“Obama Student-Aid Rule Riles For-Profits, Spurs Most Letters Since 1983” plus 3 more

Obama Student-Aid Rule Riles For-Profits, Spurs Most Letters Since 1983

Posted: 06 Sep 2010 09:25 PM PDT

Matthew Kapral, a student at Education Management Corp.'s Art Institute of Pittsburgh, was walking to class in July when a school representative sat him in front of a computer and coached him on a letter opposing limits on federal student aid to for-profit colleges.

"They kind of started it off with a paragraph, and I added a sentence or two myself," said Kapral, who estimated that his bachelor's degree in graphic design will cost him $84,000.

For-profit colleges are enlisting students and teachers to lobby against proposed limits on student aid, and may at times be using misleading tactics, the U.S. Department of Education said. The proposed government crackdown on aid has generated about 26,000 letters to the department, the most on any topic since 1983.

College representatives and lobbyists also are flocking to lawmakers' offices in the U.S. capital and their home districts. Donald Graham, chairman and chief executive officer of Washington Post Co., owner of the Kaplan education business as well as the Washington Post newspaper and other media, met Aug. 3 with Senator Tom Harkin, an Iowa Democrat, to discuss the proposed regulations. The newspaper ran an editorial criticizing the department's efforts to crack down on companies.

"There's an immense sense of urgency and recognition by the schools that if the rules goes into effect as is, there are substantial threats to their business model," Jarrel Price, an analyst with Height Analytics LLC in Washington, said in a telephone interview.

Details of Proposal

The proposed regulations, announced July 23, would make for-profit education programs qualify for government aid either by showing that a certain percentage of former students are repaying their loans or that the average former student earns enough to repay.

No programs would lose eligibility before the 2012-2013 school year, and, to give colleges time to adjust, a maximum of 5 percent of programs can lose eligibility in the first year of implementation, the Education Department said in a statement.

Data released by the government show that, if the rule were in place now, loan repayment rates at Education Management and Apollo Group Inc. would put their programs in danger of U.S. loan restrictions, and Washington Post programs might lose eligibility.

Sales Tactics

U.S. Education Secretary Arne Duncan received so many letters asking him not to cut off funding to for-profit college students, without mentioning the proposed rule, that the department began calling the writers to clarify their purpose, said David Bergeron, acting deputy assistant education secretary for policy, planning and innovation in the Office of Postsecondary Education.

"They had been told the rule was going to take away all financial aid to students at for-profit colleges," Bergeron said in a telephone interview. "We're concerned that some people are misrepresenting the rule to generate comment."

The department wouldn't say which schools' students had been called.

One letter to the department, dated Aug. 10, was written by Jacqueline Bledsoe, of Fort Lauderdale, Florida, who is "an online PhD student at a for-profit institution while working full time," according to the letter.

Keiser Role

"Very few schools where I live had the program, format, schedule, and accreditation I was looking for, and I finally found a for-profit that was appropriate for me," Bledsoe wrote. She didn't disclose that she is also associate vice president of student services at Keiser University, a for-profit college in Fort Lauderdale.

Bledsoe said in an e-mail that she stood by the comment she posted "as a student."

Coaching students to write letters is needed to help them protect their interests, said Harris Miller, CEO of the Washington-based Career College Association, an industry group of 1,500 education companies with 3.2 million students. The group has been reaching out throughout Congress and encouraged schools to support letter-writing campaigns, including those from students and teachers, Miller said in an interview in his Washington office.

"Commenting on a Federal Register notice is not something you learn in a civics class," Miller said. "We've encouraged people in our outreach to make this as easy as possible."

Post Editorial

In an Aug. 22 editorial, "How to Discourage College Students," the Washington Post newspaper criticized the effort to rein in lending to for-profit college students, saying it would remove an important educational option for poor and working students.

"The more options available to parents and students, the better," the Post said in the editorial. "Particularly among some Democrats, that's not always the prevailing view."

Asked in an interview whether he influenced the editorial, Graham said Fred Hiatt, the editorial page editor, is in charge of the opinion columns and sets policy.

Congress and the administration of President Barack Obama have attacked what they call high-pressure sales tactics and low student loan repayments at for-profit colleges, which can receive as much as 90 percent of their revenue from federal financial aid programs.

