programs.

2. The 90% loan repayment rate would be the equivalent of

requiring colleges to have a two-year cohort default

rate of less than 2.3% for students who graduated.

This loan repayment rate is unattainable for most

colleges (not just for-profit colleges) as it

represents a much harsher standard than the current

cohort default rate requirements.

3. The proposed use of Bureau of labor Statistics wage

data will disproportionately harm minority and female

students because a Bachelor's degree conveys a greater

increase in earnings for these students even though

the median income is lower than for. White and male

students.

4. The debt-service-to-income threshold effectively

establishes borrowing limits based on field of study

and degree program, but does not give the colleges the

controls needed to enforce these limits. Current

sub regulatory guidance precludes colleges from

establishing lower loan limits.

5. The proposals focus on affordable debt for the

94
 definition of gainful employment J and fail to consider

other possible definitions, such as lower unemployment

rates, more job prospects and greater job security.

Benchmarking increases in income against· median income

for high school graduates fails to consider the zero

income of someone who is unemployed.

The report includes two main recommendations:

1. Several of the flaws in the current proposal can be

fixed by adjusting the thresholds. This includes:

- Increasing the debt~service-to-income threshold from

8% to somewhere between 10% and 15%. Default rates

start rising sharply at about 13% of income. A

debt-service-to-income threshold of 13.8%

corresponds to the rule of thumb that students

should not borrow more for their entire education

than their expected starting salary .

.\
Increasing the loan term in the loan payment

calculation from 10 years to 20 years.

- Switching from a percentage of gross income to a

percentage of discretionary income, such as 20% of

dis.cretionary income.

- Changing the loan repayment rate threshold for

95
 recent graduates from ge% to 75%.

2.,Because.of the interactions with cohort default rates

and the 90/19 rule, the definition of gainful

employment should not be proposed in isolation, but

rather as part of a comprehensive and coordinated

policy. Such a policy might require some statutory

changes, so perhaps the US Department of Education

should hold off on defining gainful employment as part

of the negotiated rulemaking and instead propose a

comprehensive suite of statutory changes.

Mark Kantrowitz

Publisher of FinAid.org and FastWeb.com

Mark Kantrowitz

Publisher of FinAid.org and FastWeb.com

Author, FastWeb Col+ege Gold

FinAid Page LLC

PO Box 2eS6

Cranberry Township, PA 16e66-1e56

Tel: 1-724-538-450e

Fax: 1-724-538-4Se2

Email: mkant@finaid.org.mkant@fastweb.com

www.fastweb.com w~MJfinaid.org www.collegegold.com

96
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