CREW: Department of Education: Regarding For-Profit Education: 12/3/10 - DMadzelanemail - Crew01704

Madzelan, Dan
From: Pauline Abernathy [pabernathy@ticas.org]

Sent: Wednesday, April 14, 2010 10:56 AM
To: Kanter, Martha; Madzelan, Dan; Gomez, Gabriella; Arsenault, Leigh; Manheimer, Ann;
Shireman, Bob; Dannenberg, Michael; Bergeron, David; Rogers, Margot; Kvaal, James R.;
Plotkin, Hal
Cc: Lehr, Susan M.; Debbie Frankie Cochrane; Lauren Asher; Connie Myers
Subject: Florida College Presidents Itr in support of Gainful Employment proposal
Attachments: FL COP Letter to SecretaI)' Duncan re GE.pdf; FL Career Ed OPPAGA Highlights Rpt 10-18
FINAL.docx
Attached is a strong letter from the 28 Florida community and state college presidents urging the
Secretary to move forward with a strong gainful employment definition. The letter was mailed on
Monday and copies are being sent to the FL delegation as welL
For those who may not have seen it before, I have also attached the excellent two-page summary by
Susan Lehr at Florida State College of the recent report by the Florida legislature's policy office
comparing Florida public and for-profit college costs and student outcomes. The report focuses on
five programs and among its conclusions are that the public programs cost both students and
taxpayers less than for-profits, are much more likely to be accredited, and their students have higher
pass rates on licensure and certification tests.
«FL top Letter to Secretary Duncan re GE.pdf»«FL Career Ed OPPAGA High[ightsRpt10~18 FINAL.docx»·
Pauline Abernathy
Vice President
The Institute for College Access & Success
www.ticas.org and www.projectonstudentdebt.org
We moved! TICAS' main number is now 510.318.7900. My direct line is 510.318.7903.
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Madzelan, Dan

Sent: Tuesday, April 13, 2010 9:40 AM
To: Madzelan, Dan; Arsenault, Leigh; Shireman,Bob; Manheimer, Ann
Cc: Lauren Asher
SUbject: Industry take on what was submitted to OMB on Friday on GE
Attachments: ITT and DV Upgrade. pdf
Have you seen this? The consumer, student and workforce stakeholders would appreciate receiving
the same information as industry where possible and appropriate. Thank you. Pauline
«ITT and DV Upgrade.pdf»
Pauline Abernathy
Vice President
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Madzelan, Dan

Sent: Wednesday, April 07, 2010 9:25 AM
To: Madzelan, Dan; Shireman, Bob; James_R._Kvaal@who.eop.gov; Arsenault, Leigh; Gomez,
Gabriella
Cc: Connie Myers; Lauren Asher
SUbject: Impact of reconciliation on first discharges under IBR and ICR
Attachments: TICAS Memo Discharge Dates April2010.doc
FYI - Attached is an updated version of a TICAS memo to Chainnan Levin's staff on the timing of the first
discharges of loans under ICR and IBR. It notes that the first possible discharge of a student loan under ICR is
October 1,2019. The first possible discharge under IBR is July 1,2034. These dates were not affected by the
changes in the Health Care and Education Reconciliation Act of2010.
«TICAS Memo Discharge Dates April 201 a.doc»

Pauline Abernathy
Vice President
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Madzelan, Dan

Sent: Saturday, April 03, 2010 11 :23 AM
To: Pauline Abernathy
Cc: Edie Irons; Luke Klipp; Lauren Asher; Debbie Frankie Cochrane
Subject: For-Profit, for African-Americans?
Attachments: 4-2-10 Inside Higher Ed.doc
FYI. The Inside Higher Ed article below and attached reports that Latimer Education, Inc. is
developing "an online university targeting African Americans," (from company press release) and
quotes a source saying their goal is "to align with a private, financially challenged historically black
college," that is already accredited, thereby circumventing the normal accrediation process. This
follows a flurry of recent articles on for-profit companies effectively purchasing accreditation by buying
financially struggling non-profit colleges and subsequently radically changing the institutions.
Inside Higher Ed: For-Profit, for African-Americans?

April 2,2010
For-profit higher education has had no difficulty attracting black students. When the University of
Phoenix announced its growth to
443,000 students inthe fall, it noted that 21.7 percent of its new students are African-American.
On Thursday, a new venture announced that it will seek to become a for-profit higher education
company focused on serving black students. Officials were vague about how they would do so, but
acknowledged that they would be seeking one or more partnerships with existing institutions that
have accreditation. That has been a popular approach of late with investors who are looking to move
into new higher education markets -- since accreditation is easier to hold on to (even with a change of
ownership) than to earn from scratch, and accreditation is required for students to receive federal
financial aid.
One source familiar with some of the exploratory discussions about Latimer Education, as the new
venture is called, said that the goal was to align with a private, financially challenged historically black
college. One of Latimer's founders confirmed that working with a black college was one idea under
consideration, but he said that other ideas were as well.
Latimer's three co-founders are well connected in business and education circles: Scott R. Royster,
who spent much of his career as an executive with Radio One, a chain of black radio stations; Brian
W. Jones, who was general counsel for the U.S. Education Department during the George W. Bush
administration and has also worked in the student loan industry; and David A. Sutphen, who is a
partner in a communications firm and formerly held key positions on the staffs of such prominent
players in education policy making as the late Sen. Edward M. Kennedy. Jones also spent several
years prior to the launch of Latimer working for Dow Lohnes, a Washington law firm that has been
. brokering partnerships between nonprofit colleges and for'"profit entities.
The Web site of Latimer is sparse, and its profile has been decidedly low until Thursday's
announcement by Maveron, a Seattle venture capital firm co-founded by the chairman of Starbucks,
that it was investing in the company. Maveron was an early investor in Capella Education and has
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been recently investing in other higher education businesses that focus on providing educational
content.
Jones, in an interview, declined to discuss many details about the new venture, including the degrees
or programs it would offer. But he said it would probably have a campus and also deliver education
online. 'We hope to create an institution that will cater to what are often the unique needs and
interests of the African-American community."
The founders saw the potential to make a niche in the for-profit sector by focusing on black students,
he said. "I think the reason that the for-profits have done well, and it's not unique to African-American
students, is that they serve nontraditional students well," he said. "They have been attentive to the
needs of the market place, much more flexibility for the unique needs of nontraditional students who
work during the day or have other commitments that make it difficult to attend a traditional institution."
As for building on that record, he said, "not to disparage anything the existing for-profits are doing,"
but that he believes the right programming and services would attract more black students.
He said that the education programs would be "more culturally tailored or relevant to African-
Americans." However, Jones said that all students would be welcome. The new programs, he said,
would let students "be able to leverage all the emerging technologies that deliver a superb
experience."
"The bottom line for us is that we are coming into this market because we have the opportunity to
transform the higher education experience for a great many African-Americans."
Michael L. Lomax, president of the United Negro College Fund, said via e-mail that he was not
familiar with the new venture but was "not necessarily surprised" by it. "For-profit education
companies are targeting all segments of the market, including African-Americans," he said.
"Competition isa reality of higher education, and no sector -- including HBCUs -- is immune. The fact
is that there are increasing numbers of black Americans who are now and will be in the future seeking
post-baccalaureate degrees, and new providers will aggressively seek to serve them."
Some advocates for low-income students, who are also critics of for-profit higher education, were
alarmed by Thursday's news.
Sara Goldrick-Rab, an assistant professor of educational policy studies and sociology at the
University of Wisconsin at Madison who studies student access to higher education, said she was
bothered by quotes in the Maveron press release comparing the idea of a black for-profit college to
black media companies. Via e-mail.shesaid: ..Clearly.this is the 'business' of education and these
folks are making little effort to pretend like it's anything else."
Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars
and Admissions Officers, said it was "no secret that the sector disproportionately targets minority
communities," and he said this should be cause for concern.
While he said that he does not know specific information about Latimer, the for-profit sector in general
operates "in a free-for-all in which you grab as many warm bodies as possible," earn money from the
student loans these students take out to pay for tuition, and "ship them out the door."
He said that educators should be "all the more alarmed" if a for-profit is open about planning to focus
on black students, many of whom are from low-income families. He also said that educators and
2
accreditors should be much more wary of the way for-profit entities operate within or purchase
nonprofit colleges -- and thus are able to use the nonprofit colleges' accreditation.
"It's a form of body-snatching, turning the institutions essentially into zombies," he said. It should be
"glaringly obvious" that when a for-profit entity purchases a nonprofit entity, the changes are so
significant that there should. be no assumption that the values or priorities of the original institution
matter anymore. But he said accreditors appear "unequipped or unwilling" to challenge these
arrangements.
- Scott Jaschik
«4-2-10 Inside Higher Ed.doc»
Pauline Abernathy
Vice President
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Madzelan. Dan

Sent: Wednesday, March 24, 20104:04 PM
Subject: Daniel Webster College ends flight program in wake of ITT purchase
FYI. After firing Daniel Webster's president, laying off 1/4 of Daniel Webster's staff, and leading the
New Hampshire Postsecondary Education Commission to believe the college would continue as
before, ITT today announced it is ending Daniel Webster's flagship flight operations program,
underscoring that Daniel Webster's regional accrediation status was what ITT was really buying last
June.
Daniel Webster College ends flight program

Nashua Telegraph, Wednesday, March 24, 2010
By MICHAEL BRINDLEY Staff Writer
Daniel Webster College in Nashua announced today that it is ending its flight operations program.
In closed-door meetings with faculty and students this morning, interim president Nadine Dowling said
the program would be phased out, according to students leaving the meeting. Students currently
enrolled would still be able to graduate in the program. The air traffic control program would be
maintained.
Last year, lIT Educational Services, a for-profit corporation, bought the private college, which had
been struggling financially. Shortly after the purchase was finalized, President Robert "Skip" Myers
was fired and Dowling, who had headed up the ITT campus in Woburn, was brought in as a
replacement. There have also been several layoffs.
Dowling would not say what factors led to the decision. She said students expressed disappointment
during the meeting, which was closed to the media.
"It's hard because this is a long.:.standing program," she said. "There is a lot of emotion."
On Wednesday, the college was still promoting its aviation program as being available for prospective
students on its Web site. "Daniel Webster College offers one of the country's most renowned and
respected aviation programs," according to the site.
Michael Brindley can be reached at 594-6426 or mbrindley@nashuatelegraph.com
From the recent Bloomberg article:
"[ITt] also dismissed one fourth of the staff, fired President Robert Myers, and has been accused by
faculty members of misleading the New England accreditor, the Commission on Institutions of Higher
Education, based in Bedford, Massachusetts.
"lIT didn't really have much interest in anything other than having acquired a regionally accredited
institution," said Myers, now president of the New England Culinary Institute in Montpelier, Vermont.
1
lilt I had it to do all over again, I wouldn't have gone anywhere near lIT, The fundamerital nature of
the college has changed ,"
'" "ITT Educational "did give me the sense they would continue as before," said Kathryn Dodge,
executive director of the New Hampshire Postsecondary Education Commission, in Concord, which
approved the sale in May. "We did not expect to see the turnover in staffing happen when it
happened.""
http://www.businessweek.com/news/2010-03-04/your-taxes-supporting-for-profit-firms-as-they-
acquire-colleges. html
Pauline Abernathy
Vice President
We're moving! Beginning March 29, my phone number will change from 510.883.7303 to
510.318.7903
2
Madzelan. Dan
From: Pauline Abernathy [pabernathy@ticas.org)

Sent: Wednesday, March 24,20102:55 PM
To: Gomez, Gabriella; Arsenault, Leigh; Kvaal, James R.; Shireman, Bob; Madzelan, Dan;
Dannenberg, Michael; Eric.Stein@do.treas.gov; Peggy.Twohig@do.treas.gov
Cc: Connie Myers; Luke Klipp
Subject: FW: CFPA Update re Private Student Loans
FYI This is what we sent today to the groups that signed the coalition letters on private student loan
issues and the CFPA. The Senate bill now includes Senator Brown's private student loan
ombudsman proposal, and we are hopeful that the bill will be further improved on the Senate floor,
including adding mandatory school certification like the House bill but with better data reporting
included. Pauline
From: Luke Klipp

Sent: Wednesday, March 24, 2010 11;35 AM
To: Luke Klipp
Cc: Pauline Abernathy; 'Connie Myers'; lauren Asher
Subject: CFPA Update re Private Student loans
Dear coalition partners,
As you may have heard, the Senate Banking Committee voted 13-10 to report the financial reform bill, with the Consumer
Financial Protection Bureau in it, to the Senate floor. The full Senate is expected to take up the bill after the April recess.
The good news is the bill was reported without any weakening amendments, and with Senator Sherrod Brown's
amendment creating a Private Student Loan Ombudsman within the CFPB. The bad news is that it still does not provide
the CFPB with clear supervisory or enforcement authority over all private loans, including those made by Sallie Mae or by
non-banks, such as large for-profit colleges. .
We will be back in touch with you over the recess regarding next steps. Thank you again for all your help and support to
protect consumers from dangerous or deceptive private student loans.
Luke H. Klipp
Policy Analyst
2054 University Avenue, Suite 500
Berkeley, CA 94704
Phone: (510) 559-9509, ext. 316
Fax: (510) 845-4112
LKlipp@ticas.org
1
Madzelan. Dan

