In light of news reports that detail specific efforts by short sellers to influence Department of Education policy, we are writing to ask that you order the Department to release any and all correspondence its officials had with officials from FrontPoint Financial Services and other investments firms.  

FrontPoint has a reputation for making bets on specific industries and appears to have exerted a significant effort in its attempts to use the Department of Education to impact the stock price of publicly traded career colleges and universities.  

We are concerned that Mr. Eisman’s efforts and influence will result in Department policies that could force these schools as well as those that are privately held to close their doors.  Indeed, one school in Pittsburgh cited a draft proposal that Mr. Eisman has championed as one of the reasons it is ceasing enrollment of new students and going out of business.

The new revelations about Mr. Eisman’s efforts to influence the Department follow last month’s news that the Government Accountability Office (GAO) analysis that is fueling the drive for the Department of Education to strengthen its oversight of career schools had to be significantly altered.  The revisions to the GAO report are now prompting scrutiny from the new Chairman of the House Committee on Oversight and Government Reform.  

There are now more questions about the effort to reform Federal oversight of career colleges and universities than there are about the industry itself.  

In the interest of ensuring that the rulemaking process is being conducted appropriately, we ask that you release any and all communications between the Department of Education and investors such as Mr. Eisman, including phone calls, meeting minutes, correspondence and e-mails.  By releasing this information to the public, you will be providing needed sunlight to a process that appears to raise serious questions.

Lastly, this letter is submitted to you the day after President Obama delivered his State of the Union address to the nation.  One year ago, President Obama bemoaned the influence of special interests and those who attempt to affect public policy despite having competing interests.  We would respectfully ask that your office review Mr. Obama’s words as it considers the request made in this correspondence. 

Sincerely,

Henry Herzing
Chancellor and Founder
Herzing University

Robert Herzog
Chief Financial Officer
Harrison College

In light of last week’s Executive Order from President Barack Obama directing the Federal government to “avoid excessive, inconsistent and redundant regulation,” we are writing to ask that you set aside the “gainful employment” proposal that your Department has been developing.  We respectfully ask that you instead focus the Department’s energies on advancing policies that make career colleges and universities more accessible to students.

As you know, the “gainful employment” proposal imposes repayment standards on Federal student loans that would result in the elimination of financial aid for as many as 360,000 students at career colleges and universities. These proposed standards violate the spirit of the President’s Executive Order by placing an excessive burden on the full-time workers, single parents, returning veterans and the disabled who often attend career colleges and universities. 

These students enroll in career colleges and universities to get the specialized training and skills they need to acquire and retain jobs.  Since many of them enter school from modest- or low-income backgrounds, they are more likely to take on student loan debt on their path to graduation.  If the “gainful employment” rule advances, these students will be unable to pursue the opportunities provided by career colleges.  Indeed, many of these schools may even be forced to close their doors as Pittsburgh’s Le Cordon Bleu announced just last week.

As you know, unemployment is stubbornly stuck at over nine percent and those looking for work need every advantage possible.  But this rule would perversely stand in the way of unemployed Americans who are taking responsibility for their future by working toward a degree in a specialized field requiring both study and training.

We are sure that you would agree that government should not erect barriers that get in the way of honest Americans trying to secure work.  Accordingly, we hope that you will set the “gainful employment” proposal aside and work with us to improve access to career colleges and universities.  Thank you for your consideration.

Sincerely,
Student Access Student Choice Coalition (SASC)

Read Articl on The Chronicle of Higher Education

Opponents of the U.S. Education Department’s proposed “gainful employment” rule are appealing directly to President Obama, urging him to set aside the controversial regulation. In a letter sent on Monday, the Coalition for Educational Success argues that the rule-which would cut off federal student aid to programs whose students have high debt-to-income ratios and low loan-repayment rates-is inconsistent with a recent executive order on improving the regulatory process.

The executive order, which was issued last week, calls for streamlining regulations to “reduce burdens and maintain flexibility and freedom of choice for the public,” and urges federal agencies to consider alternatives to regulation, such as incentives for behavior change.

In its letter, the coalition argues that the “gainful employment” rule “fails on every one of the order’s criteria.”

“Onerous regulations-as you put it-can ‘stifle innovation and have a chilling effect on growth and jobs.’ However, this is exactly what will happen if the Department of Education’s proposed ‘Gainful Employment’ regulation is implemented,” it reads.

The group has made similar points in advertisements that are running this week in The Washington Post, Roll Call, and Politico. The Education Department is expected to release its final “gainful employment” rule in the coming weeks.

Meanwhile, the “Save Access Student Choice Coalition,” another group opposing the rule, is focusing its appeal on Secretary of Education Arne Duncan. In a letter also sent on Monday, the group says the rule would “violate the spirit” of the president’s order by placing an “excessive burden” on students who attend for-profit colleges.