A Government Accountability Office probe of 15 schools, including some owned by Education Management or Washington Post Co., found that recruiters at all 15 misled investigators posing as students as the recruiters tried to persuade people to enroll. Pittsburgh-based Education Management is the second- biggest for-profit college in the U.S. by enrollment. No. 1 Apollo Group Inc. operates the University of Phoenix, which had 476,500 students as of May 31, according to a company filing.

Student Aid Rule

The rule proposed by the Education Department might restrict or disqualify for-profit schools' programs from participation in government-aid programs when fewer than 45 percent of their students are repaying principal on their loans. The rule is called "gainful employment," because its intent is to show whether educational programs improve students' job prospects. As of the close of U.S. markets Sept. 3, an index of 12 education company stocks had fallen 27 percent since the department announced the proposed rule July 23.

Graham said the regulation would hurt all schools, both for-profit and not-for-profit, that serve low-income students. The gainful-employment rule won't serve its purpose of getting students better jobs or reducing their debt, he said.

"There are a variety of changes that could be made that would have a much greater impact on reducing overall student debt, reducing the number of student defaults," Graham said in a telephone interview.

Education accounted for about 58 percent of Washington Post Co.'s 2009 revenue of $4.57 billion, according to a company filing.

Biggest Response

Most Education Department proposals prompt about 400 to 600 comments, Bergeron said. The response to the gainful-employment rule may be the biggest to a department measure since 1983, when the Reagan Administration proposed cuts in funding for disabled children's education, Education Department officials said. The White House was flooded with about 40,000 letters opposing the measure, according to a 1997 report by the National Council on Disability, a federal agency in Washington.

About six boxes of letters, along with compact discs containing thousands of comments both for and against the gainful employment rule, remain to be scanned and copied into the department's computers, according to the department.

Education Management, whose biggest shareholder is Goldman Sachs Group Inc. in New York, hired DCI Group, a Washington- based company that advertises its ability to generate "direct contact -- phone calls, letters and e-mails -- from key community leaders."

Writing Assistance

All Education Management employees could expect to receive calls during business hours from DCI Group representatives to assist them in crafting letters to Secretary Duncan on the rule, Todd Nelson, CEO of Education Management, said in an e-mail on Aug. 24.

The rule "could have a particularly negative effect on students who rely on federal grants and loans in the pursuit of their degrees," Nelson said in the e-mail. "Likewise, the proposed rule could have a significant impact on those who staff and support academic programs offered at proprietary institutions, including ours."

Education Management's programs had about 136,000 students in October 2009. The company got about 89 percent of its net revenue from government sources in the year ended June 30, up from 82 percent a year earlier, according to a company filing. The legal limit is 90 percent.

The company "believes it is important during this public comment period on the proposed Federal Gainful Employment Rule that our students, faculty and staff be provided an opportunity to voice their opinion, if they choose to do so," Jacquelyn Muller, a spokeswoman, said Sept. 1 in an e-mail.

To contact the reporter on this story: John Lauerman in Boston at jlauerman@bloomberg.net.

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Student Loan Scrutiny Could Hurt Washington Post

Posted: 06 Sep 2010 08:22 PM PDT

The paper's Kaplan education unit may be battered by a crackdown on loan repayment rules

By Greg Bensinger

As the newspaper industry suffered through historic lows in advertising sales and circulation in recent years, Washington Post Co. (WPD) could always rely on its Kaplan testing and education unit to help prop up results. With the company's media business still hurting, a crackdown by the Obama Administration on student loan repayment rules could threaten Kaplan's outlook.

For-profit colleges such as those owned by Post, Strayer Education (STRA), and Corinthian Colleges rely in some cases on federal financial aid for up to 90 percent of their revenue. Yet data released by the Education Dept. last month showed that less than 35 percent of federal student loan aid is repaid at some campuses of those three college operators. The loans that aren't repaid come out of taxpayers' pockets. Congress and the Administration are proposing tougher oversight of for-profit schools amid concern that recruiters working for some of these colleges are signing up unqualified students and saddling them with loans they won't be able to repay. Regulations under consideration include rules that could make students at schools with the worst repayment records ineligible for federal loans. That could make it difficult for some for-profit colleges to survive. "This student financial aid is pretty important for for-profit colleges," said Jeffrey Silber, a BMO Capital Markets analyst. "Schools are going to have to revise some programs and seek out different types of students," if the regulations are enacted.