Sent: Friday, March 19,20108:43 AM
To: Eric.Stein@do.treas.gov; PeggyTwohig@do.treas.gov; Kvaal, James R.; Levine, Brian S.;
Michael. Barr@do.treas.gov
Cc: Shireman, Bob; Madzelan, Dan; Arsenault, Leigh; Gomez, Gabriella; Lauren Asher; Luke
Klipp; Connie Myers
Subject: Senate CFPA coverage of private student loans?
Attachments: Senate CFPA and private loans - final.doc
The attached one pager explains that the Senate-proposed CFPB may not have supervision or enforcement
authority over the largest provider of private student loans-Sallie Mae-or for-profit schools that make loans
knowing that more than half their students will default. Sallie Mae, which made nearly $5 billion in private
student loans in 2008-2009, currently finances it private loans through the Sallie Mae Bank, which has total
assets under $10 billion. Does this seem like an accurate reading of the bill to you?
«Senate CFPA and private loans - final.doc»

Pauline Abernathy
Vice President
510.883.7303 www.ticas.org
1
Madzelan, Dan

Sent: Friday, March 19, 2010 8:25 AM
To: Kvaal, James R.; Shireman, Bob; Arsenault, Leigh; Madzelan, Dan; Plotkin, Hal; Dannenberg,
Michael
Cc: Connie Myers; Lauren Asher
Subject: FW: Statement from The Project on Student Debt re: Today's Student Loan Reform
Legislation
FYI. This went out to the press and Hill yesterday and we sent out an action alert urging support for
the bill as well.
From: Connie Myers [mailto:connie.myers@nelsonmullins.com]

Sent: Thursday, March 18, 2010 5:56 PM
Cc: Lauren Asher; Pauline Abernathy; Luke Klipp; Edie Irons; Sandy Rinck
Subject: Statement from The Project on Student Debt re: Today's Student Loan Reform Legislation
. t.he~nstH:ute fo.r
-col-lege·
access -success
Statement of Lauren Asher CONTACT: Edie Irons

President, the Institute for College Access & Success 510/883-7302
Gretchen Wright
202/371-1999
March 18, 2010
Statement on Today's Student Loan

ReformLegislatio.,
"The student aid changes contained in thereconciliation bill unveiled today present an historic
opportunity for Congressto dramatically increase need-based grant aid at no cost to taxpayers.The
legislation generates $61 billion insavings by streamlining the student loan programs and reinvests the
money tomake college more affordable and help reduce the federal budget deficit.
"The poor economy underscores the need forthis legislation. Students and families need PeB Grants more
than ever, andfailure to enact refonn would make it impossible for Congress to maintain thecurrent Pell
Grant levels, much less increase the maximum grant.
"While the legislation does not ensure thatthe Pell Grant maximum grows faster than inflation as the
President proposed, itties annual Pell Grant increases to the consUmer price index beginning in
1
2013,providing a floor that we hope Congress will consistently exceed. In addition tomaking college
more affordable and reducing students' need to borrow, PellGrants also stimulate local economies by
helping students pay for textbooks,food, rent, gas, and other necessities as well as tuition andfees.
"The legislation also expands theIncome-Based Repayment (IBR) program for borrowers who take out
their frrstfederal student loan after 2014.These borrowers will not have to spend more than 10 percent of
theirdiscretionary income on student loans, and responsible borrowers who make 20years of payments
will have any remaining debt forgiven. As long-time proponentsof IBR, we are disappointed that this
expansion will not benefit currentborrowers, as the President had proposed.However, hundreds of
thousands of Americans currently struggling to repaytheir federal student loans can still significantly
reduce their mo~thlypayments by enrolling in IBR today. (Current law caps IBR payments at 15
percentof discretionary income and forgives remaining debt after 25 years.)
"This legislation represents an historicstep toward making college more affordable and helping all
Americans complete adegree or certificate program.Streamlining the federal loan program and
guaranteeing a minimum annualPell Grant increase are necessary and overdue reforms that lay a
strongfoundation for future investments in students andfamilies."
####
An independent, nonprofit organization, thelnstitute for College Access&Success works to make higher
education moreavailable and affordable for people ofall backgrounds. The Institute's Projecton Student Debt
works to increase public understanding ofrising student debtand the implications for our families, economy,
and society. For moreiriformation see www.pro;ectonstudentdebt.organdwww.ticas.org.
~~======~===================~===========~=======~============================~
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2
Madzelan. Dan
From: Pauline Abernathy [pabemathy@ticas.org]
Sent: Thursday. March 18, 2010 9:42 AM
To: James_R._Kvaal@Who.eop.gov; Shireman. Bob; Arsenault. Leigh; Madzelan, Dan;
luke_swarthout@help.senate.gov; burd@newamerica.net; nassirianb@aacrao.org; Lauren
Asher; Luke Klipp; Debbie Frankie Cochrane; Lexi_Saudargas@durbin.senate.gov;
chris.1indstrom@pirg.org; rwHiiams@pirg.org; leg@usstudents.org; lMargaret.Reiter123
@gmail.com; dloonin@nclc.org; connie.jameson@nelsonmullins.com; Gomez, Gabriella; Edie
Irons; Dannenberg, Michael; Eric.Stejn@do.treas.gov
Subject: Fw: Education: Dear Colleague: New York Times: "In Hard Times, Lured Into Trade School
and Debt"
FYI House dear colleague on NYT article making connection to ED's neg reg and the CFPA.
Scnt using BlackBerry
••••• Original Message •••-

From: Proropsaltis, Spiros <Spiros.Protopsaltis@mail.bouse.gov>
To: Masiuk, Libby <Libby.Masiuk@mail.house.gov>; Pauline Abernathy
Cc: Frorman, Seth <Seth.Frotman@mail.house.gov>
Sent: Tim Mar 18 06:20:26 2010
Subject: FW: Education: Dear Colleague: New York Times: "Tn Hard Times, Lured Into Trade School and Debt"
FrQm: e--Dear Colleague

Sent: Thursday, March 18,2010 9:20 AM
To: £.DEARCOLL_ISSUES_A~f __OOOO@ls2.house.gov
Subject: Education: Dear Colleague: New York Times: "In Hard Times, Lured loto Trade School and Debt"
New York Times: "In Hard Times, Lured Into Trade School and Dcbl"
From: 'Tnc Honorable Jared Polis

Sent By: Spiros.Protopsaltis@mail.hoose.gov
<mailto:Spiros.ProtopsaJtis@?mail.house.gov?subject=RE;%70New%20York.4420Tirnes;%20>
Date: 3/1812010
New York Times:
"In Hard Times, Lured Inlo Trade School and Debt"
Dear Colleague:
We write to bring your attention to the attached article, "lo liard Times, Lured Into Trade School and Debt," which ran on the front
page of Sunday's New York Times. The article describes the rapid growth of some large for-profit schools that get most of their
1
revenue from federal grants and student loans, and suggests that the students receiving federal student aid to attend them, and the
taxpayers subsiding them, do not always get much in return.
For example, the article quotes a man who enrolled in a Career Education Corp. culinary school charging $41,000 for a 15-month or
21-month program, only to learn that many ofthose graduating were taking low-paying jobs washing dishes and busing tables.
Another student found himself with a loan for nearly $14,000 with a $7,327 "fmance charge" and a 13 percent interest rate. Data
submitted to accrediting agencies conftrm that students who graduated from the school's culinary arts associate degree program
landed jobs that paid an average 0[$21,000 a year, or about $10 an hour in a state with a minimum wage of $8.40 an hour. The article
also quotes a woman who left her job in financial aid and admissions at lIT in 2008 after five years because she was uncomfortable
with what she considered deceptive recruiting that masked the likelihood of graduates earning too little to repay their loans.
As the article indicates,the U.S. Department of Education is currently in the process of revising its "program integrity" regulations to
more effectively protect students from high-pressure and deceptive sales tactics for programs of little or no benefit to them, and to
ensure that taxpayer dollars do not subsidize such practices and programs. The article does an excellent job of highlighting the urgent
need to strengthen these regulations and for a Consumer Financial Protection Agency with full authority over predatory institutional
lending to students.
As we work on education issues in the III th Congress, we look forward to making further progress on protecting both students and
taxpayers. If you have any questions or need more information, please contact Spiros.Protopsaltis@niail.house.gov
<mailto:Spiros.Protopsaltis@mail.house.gov> (5-2161) in Rep. Polis' office or Libby.Masiuk@mail.house.gov
<mailto:Libby.Masiuk@mail.house.gov> (5-4276) in Rep. Murphy's office.
Sincerely,
Jared Polis Patrick Murphy
Member of Congress Member of Congress
http://www.nytimes.com/20 10/03/14/business/14schools.html?ref=todayspaper
<http://www.nytimes.com/20 10/03/14/business/I4schools.html?ref=todayspaper>
In Hard Times, Lured Into Trade School and Debt
By PETER S. GOODMAN <http://topics.nytimes.com/top/reference/timestopics/people/g/peter s goodmanJindex.html?inline=nyt-

mrr>
One fast-growing American industry has become a conspicuous beneftciary of the recession
<http://topics.oytimes.com/top/reference/timestopics/subjects/r/recession and depressionJindex.html?inline;;oovt-classifier>: for-
profit colleges and trade schools.
At institutions that train students for careers in areas like health care, computers and food service, enrollments are soaring as people
anxious about weakjob prospects borrow aggressively to pay tuition that can exceed $30,000 a year.
But the profits have come at substantial taxpayer expense while often delivering dubious benefits to students, according to academics
2
and advocates for greater oversight of financial aid. Critics say many schools exaggerate the value of their degree programs, selling
young people on dreams of middle-class wages while setting them up for default on untenable debts, low-wage work and a struggle to
avoid poverty. And the schools are harvesting growing federal student aid dollars, including PeU grants awarded to low-income
students.
"If these programs keep growing, you're going to wind up with more and more students who are graduating and can't find meaningful
employment," said Rafael I. Pardo, a professor at Seattle University School of Law and an expert on educational fmance. "They can't
generate income needed to pay back their loans, and they're going to end up in fmancial distress." .
For-profit trade schools have long drawn accusations that they overpromise and underdeliver, but the woeful economy has added to
the industry's opportunities along with the risks to students, according to education experts. They say these schools have exploited the
recession as a lucrative recruiting device while tapping a larger pool of federal student aid.
"They tell people, 'If you don't have a college degree, you won't be able to get a job,' " said Amanda Wallace, who worked in the
financial aid and admissions offices at the Knoxville, Tenn., branch ofITT Technical Institute <http://itt-tech.edu/> , a chain of
schools that charge roughly $40,000 for two-year associate degrees in computers and electronics. "They teU them, 'You'll be making
beaucoup dollars afterward, and you'll get all your fmancial aid covered.' "
Ms. Wallace left her job at ITT in 2008 after five years because she was uncomfortable with what she considered deceptive recruiting,
which she said masked the likelihood that graduates would earn too little to repay their loans.
As a financial aid officer, Ms. Wallace was supposed tocounsel·students. But candid talk about job prospects and debt obligations
risked the INrath of management, she said.
"If you said anything that went against what the recruiter said, they would threaten to fire you," Ms. WaUace said. "The
representatives would have already conned them into doing it, and you had to just keep your mouth shut."
A spokeswoman for the school's owner, ITT Educational Services <http://topics.nytimes.com/top/news/business/companies/itt-

educational-services-inc/index.html?iniine=nyt-org> , Lauren Littlefield, said the company had no comment.
The average annual tuition for for-profit schools this year is about $14,000, according to the College Board
<ht:1]:/ltopics.nytimes.com/toplreference/timestopics/organizations/c/college board/index.html?inline=nyt-org>. The for-profit
educational industry says it is fulfilling a vital social function, supplying job training that provides a way up the economic ladder.
"When the economy is rough and people are threatened with unemployment, they look to education as the way out," said Harris N.
Miller, president of the Career College Association, which represents approximately 1,400 such institutions. "We're preparing people
for careers."
Concerned about aggressive marketing practices, the Obama administration is toughening rules that restrict institutions that receive
federal student aid from paying their admissions recruiters on the basis of enrollment numbers.
The administration is also tightening regulations to ensure that vocational schools that receive aid dollars prepare students for "gainful
employment." Under a proposal being floated by the Department of Education
<http://topics.nvtimes.com/top/reference/timestopics/organizations/e/education department/index.htrn1?inline=nyt-org>, programs
would be barred from loading students 'h'ith more debt than justified by the likely salaries of the jobs they would pursue.
"During a recession, with increased demand for education and more anxiety about the ability to get a job, there is a heightened level of
hazard," said Robert Shireman, a deputy under secretary of education. "There is a lot ofPell grant money outthere, and we need to
make sure it's being used effectively."
The administration's push has provoked fierce lobbying from the for-profit educational industry, which is seeking to maintain
flexibility in the rules.
A Lucrative Business
The stakes are enormous: For-profit schools have long derived the bulk of their revenue from federal loans and grants, and the
percentages have been climbing sharply.
The Career Education Corporation <http://topics.nytimes.com/top/news/business/companies/career-education-