“We are sure that you would agree,” the letter reads, “that government should not erect barriers that get in the way of honest Americans’ trying to secure work.”

Read Articl on The Wallstreet Journal

For two centuries, America’s free market has not only been the source of dazzling ideas and path-breaking products, it has also been the greatest force for prosperity the world has ever known. That vibrant entrepreneurialism is the key to our continued global leadership and the success of our people.

But throughout our history, one of the reasons the free market has worked is that we have sought the proper balance. We have preserved freedom of commerce while applying those rules and regulations necessary to protect the public against threats to our health and safety and to safeguard people and businesses from abuse.

From child labor laws to the Clean Air Act to our most recent strictures against hidden fees and penalties by credit card companies, we have, from time to time, embraced common sense rules of the road that strengthen our country without unduly interfering with the pursuit of progress and the growth of our economy.

Sometimes, those rules have gotten out of balance, placing unreasonable burdens on business—burdens that have stifled innovation and have had a chilling effect on growth and jobs. At other times, we have failed to meet our basic responsibility to protect the public interest, leading to disastrous consequences. Such was the case in the run-up to the financial crisis from which we are still recovering. There, a lack of proper oversight and transparency nearly led to the collapse of the financial markets and a full-scale Depression.

Over the past two years, the goal of my administration has been to strike the right balance. And today, I am signing an executive order that makes clear that this is the operating principle of our government.

This order requires that federal agencies ensure that regulations protect our safety, health and environment while promoting economic growth. And it orders a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive. It’s a review that will help bring order to regulations that have become a patchwork of overlapping rules, the result of tinkering by administrations and legislators of both parties and the influence of special interests in Washington over decades.

Where necessary, we won’t shy away from addressing obvious gaps: new safety rules for infant formula; procedures to stop preventable infections in hospitals; efforts to target chronic violators of workplace safety laws. But we are also making it our mission to root out regulations that conflict, that are not worth the cost, or that are just plain dumb.

For instance, the FDA has long considered saccharin, the artificial sweetener, safe for people to consume. Yet for years, the EPA made companies treat saccharin like other dangerous chemicals. Well, if it goes in your coffee, it is not hazardous waste. The EPA wisely eliminated this rule last month.

But creating a 21st-century regulatory system is about more than which rules to add and which rules to subtract. As the executive order I am signing makes clear, we are seeking more affordable, less intrusive means to achieve the same ends—giving careful consideration to benefits and costs. This means writing rules with more input from experts, businesses and ordinary citizens. It means using disclosure as a tool to inform consumers of their choices, rather than restricting those choices. And it means making sure the government does more of its work online, just like companies are doing.

We’re also getting rid of absurd and unnecessary paperwork requirements that waste time and money. We’re looking at the system as a whole to make sure we avoid excessive, inconsistent and redundant regulation. And finally, today I am directing federal agencies to do more to account for—and reduce—the burdens regulations may place on small businesses. Small firms drive growth and create most new jobs in this country. We need to make sure nothing stands in their way.

One important example of this overall approach is the fuel-economy standards for cars and trucks. When I took office, the country faced years of litigation and confusion because of conflicting rules set by Congress, federal regulators and states.

The EPA and the Department of Transportation worked with auto makers, labor unions, states like California, and environmental advocates this past spring to turn a tangle of rules into one aggressive new standard. It was a victory for car companies that wanted regulatory certainty; for consumers who will pay less at the pump; for our security, as we save 1.8 billion barrels of oil; and for the environment as we reduce pollution. Another example: Tomorrow the FDA will lay out a new effort to improve the process for approving medical devices, to keep patients safer while getting innovative and life-saving products to market faster.

Despite a lot of heated rhetoric, our efforts over the past two years to modernize our regulations have led to smarter—and in some cases tougher—rules to protect our health, safety and environment. Yet according to current estimates of their economic impact, the benefits of these regulations exceed their costs by billions of dollars.

This is the lesson of our history: Our economy is not a zero-sum game. Regulations do have costs; often, as a country, we have to make tough decisions about whether those costs are necessary. But what is clear is that we can strike the right balance. We can make our economy stronger and more competitive, while meeting our fundamental responsibilities to one another.

Read Articl on The Daily News

The Bureau of Proprietary School Supervision has largely quit investigating unlicensed schools as the volume of new institutions has overwhelmed the limited staff and budget.

In 2009, New York State shut down three trade schools and cited five more for operating without a license. Last year, the total number was zero.

That’s because the state’s Bureau of Proprietary School Supervision can’t keep up with a rising tide of new schools – and has largely abandoned probes into unlicensed schools altogether.

At a recent board meeting in October, one official warned that the agency was “in chaos.”

In the mid-1990s, a staff of 40 covered 300 schools. Today, a staff of 20 covers 500 schools, with 100 to 150 applications pending.