Kaplan operates college admissions test preparation courses as well as Kaplan University, which offers degree programs online and at campuses in Iowa, Maine, Maryland, and Nebraska. Although the Washington Post newspaper and its Newsweek magazine are better known, Kaplan has become the Post's largest unit, accounting for nearly 60 percent of revenue last year, up from 11 percent 10 years ago. Kaplan's impact on profits are even greater. In 2009, Kaplan had operating income of $194.8 million, while the Post's newspaper business lost $163.5 million and Newsweek lost $29.2 million. (Washington Post in August agreed to sell the magazine.)

The Education Dept. data showed that for-profit colleges have an average 36 percent loan repayment rate, compared with 54 percent at public universities and 56 percent at private nonprofits. The government is considering a rule, to take effect next July, that could restrict federal grants and student loans at for-profit schools with less than a 45 percent repayment rate and prohibit aid at for-profit schools with less than a 35 percent repayment rate. The schools can also qualify for aid by showing that loan repayments don't exceed a certain percentage of former students' income. The Education Dept. has said 5 percent of for-profit programs could lose eligibility.

Washington Post Chairman Donald E. Graham, who has personally lobbied on Kaplan's behalf, says the regulations "don't have the effect they intend and, in fact, have the perverse effect of punishing schools that serve low-income students." Graham says "over 70 percent of our students are Pell Grant-eligible, which means we serve a very low-income population."

The company says the federal data showed Kaplan had a 28 percent repayment rate. A Kaplan spokesperson, Melissa Mack, says the company takes issue with the data, noting that students who defer repayment on certain loans are being counted as failing to repay. "Were schools at least not penalized for having students that participate in those programs, our percentage would increase by 20 to 30 points," says Mack.

Hal Jones, Washington Post's chief financial officer, says it's not yet clear what financial impact the proposed changes would have on Kaplan. Washington Post last month said tighter restrictions on federal education grant and loan programs could cause it to lose students and struggle to retain teachers. If it cannot lift the average repayment rate or help graduates lower their debt-to-earnings ratio, the U.S. could deny Kaplan aid, the company said.

In August the Government Accountability Office issued a report critical of recruiting tactics at 15 for-profit schools, including two Kaplan campuses. The company said it was complying with a federal request for information on financial results, recruiting, operations, enrollment, and regulatory compliance over the last four years.

The warnings about Kaplan have shaken investors in Washington Post stock, whose largest common holder is Warren Buffett's Berkshire Hathaway (BRK.A), sending the shares at one point to a 14-year low. The stock has tumbled more than 18 percent this year. Short-selling of Post shares, basically a bet that the stock price will fall, has soared to its highest level in at least 19 years. "People are noticing just how important Kaplan has been to Washington Post all these years," says Will Duff Gordon, senior analyst with Data Explorers, which tracks short sales. The company may also face higher borrowing costs. Standard & Poor's (MHP) cut its outlook on Washington Post, and Moody's Investors Service (MCO) is reviewing the company for a potential downgrade.

The bottom line: Washington Post has long profited from its lucrative Kaplan education unit. Tougher rules on loan repayments could hurt the business.

With John Lauerman and John Hechinger

Bensinger is a reporter for Bloomberg News.

RNs can earn bachelor's online

Posted: 06 Sep 2010 04:48 AM PDT

Indiana University East's School of Nursing will participate with other IU campuses to provide an online option for registered nurses who are interested in earning a bachelor's degree.

The RN to BSN degree-completion program will allow registered nurses to complete a bachelor's degree in as little as 12 months through a consortium that includes all eight of IU's campuses.

The consortium is the first of its kind for IU. The distance education-accessible program delivers quality, convenient, cost-effective and contemporary online education that meets the needs of the nursing work force in the state, campus officials said.

"The benefit is now registered nurse students have another option to pursue their BSN degree," said Dean of Nursing Karen Clark. "All of our students in the consortium will have access to all of IU East's resources and will work alongside students throughout the state and nation through the IU School of Nursing."

The program has a rolling admissions process so students can begin when they are ready, decreased time to graduation as nursing courses can be completed in 12 months and new nursing electives that enhance expertise in targeted areas.

IU East already offers a bachelor of science in nursing degree and a RN to BSN Mobility Option degree-completion program. The mobility option is offered to students at IU East's Richmond campus and off-campus sites in Lawrenceburg and Good Samaritan Hospital in Dayton, Ohio.

For more information, call Chad Beanblossom at (765) 973-8353 or visit www.iue.edu/nursing.

Comment on this story at palitem@pal-item.com.

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Online Education

Monday, September 6, 2010