corporation/index.html?inline=nyt-org> , a publicly traded global giant, last year reported revenue of $1.84 billion. Roughly 80
percent came from federal loans and grants, according to BMO Capital Markets, a research and trading firm. That was up from 63
3
percent in 2007.
The Apollo Group <ht1;p://topics.nytimes.com/top/newslbusiness/companies/apono group/index.html?inline=nyt-org> ~ which

owns the for-profit University of Phoenix - derived 86 percent of its revenue from federal student aid last fiscal year, according to
BMO. Two years earlier, it was 69 percent.
For-profit schools have proved adept at capturing Pell grants, which are a centerpiece of the Obama administration's efforts to make
higher education more affordable. The administration increased financing for Pell grants by $17 billion for 2009 and 20 I0 as part of
its $787 billion stimulus package
<http://topics.nvtimes.com/top/reference/timestopics/subjects/ulunitedstateseconomy/economicstimulus/index.html?inline=nyt-
classifier> .
Two years ago, students at for-profit trade schools received $3.2 billion in Pell grants, according to the Department of Education, less
than went to students at two-year public institutions. By the 2011-12 school year, the administration now estimates, students at for-
profit schools should receive more than $10 billion in Pell grants, more than their public counterparts. (Those anticipated increases
may shrink, depending on the outcome of wrangling in Congress over health care and student lending
<http://v.'Ww.nytimes.com/info/student-loans/?inline=nyt-classifier> .)
Enrollment at for-profit trade schools expanded about 20 percent a year the last two years, more than double the pace from 2001-7,
according to the Career College Association.
Mr. Miller, the association's president, said for-profit schools were securing large numbers ofPell grants because their financial aid
.offices were diligent and because the schools served many low-income students.
But fmandal aid experts say the surge of federal money reaching such institutions reflects something else: their aggressive, sometimes
deceitful recruiting practices.
Jeffrey West was working at a pet store near Philadelphia, earning about $8 an hour, when he saw advertisements for training
programs offered by WyoTech, a chain of trade schools owned by Corinthian Colleges Inc.
. <ht1;p:/ltopics.nytimes.com/top/newslbusiness/companies/corinthian-colleges-inc/index.html?inline=nyt-org> , a publicly traded
company thatlast year reported revenue of$l.3 billion.
After Mr. West called the school, an admissions representative drove to his house to sell him on classes in auto body refinishing and
upholstering technology, a nine-month program that cost about $30,000.
Mr. West blanched at the tuition, he recalled, but the representative assured him the program amounted to an antidote to hard
economic times.
"They said they had a very high placement rate, somewhere around 90 percent," he said. "That was one of the key factors that caused
me to go there. They said I would be earning $50,000 to $70,000 a year."
Some 14 months afterhe completed the program, Mr. West, 21, has failed to frnd an automotive job. He is working for $12 an hour
weatherizing foreclosed houses.
With loan payments reaching $600 a month, he is working six and seven days a week to keep up.
"I've got $30,000 in student loans, and I really don't have much to show for it," he said. "It's really frustrating when you're trying to
better yourself and you wind up back at Square One."
Corinthian says it bars its recruiters from making promises about pay.
"The majority of our students graduate," said a spokeswoman, Anna Marie Dunlap, in a written statement. "Most see a significant
earnings increase."
The increase in market opportunities for the for-profit education industry comes as governments spend less on education. In states like
California, community colleges have been forced to cut classes just when demand is greatest
<http://www.nytimes.com/2009/1 0/28/educationl28community.html> .
"This is creating a very ripe environment for the for-profit schools to pick off more students," said Lauren Asher, president of the
Institute for College Access & Success <ht1;p://www.ticas.org!> , a nonprofit research group based in California that seeks to make
higher education more affordable. "The risks of exploitation are higher, and the potential rewards of those practices are higher."
4
For-profit culinary schools have long drawn criticism for leading students to rack up large debts. Now, they are enjoying striking
growth. Enrollment at the 17 culinary schools of the Career Education Corporation - most of them operated under the name Le
Cordon Bleu - swelled by 31 percent in the final months of last year from a year earlier.
When Andrew Newburg called the Le Cordon Bleu College of Culinary Arts in Portland, Ore., to seek information, he was feeling
pressure to start a new career. It was 2008, and his Florida mortgage business was a casualty ofthe housing bust. An associate degree
in culinary arts from a school in the food-obsessed Pacific Northwest seemed like a portal to a new career.
The tuition was daunting - $41,000 for a IS-month or 21 ~month program - but he said the admissions recruiter portrayed it as the
entrance price to a stable life.
"The recruiter said, 'The way the economy is, with the recession, you need to have a safe way to be sure you will always have
income,' " Mr. Newburg said. " 'In today's market, chefs will always have a job, because people will always have to eat.' "
According to Mr. Newburg, the recruiter promised the school would help him find a good job, most likely as a line cook, paying as
much as $38,000 a year.
Last summer, halfway through his program and already carrying debts of about $10,000, Mr. Newburg was alarmed to see many
graduates taking jobs paying as little as $8 an 'hour washing dishes and busing tables, he said. He dropped out to avoid more debt
"They have a basic money-making machine," Mr. Newburg said.
More Bills Than Paychecks
Career Education says admissions staff are barred from making promises about jobs or salaries. The school requires students to sign
disclosures stating that they understand that its programs afford no guarantees.
But promotional materials convey a sense of promise.
"Our students are given the tools needed to become the future leaders in the industry," proclaims the Le Cordon Bleu Web site
<http://www.chefs.edulabout-us/welcome.aspx>. "Many graduates have attained positions of responsibility, visibility, and
entrepreneurship soon after completing their studies."
The job placement results that the school files with accrediting agencies suggest a different outcome. From July 2007 to June 2008,
students who graduated from the culinary arts associate degree program landed jobs that paid an average of $21 ,000 a year, or about
$10 an hour. Oregon's minimum wage is $8.40 an hour.
Thejob placement list is cited in a class-action lawsuit filed against the Portland school- previously known as Western Culinary
Institute - by graduates who allege fraud, breach of contract and unlawful trade practices. Executives at Career Education denied the
allegations while asserting it would be wrong to judge the school on the basis ofits graduates' frrstjobs.
"You go out in the industry and work your way up," said Brian R. Williams, the company's senior vice president for culinary arts.
On a recent morning at the campus in Portland, hundreds of students donning chefs whites labored in demonstration kitchens stocked
with stainless steel countertops and commercial gas ranges. A chef inspected plates ofboeufBourgogne and risotto Milanese. Students
melted and pulled sugar into multicolored ribbons. Others used a chainsaw to sculpture blocks of ice into decorative centerpieces.
"It's employable skills; that's what we teach people here," said the school president, Jon Alberts. "We try to give them as much of an
industry experience in the classroom as possible."
But several local chefs said the program merely simulated what students could learn in entry-level jobs.
"When they graduate and come in the kitchen, I tell them, 'I'm going to treat you like you don't know anything; " said Kenneth
Giambalvo, executive chef at Bluehour, an upscale restaurant in Portland's Pearl District. "It doesn't really give them any edge."
What the school does give many students is debt, often at double-digit interest rates - debt that even bankruptcy cannot erase without
a lengthy, low-odds legal proceeding.
When TJ Williams arrived in Portland from his home in Utah to enroll at Le Cordon Bleu in 2007, he was shocked by the terms of the
aid package the school had arranged for him: One loan, for nearly $14,000, carried a $7,327 "fmance charge" and a 13 percent interest
5
rate.
"They told me that halfway through the program, I could probably refinance to a lower rate," he said.
When he tried to refinance, the school turned him down, he says.
Career Education declined to discuss Mr. Williams's case, citirig privacy restrictions and saying he had not signed a waiver.
Mr. Williams has been jobless since last fall and recently returned to Utah, where he moved in with his mother.
After Graduation
The Career Education Corporation e-mailed The New York Times names and contact information for four graduates "with whom we
hope you'll touch base for important perspective." One cam,e v.'ith a wrong number. A second had graduated 15 years ago.
A third, Cherie Thompson, called the program "a really positive experience" but declined to discuss her debts or earnings. The fourth,
Ericsel Tan, graduated in 2003 and later earned $42,000 a year overseeing catering at a convention center near Seattle. He said his
success reflected his seven years of kitchen experience prior to culinary school.
Career Education notes that only 5.9 percent of the federal loans to students at the Western Culinary Institute that began to come due
in 2007 - the latest available data - are listed in default by the Department of Education.
But default rates have traditionally reflected only those borrowers who fail to pay in the first two years payments are due.
The Department of Education has begun calculating default rates for three years. By that yardstick, Western Culiilary's default rate
more than doubles, to 12.5 percent. .
For-profit schools have ramped up their own lending to students to replace loans formerly extended by Sallie Mae
<http://topics.nytimes.com/top/news/business/companies/slm comoration/index.html?inline=nyt-org>, the student lending giant.
These loans are risky: Career Education and Corinthian recently told investors they had set aside roughly half the money allocated this
year for private lending to cover anticipated bad debts.
Financial aid experts say such high rates of expected default prove that graduates will not earn enough to make their payments, yet the
loans make sense for the for-profit school industry by enabling the flow of taxpayer funds to their coffers; they satisfy federal
requirements that at least 10 percent of tuition money come from students directly or from private sources.
"They're makiilg so much money off their federal student loans and grants that they can afford to write off their own loans," said Ms.
Asher of the Institute for College Access & Success.
Visit the e-Dear Colleague Service <http://e-dearcolleague.house.gov/subscribe.aspx> to manage your subscription to the available
Issue and Party list(s).
6
Madzelan. Dan
From: Pauline Abernathy {pabemalhy@ticas.org]

Sent: Monday, March 15, 2010 3:21 PM
To: Shireman, Bob; Arsenault, Leigh; Gomez, Gabriella: Madzelan, Dan; Dannenberg, Michael
Cc: Lauren Asher; Debbie FrankIe Cochrane; Connie Myers; dloonin@nclc.org;
rwitliams@pirg.org
Subject: PAYNE/HASTINGS DEAR COLLEAGUE ON GAINFUL EMPLOYMENT
Attachments: Gainful Employment Letter 3.2010PDF.PDF
I know you have your hands full with reconciliation, but the attached Payne/Hastings Dear Colleague
letter asks members to sign a letter to Secy Duncan urging the Dept not to move fOlWard on gainful
employment until "a comprehensive data-based review" is conducted and asks for a briefing and
some specific information. The letter asserts that the Dept's proposal will lead to cutbacks in
educational capacity in fields like nursing and education, and harm nontraditional and low-income
students.
It would be helpful to know what if anything the Dept. is doing in response to inform what TICAS and
other organizations that support changes in gainful employment regulations do. Thanks. Pauline
«Gainful Employment Letter 3.2010PDF.PDF»
Pauline Abernathy
Vice President
1
Madzelan, Dan

Sent: Saturday, March 13,20103:17 PM
Subject: Sunday NYT front page: In Hard Times, Lured Into Trade School and Debt
FYI-Tomorrow's front-page NYT 2,400 word, article is posted at