There are five investigators statewide, and to keep costs down they rarely fly to the western half of the state. In the last year, all schools cited for violations were in New York City or Long Island.

A key change has been the decision to jettison probes into unlicensed schools unless they pose an immediate health threat.

“We’ve taken the position that because of the workload we have, we’re not mandated under education law to investigate unlicensed schools,” said Carole Yates, head of the Bureau of Proprietary School Supervision.

“If we are notified of an unlicensed school, we will send … a letter telling them that they might need to be licensed and to contact us. It’s a forceful letter. … Sometimes we get a response.”

Faced with a budget gap, the state has taken $500,000 from the $2 million fund the state uses to reimburse students when schools are shut down – and officials fear this will get even worse.

“It worries me a lot,” Yates said. “This account is for the protection of students, not general fund money.”

Yates admits the agency sometimes can’t look into allegations that deserve investigation “simply because we can’t take any more on. The process slows down. Whether it’s getting a teacher’s license, getting a school license or renewal, a field person going on an inspection – all of it slows down.”

The bureau gets its money from the schools it regulates. That could create a conflict of interest similar to the federal agency that collected royalties from oil rigs while overseeing safety.

If the bureau shuts lots of schools, its revenue stream dries up.

The bureau spends much of its time policing for-profit schools, a job that has become increasingly complex across the country.

For-profits have emerged as the problem child of higher ed, accused repeatedly of claiming students had graduated (but providing no proof), hiring unlicensed teachers or opening schools without a license.

Nationwide enrollment at these schools has soared from 673,000 in 2000 to 1.8 million in 2008, and profits have taken off.

Tax dollars cover much of this. Last year, the government funded $4 billion in grants and backed up more than $20 billion in student loans.

For-profit schools have the worst records when it comes to students’ loan defaults within three years – 11.6% in fiscal 2008, nearly double that of public institutions (6%) and almost triple the rate for private nonprofits (4%).

In New York, loan defaults at 38 for-profits were worse than the 11.6% national average. The worst offender was Plaza College in Queens, where 28% of students defaulted on taxpayer-backed loans within three years in 2008.

For-profit colleges have the worst graduation rates. In 2008, 55% of public college students graduated within six years. At private nonprofit colleges it was 64.4%, while it was 24.5% at for-profit colleges, statistics show.

Whether they graduate or drop out, 53% of for-profit students wind up with more than $30,500 in debt, a recent College Board study found. That compares to just 12% at four-year public schools with that kind of debt.

And stats show lots of trade school students aren’t landing the jobs they were promised.

For example, recruiters at one school in Washington, D.C., told potential students they’d make $150,000 a year as a barber – a figure with no basis in fact.

In August, a congressional investigation discovered a pattern of bait-and-switch by overzealous recruiters at for-profit schools who were paid a per-student commission.

At one Florida school, a recruiter told an undercover agent posing as a student to falsify loan applications to get the money. At another, the recruiter claimed the school was accredited by the same agency that accredits Harvard. It was not.

By Mark Hyman

January 18, 2011, 6:07AM

http://spectator.org/archives/2011/01/18/the-gaos-credibility-gap

I was a recent guest lecturer at Johns Hopkins University. During the course of my talk I remarked to the students that I never would have imagined I would have written three columns on the topic of colleges and college admissions procedures. I can now add a fourth column to my résumé.

Reading the prior columns on this topic is worthwhile. They provide the reader a clear understanding of the assault on career colleges by the U.S. Department of Education. Unlike state-owned public institutions and private, not-for-profit colleges, career colleges operate on a for-profit basis.

The first two columns detail the systematic attack on the for-profit college universe. The third column reports the major revisions made to a Government Accountability Office report that originally alleged unethical and, at times, fraudulent actions by career college recruiters.

The GAO delivered the report to the Senate Health, Education Labor and Pensions Committee during an August 2010 hearing. The report formulated the basis of critical testimony that leveled very serious charges regarding career college recruiting practices.

I found numerous inconsistencies in the GAO report and had countless questions regarding assertions made in the report. I believed some of the claims in the GAO report raised serious questions about the agency’s methodology and its interpretation of conversations between college officials and undercover GAO operatives.

I put several questions to the GAO. The agency appeared to fully answer some of questions and offered only vague responses to others. In a matter of weeks after I submitted my questions the GAO quietly released a revised version of the original report. After being questioned over the revisions a GAO spokesman stated, “Ultimately nothing has changed with the overall message of the report, and nothing has changed with any of our findings.”

Nothing could be further from the truth. The revised findings significantly changed the report. In addition, they were significant enough to call into question either the competence or the integrity of the GAO.