http://www.nytimes.com/2010/03/14/business/14schools.html?hp=&pagewanted=print and pasted
below.
In Hard Times, Lured Into Trade School and Debt
By PETER S. GOODMAN
One fast-growing American industry has become a conspicuous beneficiary of the recession: for-
profit colleges and trade schools.
At institutions that train students for careers in areas like health care, computers and .food service,
enrollments are soaring as people anxious about weak job prospects borrow aggressively to pay
tuition exceeding $30,000 a year.
But the profits have come at substantial taxpayer expense while often delivering dubious benefits to
students, according to academics and advocates for greater oversight of financial aid. Critics say
many schools exaggerate the value of their degree programs, selling young people on dreams of
middle-class wages while setting them up for default on untenable debts, low-wage work and a
struggle to avoid poverty. And the schools are harvesting growing federal student aid dollars,
including Pell grants awarded to low-income students.
"If these programs keep growing, you're going to wind up with more and more students who are
graduating and can't find meaningful employment," said Rafael I. Pardo, a professor at Seattle
University School of Law and an expert on educational finance. "They can't generate income needed
to pay back their loans, and they're going to end up in financial distress."
For-profit trade schools have long drawn accusations that they overpromise and underdeliver, but the
woeful economy has added to the industry's opportunities along with the risks to students, according
to education experts. They say these schools have exploited the recession as a lucrative recruiting
device while tapping a larger pool of federal student aid.
"They tell people, 'If you don't have a college degree, you won't be able to get a job,' said Amanda
II
Wallace, who worked in the financial aid and admissions offices at the Knoxville, Tenn., branch of ITT
Technical Institute, a chain of schools that charge roughly $40,000 for two-year associate degrees in
computers and electronics. "They tell them, 'You'll be making beaucoup dollars afterward, and you'll
get all your financial aid covered.' "
Ms. Wallace left her job at ITT in 2008 after five years because she was uncomfortable with what she
considered deceptive recruiting, which she said masked the likelihood that graduates would earn too
little to repay their loans.
1
As a financial aid officer, Ms. Wallace was supposed to counsel students. But candid talk about job
prospects and debt obligations risked the wrath of management, she said.
"If you said anything that went against what the recruiter said, they would threaten to fire you," Ms.
Wallace said. "The representatives would have already conned them into doing it, and you had to just
keep your mouth shut."
A spokeswoman for the school's owner, lIT Educational Services, Lauren Littlefield, said the
company had no comment.
The for-profit educational industry says it is fulfilling a vital social function, supplying job training that
provides a way up the economic ladder.
"When the economy is rough and people are threatened with unemployment, they look to education
as the way out," said Harris N. Miller, president of the Career College Association, which represents
approximately 1,400 such institutions. "We're preparing people for careers."
Concerned about aggressive marketing practices, the Obama administration is toughening rules that
restrict institutions that receive federal student aid from paying their admissions recruiters on the
basis of enrollment numbers.
The administration is also tightening regulations to ensure that vocational schools that receive aid
dollars prepare students for "gainful employment." Under a proposal being floated by the Department
of Education, programs would be barred from loading students with more debt than justified by the
likely salaries of the jobs they would pursue.
"During a recession, with increased demand for education and more anxiety about the ability to get a
job, there is a heightened level of hazard," said Robert Shireman, a deputy under secretary of
education. "There is a lot of Pell grant money out there, and we need to make sure it's being used
effectively."
The administration's push has provoked fierce lobbying from the for-profit educational industry, which
is seeking to maintain flexibility in the rules.
A Lucrative Business
The stakes are enormous: For-profit schools have long derived the bulk of their revenue from federal
loans and grants, and the percentages have been climbing sharply.
The Career Education Corporation, a publicly traded global giant, last year reported revenue of $1.84
billion. Roughly 80 percent came from federal loans and grants, according to SMO Capital Markets, a
research and trading firm. That was up from 63 percent in 2007.
The Apollo Group - which owns the for-profit University of Phoenix - derived 86 percent of its
revenue from federal student aid last fiscal year, according to BMO. Two years earlier, it was 69
percent. .
For-profit schools have proved adept at capturing Pell grants, which are a centerpiece of the Obama
administration's efforts to make higher education more affordable. The administration increased
financing for Pell grants by $17 billion for 2009 and 2010 as part of its $787 billion stimulus package.
2
Two years ago, students at for-profit trade schools received $3.2 billion in Pel! grants, according to
the Department of Education, less than went to students at two-year public institutions. By the 2011-
12 school year, the administration now estimates, students at for-profit schools should receive more
than $10 billion in Pell grants, more than their pUblic counterparts. (Those anticipated increases may
shrink, depending on the outcome of wrangling in Congress over health care and student lending.)
Enrollment at for-profit trade schools expanded about 20 percent a year the last two years, more than
double the pace from 2001-7, according to the Career College Association.
Mr. Miller, the association's president, said for-profit schools were securing large numbers of Pell
grants because their financial aid offices were diligent and because the schools served many low-
income students.
But financial aid experts say the surge of federal money reaching such institutions reflects something
else: their aggressive, sometimes deceitful recruiting practices.
Jeffrey West was working at a pet store near Philadelphia, earning about $8 an hour, when he saw
advertisements for training programs offered by WyoTech, a chain of trade schools owned by
Corinthian Colleges Inc., a publicly traded company that last year reported revenue of $1.3 billion.
After Mr. West called the school, an admissions representative drove to his house to sell him on
classes in auto body refinishing and upholstering technology, a nine-month program that cost about
$30,000.
Mr. West blanched at the tuition, he recalled, but the representative assured him the program
amounted to an antidote to hard economic times.
"They said they had a very high placement rate, somewhere around 90 percent," he said. "That was
one of the key factors that caused me to go there. They said I would be earning $50,000 to $70,000 a
year."
Some 14 months afterhe completed the program, Mr. West, 21, has failed to find an automotive job.
He is working for $12 an hour weatherizing foreclosed houses.
With loan payments reaching $600 a month, he is working six and seven days a week to keep up.
"I've got $30,000 in student loans, and I really don't have much to show for it," he said. "It's really
frustrating when you're trying to better yourself and you wind up back at Square One."
Corinthian says it bars its recruiters from making promises about pay.
"The m'ajority of our students graduate," said a spokeswoman, Anna Marie Dunlap, in a written
statement. "Most see a significant earnings increase."
The increase in market opportunities for the for-profit education industry comes as governments
spend less on education. In states like California, community colleges have been forced to cut
classes just when demand is greatest.
"This is creating a very ripe environment for the for-profit schools to pick off more students," said
Lauren Asher, president of the Institute for College Access & Success, a nonprofit research group
3
based in California that seeks to make higher education more affordable. 'The risks of exploitation
are higher, and the potential rewards of those practices are higher."
For-profit culinary schools have long drawn criticism for leading students to rack up large debts. Now,
they are enjoying striking growth. Enrollment at the 17 culinary schools of the Career Education
Corporation - most of them operated under the name Le Cordon Bleu - swelled by 31 percent in
the final months of last year from a year earlier.
When Andrew Newburg called the Le Cordon Bleu College of Culinary Arts in Portland, Ore., to seek
information, he was feeling pressure to start a new career. It was 2008, and his Florida mortgage
business was a casualty of the housing bust. An associate degree in culinary arts from a school in the
food-obsessed Pacific Northwest seemed like a portal to a new career.
The tuition was daunting - more than $41,000 for a 14-month program - but he said the admissions
recruiter portrayed it as the entrance price to a stable life.
"The recruiter said, 'The way the economy is, with the recession, you need to have a safe way to be
sure you will always have income,' " Mr. Newburg said. " 'In today's market, chefs will always have a
job, because people will always have to eat.' "
According to Mr. Newburg, the recruiter promised the school would help him find a good job, most
likely as a line cook, paying as much as $38,000 a year.
Last summer, halfway through his program and already carrying debts of about $10,000, Mr.
Newburg was alarmed to see many graduates taking jobs paying as little as $8 an hour washing
dishes and busing tables, he said. He dropped out to avoid more debt.
"They have a basic money-making machine," Mr. Newburg said.
More Bills Than Paychecks
Career Education says admissions staff are barred from making promises about jobs or salaries. The
school requires students to sign disclosures stating that they understand that its programs afford no
guarantees.
But promotional materials convey a sense of promise.
"Our students are given the tools needed to become the future leaders in the industry," proclaims the
Le Cordon Bleu Web site. "Many graduates have attained positions of responsibility, visibility, and
entrepreneurship soon after completing their studies."
The job placement results that the school files with accrediting agencies suggest a different outcome.
From July 2007 to June 2008, students who graduated from the culinary arts associate degree
program landed jobs that paid an average of $21,000 a year, or about $10 an hour. Oregon's
minimum wage is $8.40 an hour.
The job placement list is cited in a class-action lawsuit filed against the Portland school - previously
known as Western Culinary Institute - by graduates who allege fraud, breach of contract and
unlawful trade practices. Executives at Career Education denied the allegations while asserting it
would be wrong to judge the school on the basis of its graduates' first jobs.
4
"You go out in the industry and work your way up," said Brian R. Williams, the company's senior vice
president for culinary arts. .
On a recent morning at the campus in Portland, hundreds of students donning chefs whites labored
in demonstration kitchens stocked with stainless steel countertops and commercial gas ranges. A
chef inspected plates of boeuf Bourgogne and risotto Milanese. Students melted and pulled sugar
into multicolored ribbons. Others used a chainsaw to sculpture blocks of ice into decorative
centerpieces.
"It's employable skills; that's what we teach people here," said the school president, Jon Alberts. 'We
try to give them as much of an industry experience in the classroom as possible."
But several local chefs said the program merely simulated what students could learn in entry-level
jobs.
"When they graduate and come in the kitchen, I tell them, 'I'm going to treat you like you don't know
anything,' said Kenneth Giambalvo, executive chef at Bluehour, an upscale restaurant in Portland's
It
Pearl District. "It doesn't really give them any edge."
What the school does give many students is debt, often at double-digit interest rates - debt that
even bankruptcy cannot erase without a lengthy, low-odds legal proceeding. .
When TJ Williams arrived in Portland from his home in Utah to enroll at Le Cordon Bleu in 2007, he
was shocked by the terms of the aid package the school had arranged for him: One loan, for nearly
$14,000, carried a $7,327 "finance charge" and a 13 percent interest rate.
"They told me that halfway through the program, I could probably refinance to a lower rate," he said.
When he tried to refinance, the school turned him down, he says.
Career Education declined to discuss Mr. Williams's case, citing privacy restrictions and saying he
had not signed a waiver.
Mr. Williams has been jobless since last fall and recently returned to Utah, where he moved in with
his mother.
After Graduation
The Career Education Corporation e-mailed The New York Times names and contact information for
four graduates "with whom we hope you'll touch base for important perspective." One came with a
wrong number. A second had graduated 15 years ago.
A third, Cherie Thompson, called the program "a really positive experience" but declined to discuss
.her debts or earnings. The fourth, Ericsel Tan, graduated in 2003 and later earned $42,000 a year
overseeing catering at a convention center near Seattle. He said his success reflected his seven
years of kitchen experience prior to culinary school.
Career Education notes that only 5.9 percent of the federal loans to students at the Western Culinary
Institute that began to come due in 2007 - the latest available data - are listed in default by the
Department of Education.
5
But default rates have traditionally reflected only those borrowers who fail to pay in the first two years
payments are due.
The Department of Education has begun calculating default rates for three years. By that yardstick,
Western Culinary's default rate more than doubles, to 12.5 percent.
For-profit schools have ramped up their own lending to students to replace loans formerly extended
by Sallie Mae, the student lending giant.
These loans are risky: Career Education and Corinthian recently told investors they had set aside
> roughly half the money allocated this year for private lending to cover anticipated bad debts.
Financial aid experts say such high rates of expected default prove that graduates will not earn
enough to make their payments, yet the loans make sense for the for-profit school industry by
enabling the flow of taxpayer funds to their coffers: they satisfy federal requirements that at least 10
percent of tuition money come from students directly or from private sources.
"They're making so much money off their federal student loans and grants that they can afford to
write off their own loans," said Ms. Asher of the Institute for College Access & Success.
Pauline Abernathy
Vice President
6
Madzelan, Dan

Sent: Friday, March 12, 2010 12:05 PM
To: James_R._Kvaal@who.eop.gov; Shireman, Bob; Madzelan, Dan; Kanter, Martha; Plotkin, Hal;
Arsenault, Leigh; Gomez, Gabriella; Dannenberg, Michael; Gordon, Robert M.; Levine, Brian
S.
Cc: Lauren Asher; Connie Myers
SUbject: FW: Statement from the Project on Student Debt on Need for Student Loan Reform in
Reconciliation
FYI. TICAS statement released today below.
.·~su.ccess.
Statement of Lauren Asher CONTACT: Edie Irons

Gretchen Wright
March 12,2010 202/371-1999
Statement on the Need for Student Loan Reform to be Included in

Reconciliation
"We urge Congress to seize this historic opportunity to increase Pell Grants, which help reduce student debt,
support needed education and training, and stimulate local economies. The fact is that colleges that account for
96 percent of all student loans have either switched or are in the process of switching to Direct student loans
because they can't depend on the other 'guaranteed' student loan program's functioning after this June, when
the emergency legislation propping it up expires.
"Student loan reform is already underway - the only question is whether Congress will act now to reinvest the
savings to increase PeB Grants and help millions of students complete college, or will let this opportunity slip
away."
####
An independent, nonprofit organization, the Institute for College Access & Success works to make higher education more available
and affordable for people ofall backgrounds. The Institute's Project on Student Debt works to increase public understanding ofrising
1
student debt and the implications/or ourfamilies, economy. and society. For more information see www.projectonstudentdebt.organd
www.ticas. org.
=========================~~=========================~~============~~=========~
2
Madzelan, Dan

Sent: Thursday, March 04,201011:15 AM
Subject: Bloomberg News: Your Taxes Support For-Profits as They Buy Colleges
FYI. Really disturbing.
Your Taxes Support For-Profits as They Buy Colleges (Update1)
By Daniel Golden
March 4 (Bloomberg) -- In Educational Services Inc. paid $20.8 million for debt-ridden Daniel
Webster College in June. In return, the company obtained an academic credential that may generate
a taxpayer-funded bonanza worth as much as $1 billion.
ITT Educational, the U.S.'s third-biggest higher education company with a market value of $3.8
billion, may increase it by 26 percent, or $1 billion, within five years because of the purchase of 1,200-
student Daniel Webster in Nashua, New Hampshire, according to Michael Clifford, an investor in Del
Mar, California, who has participated in the acquisitions of four nonprofit colleges. At least 75 percent
of new revenue would come from access to the more than $100 billion a year in financial aid the U.S.
hands out to college students, he said.
Key to tapping that money is Webster's regional accreditation, which isthe same gold standard of
academic quality enjoyed by Harvard University and helps students transfer course credits from one
college to another. Daniel Webster's accreditation was its "most attractive" feature to ITT Educational,
said Michael Goldstein, an attorney at Dow Lohnes, a Washington law firm that has represented the
company.
"Companies are buying accreditation," said Kevin Kinser, an associate professor at the State
University of New York at Albany, who studies for-profit higher education. "You can get accreditation
a lot ofways, but all of the others take time. They don't have time. They want to boost enrollment 100
percent in two years."
Exploiting Loopholes
The nation's for-profit higher education companies have tripled enrollment to 1.4 million students and
revenue to $26 billion in the past decade, in part through the recruitment of low-income students and
active-duty military. Now they're taking a new tack in their quest to expand. By exploiting loopholes in
government regulation and an accreditation system that wasn't designed to evaluate for-profit
takeovers, they're acquiring struggling nonprofit and religious colleges -- and their coveted
accreditation. Typically, the goal is to transform the schools into online behemoths at taxpayer
expense.
For-profit education companies, including ITT Educational Services, based in Carmel, Indiana, and
Laureate Education Inc., in Baltimore, have purchased at least 16 nonprofit colleges with regional
accreditation since 2004, according to corporate announcements and filings with the U.S. Securities
1
and Exchange Commission. Jack Welch, the former chief executive of General Electric Co., and
Michael Milken, the U.S. junk bond pioneer, have invested in for-profit companies that bought or
formed partnerships with nonprofit, regionally accredited schools.
Academic Status
By acquiring regional accreditation, trade and online colleges gain a credential usually associated
with the traditional academic culture of liberal arts, faculty scholarship and selective admissions.
Normally the accreditation process takes about five years and requires evaluations by outside
professors. The regional bodies examine financial stability, academic rigor and commitment to
"teaching, learning, service and scholarship," according to the Web site of the Commission on
Institutions of Higher Education, which accredits colleges in New England.
Enrollment at Grand Canyon University, a Christian college in Phoenix bought by investors in 2004,
has soared to 37,700, as of Dec. 31, up from 1,500, said Brian Mueller, chief executive of Grand
Canyon Education Inc. Ninety-two percent of students now take classes online, according to the
company's most recent 10-K. Bridgepoint Education Inc., based in San Diego, has boosted
enrollment of two regionally accredited colleges it bought in 2005 and 2007 to 53,688 students as of
Dec. 31, up from 400 combined, according to a company filing. Ninety-nine percent of those students
take courses exclusively online.
Growth Potential
Daniel Webster "could parallel Grand Canyon or Bridgepoint's growth curve," said Clifford, who was
part of the investor group that purchased Grand Canyon.
ITT Educational rose 87 cents, or less than one percent, to $110.65 at 10:.11 a.m. today in Nasdaq
stock market trading. The company declined 1.4 percent in the 12 months ended March 3.
ITT Educational declined to comment for this story. The company plans to open moreDaniel Webster
campuses and also expand online offerings, Kevin Modany, ITT Educational's chairman and chief
executive officer, said in a Feb. 22 presentation to analysts. The company expects to introduce
programs including accounting, education and health sciences, he said.
Daniel Webster will attract more students "a little on the higher end" in income whose tuition would be
paid by private employers rather than federal financial aid, Modany said.
New Regulations
The U.S. Department of Education, which doled out $129 billion in federal financial aid to students at
accredited postsecondary schools in the year ended Sept. 30, is examining whether these kinds of
acquisitions circumvent a federal law that new for-profit colleges can't qualify for assistance for two
years, Deputy Undersecretary of Education Robert Shireman said in a telephone interview.
Under federal regulations taking effect July 1, accrediting bodies may also have to notify the secretary
of education if enrollment at a college with online courses increases more than 50 percent in one -
year.
"It's an area that we are watching closely," Shireman said. "It certainly has been a challenge both for
accreditors and the Department of Education to keep up with the new creative arrangements that
have been developing."
2
Immediate Benefits
Buying accreditation lets the new owners benefit immediately from federal student aid, which provides
more than 80 percent of revenue for some for-profit colleges, instead of having to wait at least two
years. Traditional colleges are also more inclined to offer transfer credits for courses taken at
regionally approved institutions, making it easier to attract students nationwide.
The six nonprofit regional accrediting bodies, which rely on academic volunteers, bestow the valuable
credential with scant scrutiny of the buyers' backgrounds, Barmak Nassirian, associate executive
director of the American Association of Collegiate Registrars & Admissions Officers in Washington,
said in a telephone interview.
While accrediting bodies treat these purchases as changes of ownership, the acquisitions, in reality,
create new colleges that should be required to earn certification from scratch, Kinser said.
Maintain Mission
For accreditation to continue once the college is sold, the buyer must promise not to change its
mission, Steven Crow, former executive director of the Chicago-based Higher Learning Commission,
the largest regional body, said in a telephone interview. Once accreditation is maintained, the
acquirer seeks permission, which is usually granted, to start branch campuses and online programs,
Crow said.
"You knew by month six they would come back to you with a new game plan," said Crow, now a
consultant to publicly traded Corinthian Colleges Inc., based in Santa Ana, California. It acquired
regionally accredited San Francisco-based Heald College on Jan. 4.
Obama administration officials have recently questioned Whether the accreditation system is effective
in protecting academic standards. Accrediting decisions lack transparency and take too long,
Undersecretary of Education Martha Kanter said in a Jan. 26 speech in Washington to the annual
meeting of the Council for Higher Education Accreditation.
Considering Termination
The inspector general of the Education Department in December urged the agency to consider
terminating recognition of the Higher Learning Commission, which has approved more for- profit
colleges than its counterparts around the country.
The' inspector general criticized the commission's decision to accredit Career Education Corp.'s
online American Intercontinental University, citing concerns about how much time students spent in
class. The approval was appropriate, the commission and Hoffman Estates, Illinois-based Career
Education said.
More vigilance by the Education Department and accrediting groups is likely to slow enrollment
growth and the share prices of higher education companies that rely on acquisitions, said Clifford.
While publicly held postsecondary education companies rose 25.6 percent in the 12 months ended
March 2, they lagged behind the S&P SOD, which increased 59.6 percent over the same period, The
shortfall reflected investors' fears of tighter federal regulation of for-profit colleges, said Jeffrey Silber,
an analyst for BMO Capital Markets in New York.
Accreditation's Worth
3
Regional accreditation is worth $10 million to a for-profit acquirer, Clifford said in a telephone
interview. That's how much it would cost to start a regionally accredited college, a process that can
take 10 years and has only a 50-50 chance of success, he said. On top of the $10 million, buyers
typically pay $23,000 to $50,000 per enrolled student, making the purchase of Daniel Webster a
bargain, Clifford said.
Clifford and his fellow investors popularized the strategy of acquiring nonprofit colleges with regional
accreditation by purchasing Grand Canyon University in 2004 and building online enrollment.
Grand Canyon "is the same institution," Mueller said in an e-mail. "It was important to the new
leadership group that the mission of providing a high-quality Christian-based education remain intact."
Grand Canyon, which went public in November 2008, derived 83 percent of its revenue from federal
financial aid in 2009, according to a company filing.
Bridgepoint, Ashford
Bridgepoint Education bought the regionally accredited Franciscan University of the Prairies in 2005
and Colorado School of Professional Psychology in 2007. It renamed them Ashford University and
University of the Rockies, respectively, and refocused them online. Ashford gained 86 percent of its
revenue from federal student aid in 2009 and University of the Rockies got 85 percent, according to a
1O-K filing by Bridgepoint, which went public in April.
"There are several meaningful continuities" from the colleges before they were acquired, including
campus athletic and social events, Shari Rodriguez, a Bridgepoint spokeswoman, wrote in an e-mail.
Clifford participated in the 2008 purchase of Myers University in Cleveland, which was renamed
Chancellor University. Chancellor attracted Welch as an investor last year and named its new online
management institute after him. Welch collaborated with faculty in developing curricula for a master's
program in business administration, Clifford said.
'Something New'
"We chose to work with Chancellor University because it gave us the flexibility to start something
new," Welch said through a spokeswoman, Betsy Linaberger. "As a for-profit venture, we have the
resources to invest in the student experience and the very best faculty, and we. want to provide a high
quality business education."
Knowledge Universe Learning Group, chaired by Milken, entered into a partnership in 2007 with
regionally accredited Sierra Nevada College in Incline Village, Nevada, agreeing to provide as much
as $15 million in return for an opportunity to share in online revenue, Geoffrey Moore, a senior
adviser to Milken, said in an e-mail. The company is a unit of Santa Monica, California-based
Knowledge Universe Inc., of which Milken is co-founder and chairman. Knowledge Universe Learning
Group has three seats on the nonprofit college's nine-member board, Moore said.
'Existing Character'
'This partnership preserved the existing character of Sierra Nevada College," he said. "That was
important to us and the college."
4
A 2006 regulatory change fostered online growth and made takeovers more attractive, said Silber, the
BMO analyst. That year, Congress eliminated a rule prohibiting colleges that offered more than half of
their courses online from receiving federal financial aid.
ITT Educational Services Inc. didn't buy Daniel Webster just for its 52-acre red-brick campus and
. science and technology programs including training pilots and air traffic controllers.
"Regional accreditation was very important" to the company, said Goldstein, co-leader of the higher
education practice at Dow Lohnes. "I don't think there's any question that was the most attractive
element."
Of the $20.8 million purchase price, $20.6 million went to payoff the college's debt, according to an
ITT Educational 10-0 filing.
Making Changes
ITT Educational Services, which was spun off from ITT Co~p. in the 1990s, wasted no time making
changes at Daniel Webster. It renovated a main building and razed a dilapidated dormitory. It also
. dismissed one fourth of the staff, fired President Robert Myers, and has been accused by faculty
members of misleading the New England accreditor, the Commission on Institutions of Higher
Education, based in Bedford, Massachusetts.
"ITT didn't really have much interest in anything other than having acquired a regionally accredited
institution," said Myers, now president of the N~w England Culinary Institute in Montpelier, Vermont.
"If I had it to do all over again, I wouldn't have gone anywhere near ITT. The fundamental nature of
the college has changed."
."We're making fantastic progress with the cultural assimilation" of Daniel Webster, Modany said in a
Jan. 21 call with analysts. 'Things are going really well there, great group of staff and faculty, and
everybody is getting on board."
'Something Different'
Barbara Brittingham, director of the Commission on Institutions of Higher Education, declined to