I was not the only one challenging the GAO. The Coalition for Educational Success is an interest group comprised of career colleges. The coalition filed a lawsuit against the Department of Education after the agency refused to release documents requested by the coalition under the Freedom of Information Act. Of interest to the coalition were documents possibly showing ties between Ed Dept officials and stock investment “short sellers.” Allegedly a small number of investors “shorted” the stock of several publicly-traded companies that operate career colleges whose stocks dramatically fell in price after the Ed Dept begin threatening to implement new restrictive regulatory policies affecting only career colleges.

In late 2010, the coalition hired Norton-Norris, a consulting firm specializing in higher education. The firm was asked to review dozens of hours of audio recordings given to HELP Committee Chairman Senator Tom Harkin (D-IA) by the GAO. The recordings purportedly captured exchanges between college recruiters and undercover GAO personnel posing as prospective students.

Norton-Norris first discovered that several audio recordings of some of the conversations were missing so the authenticity of GAO investigations involving some schools could not be verified. Additionally, it appeared the undercover GAO applicants turned recorders on and off during some conversations thereby eliminating a electronic record of some portions of the interviews.

Norton-Norris was able to confirm the accuracy of the GAO’s findings in only 14 of the reported 65 conversations.

According to a 68-page report of the firm’s findings ( GAO Bias Evident in Report to HELP Committee), “the GAO misrepresented conversations and explanations to meet their needs.” The firm found “fragments of discussions were extracted to embellish and even fabricate [the GAO's] claims of deceptive and questionable behavior [by career colleges].”

In its review of the tapes, the firm found numerous instances in which the GAO fabricated entire conversations. Further, the GAO studiously ignored statements in the exchanges that portrayed career college recruiters as acting professionally and responsibly.

According to the revised GAO report, a college recruiter “told the undercover applicant that getting a job is a ‘piece of cake’ and then told the applicant she [the college recruiter] has graduates making $120,000-$130,000 a year.” In scouring the audio tapes of that interview, Norton-Norris found that conversation never took place. It was completely fabricated by the GAO.

In another scenario, the GAO alleged a college recruiter misled an undercover applicant regarding the true cost of a program by providing a quote for only nine months and not the entire 12 months of a year. According to Norton-Norris, the confusion was in the minds of the GAO officials who did not understand the differences between a calendar year and an academic year. In fact, the college recruiter complied with the National Association of College Admissions Counseling’s Statement of Principles of Good Practice. To do as the GAO suggested would have been in violation of the practices that all colleges — regardless of profit status — practice.

Norton-Norris also found instances in which helpful and useful information offered by college recruiters was intentionally omitted from the GAO report. An example is the following exchange that took place but was not reported:

Undercover applicant: “Is employment guaranteed?”

Admissions Representative: “No, that I cannot say. Any school that says that to you, is uh, gets the Pinocchio award.” 

This detailed examination of the GAO’s work underscores that the agency has — at least in this one instance — acted irresponsibly. It would be naïve to believe this is the only occasion.

In fact, the government’s auditor has behaved in a truly egregious manner. This type of behavior in the private sector would have resulted in the complete collapse of a public accounting firm. Just ask the now-defunct Arthur Andersen, LLP.

Read Articl on The Red State Blog

After my mother-in-law lost her battle with pancreatic cancer, I started volunteering for hospice and realized that my true calling in life was to help hospice patients and their families. But with no nursing degree, my ability to do so was severely limited.

I already had a bachelor’s degree and had been an executive assistant for 25 years, but I needed to go back to get a degree, a daunting idea for someone who had been in the workforce for so long. Fortunately, I was able to get my LPN degree and will be pursuing my RN degree at Herzing University early next year.

Like many career colleges, Herzing not only provides training for specialized professions like nursing but also accommodates the busy schedules of adult learners who are often balancing family life with education.

But my ability to complete my degree program may be hurt by an effort that is underway at the Department of Education that would limit Federal funding for schools whose students have an unduly high ratio of debt to post-graduation income.

The proposal is called “Gainful Employment” and would adversely impact students attending career colleges and universities since many of them (myself included) are more likely to take on student loan debt on their path to graduation.

By disproportionately impacting career colleges, this “Gainful Employment” proposal would result in the elimination of financial aid for as many as 360,000 students, including hundreds of thousands of women, full-time workers, single parents, returning veterans and the disabled.

Students at career colleges have a 38% higher completion rate than their counterparts at community colleges and account for a disproportionate percentage of graduates in health care, computer-data processing and other fields that are expected to add 1.8 million new American jobs through 2016.

I hope the federal government rethinks this proposal and focuses on giving students the ability to get a diploma instead of making it harder for them to do so. With more adults either rethinking their careers later in life, this proposal promises to do more harm than good.

Lane H. Brown earned her LPN diploma and is currently working in the nursing field. She will begin work on her RN degree from Herzing University in January.

Megan Wilczek