comment on its approval of the Daniel Webster sale.
In general, "when these institutions are bought, they are not at the moment successful in the financial
sense or they wouldn't be for sale," Brittingham said. "There's an understanding that whoever buys
them is going to want to do something different."
Accreditation is higher education's way of regulating itself. The nonprofit associations set standards
on financial stability, governance, faculty and academic programs and use volunteers from college
presidents to professors to assess quality. It is a peer review system: a marketing professor is more
likely than a poet to evaluate a business school.
For more than a century, regional organizations have evaluated most public and private universities.
Starting in the 1950s, leaders offor-profit colleges, which were then ineligible for regional approval,
established seven national accrediting bodies for career education and training. The regions dropped
their for-profit ban in the 1960s.
Cachet, Credits
5
Apollo Group Inc. 's University of Phoenix, whose enrollment of 455,600 makes it the nation's second-
largest university behind the State University of New York system, is accredited by a regional body,
the Higher Learning Commission. Students enrolled at both regionally and nationally accredited
colleges can receive federal grants and loans.
Regional accreditation is important to for-profit colleges because students are attracted to its cachet
and can transfer course credits more easily. Only 14 percent of nonprofit universities accept credits
transferred from nationally certified schools, according to a 2006 study by the University Continuing
Education Association, in Washington.
The six regional associations scrutinize takeovers of nonprofit colleges in advance, and then follow up
afterward, accrediting officials said in telephone interviews. They could cite few, if any, cases in which
they refused to continue accreditation, they said.
Heald Purchase
Corinthian Colleges' past difficulties with California state regulators didn't matter to accreditors when
it purchased Heald Capital LLC, parent company of Heald College, for $395 million. Corinthian, the
country's seventh-largest higher education company by market value, has more than 100 campuses
in North America, and had 106,052 students as of Dec. 31, including Heald, said Anna Marie Dunlap,
a Corinthian spokeswoman.
Corinthian paid a $6.5 million settlement in July 2007 to the California attorney general's office, over
allegedly misrepresenting graduates' job placement rates and salaries. [t also agreed to cease
enrolling students in 11 programs at nine campuses. The Santa Ana, California-based Corinthian said
in a 1O-K filing that it didn't admit wrongdoing.
"We strongly disagreed with the Attorney General's conclusions, but we are pleased to have settled
the matter," Dunlap said in an e-mail.
Exclusively Online
Regionally accredited Heald College had 11 campuses with 12,900 students, primarily in two-year
health-care and business programs, as of Dec. 31. The college was nonprofit before its purchase in
2007 by Palm Ventures LLC, a Greenwich, Connecticut, investment company. Heald expects to start
enrolling exclusively online students this year, Corinthian Chief Executive Peter Waller wrote in an e-
mail.
The Accrediting Commission for Community & Junior Colleges in Novato, California, which certifies
two-year institutions in California and Hawaii, approved the change in Heald's ownership.
"We judge the college we accredit," said Barbara Beno, president of the commission. "It would be
unfair to say, 'Heald, you've been bought by a parent corporation that doesn't have as fine a track
record as you do. Therefore, we'll condemn you,'" she said in a telephone interview.
Heald will "continue to meet ACCJC's accreditation standards and eligibility requirements," Waller
said.
The scrutiny "doesn't remotely satisfy the sloppiest of due-diligence requirements," said Nassirian of
the American Association of Collegiate Registrars & Admissions Officers. "There is no methodical
review of who has bought the college. If the Cosa Nostra applied, you would think you'd take a look."
6
'Same Animal'
The nation's biggest regional accreditor is starting to take a closer look. The Higher Learning
Commission, which certifies more than 1,000 colleges from Arkansas to Wisconsin, stiffened its rules
on ownership changes last year.
Buyers must wait from one to four years to reapply for accreditation if the college won't stay "the
same animal," President Sylvia Manning said in a telephone interview. The commission now charges
$10,000 for ownership changes to pay for more extensive research. New owners must be approved
by its board, rather than at the staff level, Manning said.
The commission applied its newfound rigor to Mayes Education Inc.'s purchase of Waldorf College in
Forest City, Iowa, putting the brakes on online expansion. A subsidiary of online privately held
Columbia Southern University in Orange Beach, Alabama, Mayes agreed in May to buy the assets of
Waldorf, an Evangelical Lutheran college with 500 students, for an undisclosed sum. The deal closed
on Jan. 8.
Approval Condition
As a condition of approval, the commission stipulated that Waldorf can't offer online-only degrees at
least until 2011- 2012. Mayes Education plans to boost Waldorf's enrollment to 2,300 students in
three years through programs combining online classes with face-to-face instruction at temporary
sites around the country, Jessica Brown, a. spokeswoman for Columbia Southern, said in a telephone
interview.
The sale "barely made it through" the commission, former Waldorf president Richard Hanson said in a
telephone interview.
"Columbia Southem wanted to ramp up the online program quickly. The commissioners said, 'If we
maintain accreditation, Waldorf has to remain the college we know.'''
Columbia Southern wasn't the only for-profit that expressed interest in buying Waldorf, Hanson said.
Another company that lacked regional accreditation also contacted him: ITT Educational Services.
ITT Educational, runs 120 nationally accredited technical institutes with 80,000 students, most of
whom pursue associate degrees.
Graduation Rate
The cost of attending an ITT Technical Institute, including tuition, fees and off-campus room and
board, was $26,775 in 2008-09, according to the National Center for Education Statistics. Of students
who entered ITT's two-year schools in 2004, 29 percent graduated. ITT derived 70 percent of its 2009
revenue from federal financi~1 aid, according to a company filing.
ITT Educational is in the preliminary stages of seeking regional accreditation for its technical institutes
through the Higher Learning Commission, which sent a team to visit the company in late 2009, a
commission spokeswoman, Susan Van Kollenburg, said in an e-mail. The commission hasn't acted
on this evaluation, she said.
Daniel Webster is ITT Educational's first regionally accredited campus. Founded in 1965 as the New
England Aeronautical Institute, the college is tucked beside Nashua's municipal airport, and keeps its
7
fleet of Pipers and Cessnas there. The campus includes an aviation center, a library, an
administration building, classrooms, dormitories, and a student center called the Common Thread.
'Good Reputation'
" Over the years, the college expanded from flight instruction into training air traffic controllers and
airline managers, as well as teaching computer science, engineering, and business.
It has "a longstanding good reputation," said Gary Kiteley, executive director of the Aviation
Accreditation Board International in Auburn, Alabama, which licenses the college's aviation programs.
Financially, Daniel Webster never enjoyed a cushion. With an endowment that peaked at about $3
million in 2008, it relied on tuition revenue, Myers said. The airline industry's decline after 9/11 and
the collapse of Internet stocks hurt enrollment in aviation and computer science, said former provost
Michael Fishbein, who said he suffered a heart attack from the stress of keeping the college alive.
Red Ink
Just as trustees reached consensus on a strategic plan in 2008, fuel costs skyrocketed, and "we were
running red ink again," Rodney Conard, the former chairman of the board, said in a telephone
interview.
The Commission on Institutions of Higher Education and the U.S. Department of Education
expressed concerns that Daniel Webster didn't meet their financial standards, placing its accreditation
and eligibility for federal aid in jeopardy, according to a filing last April 23, by the college in a New
Hampshire court.
ITT Educational contacted Myers in December 2008, he said. Modany visited Daniel Webster the
next month, and the parties reached agreement in April. The acquisition would enable the company to
target a more upscale audience, Modany told Wall Street analysts on April 23.
While ITT Educational's institutes drew unskilled "career changers," the regionally accredited college
would appeal to "career advancers" seeking to enhance their capabilities, Modany said.
The Commiss"ion on Institutions of Higher Education approved the sale .that same month.
'Public Interest'
"It's in the public interest to have these small institutions continue to function," said Bruce Mallory, a
commission member and education professor at the University of New Hampshire in Durham. "If a
proprietary school can come in, continue to provide the same level of education and assure viability,
that's all for the better."
Modany promised to leave Daniel Webster's administrators in charge because they were experts in
running a four-year residential college, Myers and Fishbein said. At a campus event introducing the
ITT Educational chief executive to the college community, Modany said the company was growing
and there would be ample job opportunities, said Myers.
Growing Suspicions "
8
As Myers negotiated the sale, he came to suspect that the company wasn't being forthrightabout its
intentions, he said. When he and Conard, who chaired the college's board of trustees, worked out at
a YMCA a week before the June closing, they discussed canceling the deal, Myers said. Only after
consulting colleagues did they decide to go through with it, he said.
"We had lots of conversations when it was on the table," said Conard, a management consultant.
"Should we take it? We didn't have to take it. There was a point where we realized, they were going
to be more businesslike about it. It didn't feel as comfy as we were hoping."
Going through with the sale was the right decision, Conard said.
"ITT is in this for the long haul, and I'm very comfortable with where they plan to take Daniel
Webster," Conard said.
Another former trustee, Cathy Trower, went along with the sale as a last resort to save the college
and honor commitments to students, she said.
"A for-profit should not be able to buy accreditation," Trower, a research director at Harvard
University's Graduate School of Education in Cambridge, Massachusetts, said in a telephone
interview. "To me, that's almost like buying a degree and not actually earning it."
Duplicating Functions
In July, ITT Educational dismissed more than 20 Daniel Webster employees, Myers said. It believed
they were duplicating functions that the company's corporate offices in Indiana could provide, two
people familiar with the company's thinking said. ITT Educational also replaced Conard, Trower and
the other trustees.
Appointees to the college's new board included Charles Cook, former director of the Commission on
Institutions of Higher Education, which accredits Daniel Webster. Cook soon resigned because of a
potential conflict of interest with his position as a director of Corinthian's Heald College, he said in a
telephone interview.
"I was never substantively involved with Daniel Webster," Cook said.
Questioning Changes
At the time of the firings, Myers was circulating a draft report questioning whether some of ITT
Educational's changes were in accord with the standards of the accreditation commission, which call
for a faculty role in curriculum and governance, he said.
"ITT came in and said, 'We only want faculty to teach,'" Myers said. "We'll develop curricula in
Carmel, Indiana, and give them to you."
On August 5, ITT Educational ousted him, Myers said. Nadine Dowling, director of the Woburn,
Massachusetts, campus of ITT Tech, became interim president.
In an unusual move in credential-conscious academia, ITT Educational also named an assistant

professor without an advanced degree to a deanship. When Triant Flouris, who has a doctorate and
has written four books, resigned as dean of aviation sciences, he was replaced by David Price, who
only has a bachelor's degree.
9
Price is weeks away from completing a master's degree at Daniel Webster, and will enroll in a
doctoral program in the coming academic year at President Dowling's request, he said in a telephone
interview. "In has continued the strong emphasis we've always had on getting a higher degree," he
said.
Fewer Worries
The biggest difference at Daniel Webster under new ownership is "worrying less," Price said.
"There are a lot of schools that would just go under, students would be out of a school, faculty and
staff would be out of a job that they love passionately. I'm allowed to stay in the position I'm in
because of ITT."
In November, faculty members told a team from the New England commission visiting the campus
that ITT Educational had rewritten a college self-study report prepared by professors and staff for the
accrediting group. Faculty members complained that the company's revisions glossed over
inadequacies in such areas as governance, according to two people who attended the session.
When asked about the allegations concerning the self-study report, Richard Schneider, president of
Norwich University in Northfield, Vermont, who chaired the team, said that in his experience colleges
don't try to deceive accrediting bodies.
Facebook Group
About 450 people have joined a Facebook group entitled, "I went to Daniel Webster before it sold
out," including Chad Los Schumacher, 20. After his sophomore year at Daniel Webster, where he
majored in homeland security and joined the paintball club, Los Schumacher transferred for the
current academic year to Saint Leo University in Saint Leo, Florida.
"It was a very hard decision to come to, but 1knew I could not stay there," Los Schumacher said.
Los Schumacher was bothered by an ITT Educational policy that students receiving financial
assistance through work-study programs sign an agreement that the company owned their intellectual
output, he said.
"If I created the next Facebook or Twitter, it would be theirs," Schumacher said.
Matthew Mcinnis, a flight operations major, stayed at Daniel Webster.
"A lot of big names in aviation have come through here and taught here," the senior from Beverly,
Massachusetts, said as he headed to the aviation center on Jan. 27. "Looking in the long term, the
ITT buyout should add value. Hopefully, it will attract bette~ professors and more students."
Personnel Moves
The personnel moves took New Hampshire regulators aback, the officials said.
ITT Educational "did give me the sense they would continue as before," said Kathryn Dodge,
executive director of the New Hampshire Postsecondary Education Commission, in Concord, which
approved the sale in May. "We did not expect to see the turnover in staffing happen when it
happened."
10
As a result of the Webster case, Dodge said, she is proposing to require colleges in ownership
transition to outline plans for faculty and staff contracts and internal governance.
"It's a cultural issue," Dodge said. "Unless we're extremely specific in our requests, for-profits aren't
as forthcoming as nonprofits."
To contact the reporter on this story: Daniel Golden in Boston at dlgolden@bloomberg.net
Last Updated: March 4, 2010 10:26 EST
Related Videos
http://www.bloomberg.com/avp/avp.htm?N=video&T=For-
Profit+Schools+Reap+Bonanzas+at+Taxpayer+Expense+&clipSRC=mms://media2. bloomberg. comIc
ache/voHvSz4GWxPU. asf
Watch
For-Profit Schools Reap Bonanzas at Taxpayer Expense
March 4 (Bloomberg) -- Matthew Mcinnis, a student at Daniel Webster College, talks with
Bloomberg's Dan Golden about the changes at the ,school since ITT Educational Services Inc. bought
it last June. With its purchase of the debt-ridden school, In obtained an academic credential that
may generate a taxpayer-funded bonanza worth as much as $1 billion.
Pauline Abernathy
Vice President
11
Madzelan, Dan

Sent: Thursday, March 04, 201010:26 AM
To: Ziarko, Jeff; Kvaal, James R.; Shireman, Bob; Madzelan, Dan; Arsenault, Leigh
Cc: Edie Irons; Connie Myers; Lauren Asher; Luke Klipp
Subject: 1BR survey results on taxation of forgiveness!
TICAS just completed a survey of IBRinfo.org subscribers and 6,000 of them responded, half of
whom have applied for lBR and at least one third have been approved. There is lots of helpful
feedback, including the following which documents real concern about the potential tax liability:
• 86% are very or somewhat concerned about the taxation of loan forgiveness under IBR (60%
very concerned; 26% somewhat)
• 93% support HR 2492
• More than 8% of those not applying for IBR cite the potential tax liability as a reason why
(more than half of the survey respondents said they were not aware of the tax problem until we
asked about it on the survey so this number would no doubt have been much higher if more
had been aware of it)
We have not yet released these results publicly and welcome your feedback on when it would be best
to do so. Pauline
Pauline Abernathy
Vice President
1
Madzelan, Dan

Sent: Thursday, March 04, 201010:26 AM
To: Ziarko, Jeff; Kvaal, James R.; Shireman, Bob; Madzelan, Dan; Arsenault, Leigh
Cc: Edie Irons; Connie Myers; Lauren Asher; Luke Klipp
Subject: IBR survey results on taxation of forgiveness!
TICAS just completed a survey of IBRinfo.org subscribers and 6,000 of them responded, half of
whom have applied for IBR and at least one third have been approved. There is lots of helpful
feedback, including the following which documents real concern about the potential tax liability:
• 86% are very or somewhat concerned about the taxation of loan forgiveness under IBR (60%
very concerned; 26% somewhat)
• 93% support HR 2492
• More than 8% of those not applyirig for tBR cite the potential tax liability as a reason why
(more than half of the survey respondents said they were not aware of the tax problem until we
asked about it on the survey so this number would no doubt have been much higher if more
had been aware of it)
We have not yet released these results publicly and welcome your feedback on when it would be best
to do so. Pauline
Pauline Abernathy
Vice President
The Institute for College Access & Success·
510~883.7303 www.ticas.org
1
Madzelan. Dan
From: Pauline Abernathy [pabemathy@ticas.org]

Sent: Tuesday, March 02, 2010 10:32 AM
To: Shireman, Bob; Arsenault, Leigh; Dannenberg, Michael; Madzelan, Dan
Cc: Lauren Asher; Debbie Frankie Cochrane
SUbject: FW: What is Gainful Employment? I 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 01,20109:55 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 Departrllent of Education was
unintentionally a little bit too harsh, yielding a definition which would 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 provisions, with my proposed modifications, should be
applied to *'al1* colleges, not just for-profit colleges. 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, Mark
Sent: Monday, March 01, 20109:29 PM
To: FINAID-L@LISTS.PSU.EDU
Cc: Kantrowitz, Mark
Subject: What is Gainful Employment?
The Higher Education Act of 1965 requires for-profit colleges to provide "an eligible program of train ing 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 defming 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
loan 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 of90%. The loan repayment rate measures the percentage
of borrowers actively repaying 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 with borrowers who are in default.
I have prepared a report analyzing the implications of the proposed policy change.
1
The full report can be found at
http://www.finaid.orgleducators/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.ofBureau 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
subregulatory guidance precludes colleges from
establishing lower loan limits.
5. The proposals focus on affordable debt for the

definition of gainful employment, 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:
I. 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 salaiy.
- Increasing the loan term in the loan payment

calculation from 10 years to 20 years.
2
- Switching from a percentage of gross income to a
percentage of discretionary income, such as 20% of
discretionary income.
- Changing the loan repayment rate threshold for

recent graduates from 90% to 75%.
2. Because of the interactions with cohort default rates

and the 90/1 0 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 College Gold
FinAid Page LLC

PO Box 2056
Cranberry Township, PA 16066-1056
Tel: 1-724-538-4500
Fax: 1-724-538-4502
Email: mkant@finaid.org.mkant@fastweb.com
www.fastweb.com www.fmaid.org www.collegegold.com
NOTICE:
This message, and any attachments, contain(s) information that may be confidential or protected by privilege from
disclosure and is intended only for the individual or entity named above. No one else may disclose, copy, distribute or use
the contents ofthis message for any purpose. Its unauthorized use, dissemination or duplication is strictly prohibited and
may be unlawful. If you receive this message in error or you otherwise are not an authorized recipient, please immediately
delete the message and any attachments and notify the sender.
3
Madzelan, Dan
Sent: Tuesday, December 15, 2009 7: 15 PM
To: Shireman, Bob; Madzelan, Dan; James_R._Kvaal@who.eop.gov; Swarthout, Luke (HELP
Committee); Little, Bethany (HELP Committee); Radocchia, Julie; Appel, Jeff; Talwalker, Ajita;
Pajcic, Helen; Gomez, Gabriella
Cc: Connie Jameson; Luke Klipp; Lauren Asher
Subject: TICAS stmt on new cohort default rates
Attachments: 3yr CDR NR final.doc
FYI Attached and below.

«3yr CDR NR final.doc»
thelmtit ute for
<college
access success
FOR IMMEDIATE RELEASE CONTACT: Edie Irons

DecemberJ5,2009 510/883-7302
202/371-1999
New Default Rate Data for Federal Student Loans:

44 % of Defaulters Attended For-Profit Institutions
1
Berkeley (CA) - Yesterday the U.S. Department of Education released a preview of college "cohort default
rates" for federal student loans using a more robust methodology that will take effect in 2011. The new data
show nearly 400,000 students who entered repayment in 2007 had defaulted by 2009, representing 12 percent of
all students who entered repayment that year. Nearly half of these borrowers (44 percent) attended for-profit
schools, even though only 1 in ·14 students (7 percent) attend such schools.
Since 1989, cohort default rates have measured the share of students who defaulted on their student loans within
the first two years of repayment. The Higher Education Opportunity Act of 2008 changed the cohort default
rate calculation to measure the share defaulting in the first three years of repayment. The three-year CDRs
preview what the default rates would look like if the 2011 policy were in effect today.
"These data can help colleges prepare for the coming change and send a wake-up call to schools with high
default rates and significant numbers of borrowers," said Deborah Cochrane, program director at the Institute
for College Access & Success. "While some increase in overall defaults may be the result of unemployment and
the economy, those factors do not explain the large numbers and percentages of defaults at certain schools.
Disturbingly high default numbers mean the education students received did not give them the earning power to
repay their student loans. The new 'three-year CDR' is a more accurate and meaningful measure of defaults,
increasing colleges' accountability for their students' fmancial well-being."
Disproportionate Loan Defaults Compared to Enrollment

100% -.----------r----.-----~---_r_-~
o Private Nonprofit
80% + - - -
60% - / - - - mPublic 4 Year
40% + - - - B Public2 Year
20% + - - -
• For-Profit
0% + - - -
Share of Enrollment Share of Defaults
Source: u.S. Department of Education. Based on ttlree-year CDR data for FY 2007.
Defaulting on a federal student loan is a disastrous and long-lasting financial problem for borrowers. It mins
their credit and makes them ineligible for further federal fmancial aid. The government can garnish their wages
and seize income tax refunds without a court order, and can addlarge collection fees to the outstanding debt.
There is no statute of limitations on federal student loan collections, and those unable to pay are unlikely to get
relief through bankruptcy. It takes 270 days of non-payment to default on a federal student loan.
The Department also provided important information about enrollment at each school in this preview of the new
rates, which shows that student loan defaults are disproportionately a problem for proprietary colleges and their
students. Community colleges and for-profit colleges both enroll large numbers of lower income students, but
far fewer students borrow and default at community colleges.
2
Schools with default rates above certain levels risk losing access to federal student aid. The new data indicate
that very few public or nonprofit colleges would be at risk of sanctions under the new methodology. While
default rates rise for almost all institutions under the new methodology, they rise less at public and nonprofit
colleges than at for-profit colleges. For-profit colleges already have the highest default rates using the current
methodology, and they appear to be at even higher risk oflosing access to federal aid programs under the new
methodology.
The Institute's recent report, Getting with the Program: Community College Students Need Access to Federal
Student Loans, examined the issue of public two-year colleges opting not to offer federal student loans, due in
large partto fears of high default rates. Few community colleges are likely to be at risk of sanction under the
new methodology, as the vast majority of public two-year colleges' rates still fall below sanction thresholds.
Low numbers of borrowers at these schools further reduce their risk of sanction. Schools where only a small
proportion of students borrow - often the case at public two-year community and technical colleges - can
appeal potential sanctions on that basis. This is called a "participation rate index appeal."
####
See the U.S. Department of Education's preview of draft three-year cohort default rates by institution.
Pauline Abernathy
Vice President
3
Madzelan, Dan

Sent: Friday, December 11, 2009 11 :08 AM
To: Eric.Stein@do.treas.gov; Peggy. Twohig@do.treas.gov; Michael. Barr@do.treas.gov;
James_R._Kvaal@who.eop.gov; Shireman, Bob; Madzelan, Dan; Gomez, Gabriella; Smith,
Zakiya; Gordon, Robert M.; Diana_Farrell@who.eop.gov; jason_furman@who.eop.gov
Cc: Lauren Asher; Connie Jameson; Luke Klipp
Subject: TICAS press stmt on CFPA amdts on private student loans
Attachments: CFPA statement on house amdts FINAL Dec 11.doc
FYI--Attached and below is TICAS' statement praising the House action to give the. CFPA authority over all
private student loans and to require school certification of private loans and that students be told of any
untapped eligibility for federal grants or loans. The statement applauds the Obama administration for its
leadership on this. Thank you all, and especially Eric, for helping make this happen. It will make a
meaningful difference for millions of Americans. Pauline
~he ins.titute for
college
access success
STATEMENT OF LAUREN ASHER CONTACT: Edie Irons

December 11, 2009 202/371-1999
1
Yesterday's House Votes on Consumer Financial Protection Agency
Took Important Steps to Rein in Risky Private Student Loans
"Yesterday's actions by the full House of Representatives will help bring law and order to the 'wild west' of the
private student loan market. These votes will help protect Americans from risky pIivate student loans and other
dangerous financial products, deceptive marketing, and unfair treatment. Private student loans typically have
variable interest rates with no cap and cost more for those who can least afford them. They also lack the
important consumer protections - such as deferment, forgiveness, and flexible repayment programs - carried by
federal student loans.
"The House voted to adopt two very important reforms. The first ensures that the CFPA will have authority
. over all private student loans, regardless of the institution making them. This is critical, because a private
student loan from a school can pose the same serious risks to consumers as one from a fmancial institution. The
second requires that lenders "certify" private student loans. This means lenders cannot issue a loan until
confirming with the student's school that the student is enrolled there, how much they are eligible to borrow,
and that they have been informed of any untapped eligibility for federal grants and loans.
"Requiring real certification for private loans v.rill help reduce unnecessary and risky borrowing. The latest
federal data show that nearly two-thirds (64 percent) of undergraduates with private loans borrowed less than
they could have in safer federal loans last year. One-quarter (26 percent) of private loan borrowers took out no .
federal loans at all. According to one major lender, the certification process leads students to borrow less than
originally requested nearly 30 percent of the time.
"We applaud Financial Services Committee Chairman Barney Frank, Education and Labor Committee
Chairman George Miller, Higher Education Subcommittee Chairman Ruben Hinojosa, Representatives Jared
Polis, Patrick Murphy, Tim Bishop, and Maxine Waters, and the Obama Administration for all of their efforts to
protect private student loan borrowers. These provisions were also supported by a wide range of more than 30
higher education, student, consumer, and civil rights organizations.
"Private student loans are one of the riskiest ways to pay for college. Private loans are not financial aid any
more than a credit card is when used to pay for textbooks or tuition. However, unlike credit cards and other
fOims of consumer credit, private student loans are virtually impossible to discharge in bankruptcy. These risks
underscore the importance of CFPA oversight of private loans, and we urge the Senate to act quickly to protect
students and their families from the dangers of private student loans."
«CFPA statement on house amdts FINAL Dec 11.doc»
Pauline Abernathy
Vice President
2
Madzelan. Dan

Sent: Wednesday, December 02,2009 3:48 PM
To: James_R._Kvaal@who.eop.gov; Madzelan, Dan; Shireman, Bob; Smith, lakiya; Gomez,
Gabriella; Gordon, Robert M.; Eric.Stein@do.treas.gov; MichaeI.Barr@do.treas.gov;
Peggy.Twohig@do.treas.gov
Cc: Connie Jameson; Lauren Asher; Luke Klipp
Subject: FW: Letter from 29 organizations on private student loans and the CFPA
Attachments: Coalition Letter to Sens Dodd and Shelby - FinaL12-2-09.pdf
FYI--Attached and be10w is the coalition letter sent to Dodd and Shelby praising the draft Senate bill
for including all private student loans under the CFPA's authority.
From: Luke Klipp

Sent: Wednesday, December 02,20093:29 PM
To: Luke Klipp
Cc: Pauline Abernathy; 'Connie Jameson'; Lauren Asher
Subject: Letter from 29 organizations on private student loans and the CFPA
Attached and below is a letter to Senate Banking Chairman Chris Dodd and Ranking Member Richard Shelby from 29
organizations, representing consumers, civil rights organizations, students, colleges and taxpayers, applauding the
inclusion of all private student loans under the CFPA's authority in the Chairman's draft bill. It is critically important that
the CFPA retain full authority over all private student loans, regardless of the institution offering the loan. Thank you for
your attention to this important issue.
All members of the Senate Banking Committee are cc'd on this letter.
December 2, 2009
The Honorable Cluistopher Dodd, Chairman

Committee on Banking, Housing and Urban Affairs
United States Senate
Washington, DC 20510
The Honorable Richard Shelby, Ranking Member

Committee on Banking, Housing and Urban Affairs
United States Senate
Dear Chairman Dodd and Ranking Member Shelby:
As advocates for consumers; students, higher education, civil rights and taxpayers, we applaud the Chairman's
inclusion of all private student loans under the jurisdiction of the Consumer Financial Protection Agency
(CFPA). As legislation establishing the CFPA moves forward, it is critically important that the CFPA retain
full authority over all private student loans.
Private student loans are one of the riskiest ways to pay for college, yet a large number of students have private
student loans as well as, or instead of, federal student loans. Private student loans are expensive, mostly
variable-rate loans that cost more for those who can least afford them. They lack the fixed rates, consumer
protections and flexible repayment options of federal student loans, and are not financial aid any more than a
1
.credit card is when used to pay for textbooks or tuition. Witnesses before the Senate Banking Committee have
described the private student loan market as "the wild west" of student lending, and this market has still not
received the attention needed to adequately protect consumers.
At for-profit colleges, which are attended disproportionately by African-American and Latino students, 42
percent of undergraduate students took out private loans in 2007-08. Several large for-profit colleges, including
Corinthian Colleges, Inc., ITT Educational Services Inc., and Career Education Corporation, make private loans
directly to their students. Corinthian Colleges has told investors that it plans to make $130 million in loans to
its students this year alone, even though it expects 56 to 58 percent of these borrowers to default. The company
considers these loans good investments because they \\111 increase enrollment and with it a profitable flow of
federal grant and loan dollars that outweighs the planned write-offs. Several for-profit colleges, such as DeVry
University, also offer high-interest open-end credit to their students.
Unlike other retail businesses, large for-profit colleges can receive up to 90 percent oftheir revenues from
federal grants and loans. Therefore, while other businesses decrease their lending when defaults rise, some for-
profit colleges have increased their lending despite double-digit default rates.
To effectively protect consumers, the CFPA must have full authority over private. student loans regardless of the
institution offering them. For consumers, a private student loan can pose the same serious risks whether issued
by a financial institution or by a school. For this reason, the CFPA needs to apply and enforce standards based
upon the product and not the issuing institution.
We are grateful for the Chainnan's clear placement of all private student loans within the CFPA's authority, and
urge you to ensure it retains this authority. Thank you for your leadership and consideration of our views.
Links to additional information about private student loans, including loans by for-profit colleges, are provided
. below. Should you or your staff have any questions, please contact Pauline Abernathy with the Institute for
College Access & Success at 510-559-9509.
Sincerely,
American Association of Collegiate Registrars and Admissions Officers

American Association of Community Colleges
American Association of State Colleges and Universities
American Association of University Women
American Federation of Teachers
Americans for Fairness in Lending
Campus Progress Action
Center for Responsible Lending
Consumer Action
Consumer Federation of America
Consumer Watchdog
Demos: A Network for Ideas & Action
The Greenlining Institute
Institute for College Access & Success and the Project on Student Debt
NAACP
National Association for Equal Opportunity in Higher Education
National Association of College Admission Counseling
National Association of Consumer Advocates
National Association of Consumer Bankruptcy Attorneys
National Center for Public Policy and Higher Education
National Consumer Law Center (on behalf of its low income clients)
2
National Consumers League
National Council of La Raza
National Education Association
New York Public Interest Resource Group (NYPIRG)
U.S. Public Interest Resource Group (U.S. PIRG)
United States Student Association
USAction
Woodstock Institute
cc: Members of the Senate Committee on Banking, Housing and Urban Affairs
3
Further information about loans made by for-profit colleges and private loans:
"An Education in Student Loans," by David A. Graham, Newsweek, November 20, 2009:
http://v.rwv../.newsweek.comJid/223727
"Leveraging Up to Leam," by Bill Alpert, Barron's, November 9, 2009:

http://online.barrons.com/article/SBI25755384448934953.htm1#articleTabs panel article%3D 1
"The Subprime Student Loan Racket," by Stephen Burd, Washington ll1.onthly, November/December 2009:
http://www.washingtonmonthly.com/features/2009/0911.burd.htm!
"Stimulus Wreckage: Despite having been accused of deceptive business practices by the attorney general,
fonner students, and ex-employees, Corinthian Colleges are getting millions in federal stimulus dollars," SF
Weekly, September 30, 2009: http://www.sfweekly.com/2009-09-30/news/stimulus-wreckage/
Testimony of Michael Calhoun, President of Center for Responsible Lending, before House Committee on
Financial Services, September 30, 2009: http://www.responsiblelending.org/mortgage-Ie.nding/policy-
legislation/congresslcfpa-calhoun-testimony.pdf
Testimony of Lauren Asher, President of The Institute for College Access & Success before the House
Judiciary Committee Subcommittee on Commercial and Administrative Law, September 23, 2009:
http://j udiciarv.house. gov/hearings/pdf!Asher090923.pdf
"For-Profit Colleges' Increased Lending Prompts Concerns," by Justin Pope, The Associated Press, August 15,
2009: http://www.usatoday.comlnews/education/2009-08-15-profit-college-lendingN.htm
"Private Loans: Facts and Trends," The Institute for College Access & Success, August 2009:
http://projectonstudentdebt.org/files/pub/private loan facts trends 09.pdf
"Corinthian Colleges, Inc. F4Q09 (Qtr End 06/30/09) Earnings Call Transcript:"
http://seekingalpha.com/article/IS 8257-corinthian-colleges-inc-f49 09-gtr-end-06-30-09-earnings-call-
transcript?source=bnet
Luke H. Klipp
Policy Analyst
2054 University Avenue, Suite 500
Berkeley, CA 94704
Phone: (510) 559-9509, ext. 316
Fax: (510) 845-4112
LKlipp@ticas.org
4
Madzelan, Dan

Sent: Tuesday, November 10, 2009 11 :36 AM
To: Swarthout, Luke (HELP Committee); James_R._Kvaal@who.eop.gov; Shireman, Bob;
Madzelari, Dan .
Subject: Barron's cover article on for-profits
FYI. Has useful quotes, stats and charts. Cites the neg reg and quotes Bob.
Leveraging Up To Learn: Apollo Group and other for-profit colleges will find it harder to make the
grade -- especially as they come under scrutiny for aggressive enrollment practices.
http://online.barrons.com/article/SB 125755384448934953.html#articleTabs panel article%3D 1
Pauline Abernathy
Vice President
1
Madzelan. Dan
From: Pauline Abernathy Ipabernathy@ticas.org]

Sent: Thursday, November 05, 2009 1:56 PM
To: jkvaal@who.eop.gov; Shireman, Bob; Madzelan, Dan; Gomez, Gabriella;
Eric.Stein@do.treas.gov; Peggy.Twohig@do.treas.gov; Smith, Zakiya
Subject: FW: SENS. BROWN, BENNET, FRANKEN, MIKULSKI INTRODUCE BILL TO ESTABLISH
PRIVATE LOAN OMBUDSMAN
FYI--Senator Brown willlikelyoffer this legislation as an amdt to the Senate CFPA legislation, putting
this ombudsman at the CFPA rather than at Treasury.
From: Lenehan, Moira (Brown) [mailto:Moira Lenehan@brown.senate.gov]

Sent: Thursday, November 05,20099:43 AM
To: Pauline Abernathy; Deanne Loonin; Angela M. Peoples; c1indstrom@pirg.org
Subject: FW: SENS. BROWN, BENNET, FRANKEN, MIKULSKI INTRODUCE BILL TO ESTABLISH PRIVATE LOAN
OMBUDSMAN
FYI
From: Morris, Haley (Brown)

sent: Thursday, November OS, 2009 12:41 PM
Subject: SENS. BROWN, BENNET, FRANKEN, MIKULSKI INTRODUCE BILL TO ESTABLISH PRIVATE LOAN OMBUDSMAN
OFFICE OF U.S. SENATOR SHERROD BROWN

For Immediate Release
Thursday, November 5, 2009
Contact: Meghan Dubyak
202-224-3978
SENS. BROWN, BENNET, FRANKEN, MIKULSKI INTRODUCE BILL TO

ESTABLISH PRIVATE LOAN OMBUDSMAN
BiD Would Create Federal Resource to Improve Coordination, Assistance with Private
Student Loans
WASHINGTON, D.C. - U.S. Sen. Sherrod Brown (D-OH), joined by U.S. Sens. Michael Bennet (D-CO), Al
Franken (D-MN) and Barbara Mikulski (D-MD), today announced new legislation to help streamline assistance
to Americans struggling with private student loan issues. The Private Education Loan Ombudsman Act, to be
housed in the U.S. Department of Treasury, would help private student loan borrows address complaints or
challenges by working colleges and universities and private lenders.
"When challenges or problems arise with private student loans, borrowers have no place to turn," Brown said.
"This bill would establish a federal private loan ombudsman to improve coordination and assistance for private
student loan borrowers just as exists with federal student loans.
1
"Today's students have enough to worry about," Franken said. "Navigating their way through loans shouldn't
be harder than college. And when something goes wrong, they need to know someone's there to help them
figure out their case. This bill will make sure they have the assistance they need."
"Students and their families are feeling stretched and strained as it is. Our students are graduating with so much
debt it's like their first mortgage," Mikulski said. "I want to make sure they're not burdened with extra debt due
to unscrupulous lenders or opaque lending terms. This bill will give student borrowers a place to turn when
they're facing problems with their loan. The federal government has a loan ombudsman. Private lenders
should, too. "
"Students and families deserve an advocate who can answer their questions and address their concerns about
student loans," Bennet said. "This bill will provide a much-needed resource to make sure students can focus on
their books, not their loans."
The 1998 Amendments to the Higher Education Act established the Student Loan Ombudsman, which serves as
a centralized federal clearinghouse to help borrowers navigate disputes and problems with federal loans. The
Student Loan Ombudsman has earned the support of borrowers and advocates alike. Currently, however, no
such federal resource exists for private student loans borrowers.
By establishing a Private Education Loan Ombudsman, Brown's bill would ensure that Americans engaged in
private student loan conflicts have access to a similar federal resource. The Private Education Loan
Ombudsman would coordinate services with the Department of Education and Federal Student Loan
Ombudsman to ensure that all complaints and problems are reported. The federal body would also assist
borrowers in mediating and settling disputes with private lenders.
Brown is a longtime proponent of offering students improved information and assistance in navigating student
loan financing. He recently introduced a "debt swap" bill to enable Americans with private student loans to
refinance their costly, private loans into low-interest, unsubsidized Stafford loans, which carry a 6.8 percent
fixed interest rate. These new "debt swap" loans would be administered by the federal government under the
same terms and conditions as other federal student loans.
Last year, Brown conducted an official hearing of the Senate Health, Education, Labor, and Pensions (HELP)
Committee on college access and affordability at The Ohio State University. Entitled "Fulfilling the Promise of
an Affordable College Education," Brown's hearing addressed the effect the. credit crunch on the availability of
student loans and the fast growth of high cost private student loans.
###
2
Madzelan, Dan
From: Lorena L1ivichuzca [Iorena@millrockllc.com}
Sent: Monday, May 17, 20106:33 PM
To: Duncan, Arne
Cc: Rogers, Margot; Rose, Charlie; Shireman, Bob; Ceja, Alejandra; Tighe, Kathleen S.; West,
Keith; Erceg, Marta; Hamel, William; Roberts, Jim; Sorensen, Howard; Aspling, David; William
Taggart; Minor, Robin; Madzelan, Dan; Bergeron, David
Subject: Letter to The Honorable Arne Duncan from the Alliance for Economic Stability, Inc.
Attachments: Letter to Secretary Duncan 05-17-10.pdf
Dear secretary Duncan,
Attached please find a letter from the Alliance for Economic Stability, Inc. Thank you.
Lorena M. L1ivichuzca
··747 Third Avenue, 25th Floor
New York, NY 10017
Tel. (212) 702-8805
Fax (212) 918-3465
Email: lorena@millrockllc.com
This message is for the intended recipienrs use only. It is not to be retransmitted without the express written consent of the sender. This e-mail may
contain confidential, proprietary or legally privileged information. If you receive this message in error, please immediately delete it and notify the sender.
You must not. directly or indirectly, use, disclose, distribute, print, or copy any part of this message if you are not the intended recipient.
Copies of written communications (including e-mails) may be kept and archived indefinitely. This may include this e-mail, and any e-mail reply made to it.
1
u.s. Department of Education
Distribution List
Office of the Secretary
1. Arne Duncan, Secretary

2. Margot M. Rogers, Chief of Staff
3. Charles P. Rose, General Counsel
Office of the Undersecretary
4. Robert Shireman, Deputy Undersecretary

5. Alejandra Ceja, Chief of Staff
Office of the Inspector General
6. Kathleen S. Tighe, Inspector General

7. Keith West, Assistant Inspector General
Audit Services
8. Marta Erceg, Counsel to theInspector General·
9. William Hamel, Assistant Inspector General
Investigation Services
10. Jim Roberts, Director
Special Investigations Unit
11. Howard Sorensen, General Counsel
12. David Aspling, Assistant Special Agent in Charge
Federal Student Aid
13. William Taggart, Chief Operating Officer

14. Robin Minor, Acting Chief Compliance Officer
Postsecondary Education
15. Dan Madzelan, Assistant Secretary

16. David Bergeron, Director
Policy, Planning and Innovation
Alliance For Economic Stability, Inc.
747 Third Avenue, 25 th Floor
New York, New York 10017
May 172010
The Honorable Arne Duncan

Secretary
U.S. Department of Education
LBJ Education Building
400 Maryland Avenue, SW
Room # 7W311
Dear Secretary Duncan:
The Alliance for Econonric Stability ("AES") 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 that 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 of DOE regulations surrounding Bridgepoint's use of
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."] 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 per se.
A television program recently aired by PBS in the Frontline series, titled "College Inc.," featured a
former 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 describing Bridgepoint's quota
system, which email was shown and discussed in a public DOE hearing.
Advisors to the AES have also spoken with fanner Bridgepoint 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 be terminated. If
an employee exceeds the quota, his or her salary will increase.
34 c.P.R. § 668.l4(b)(22)(ii)(A)
Secretary Duncan
May 17,2010
Page 2 of3
Even without such personal testimony, one can determine that Bridgepoint shows a remarkabl
consistent number of students enrolled per month per salesperson. The attached Table I, based up
data in Bridgepoint's public financial statements, shows that over a span of years the number f
students enrolled by Bridgepoint per salesperson employed has been exactly consistent, both durin
the period covered by the audit of Bridgepoint by the DOE's Office of Inspector General (''OIG'
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 recent annual report discloses that the company had 1,175 enrollment advisors
of December 31, 2009. The report also discloses that Bridgepoint employs financial service adviso
and academic advisors who work in conjunction with the enrollment advisors in the sales proces .
With this division of duties, the sole function of enrollment advisors is to make sales calls - not
consult on financial or academic issues. By necessity, Bridgepoint must make decisions 0
terminations and salary 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 investigation that the DOE may follow to determine the extent f
Bridgepoint's use of a quota system as a sole basis for compensation. Bridgepoint records will sho
the date a new enrollment advisor begins work and the date of his or her first salary increase r
termination. Those who are terminated fD'St 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. T
foregoing is based upon information provided by former Bridgepoint employees to an AES advisor.
Mr. Howard Sorenson of the OIG spoke with an advisor to the AES and kindly explained his vie s
on the OIG's authority in its current audit of Bridgepoint. He conveyed that the OIG's statuto
authority and statutorily-mandated processes for audits have limitations on the extent of the audit, th
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 corrfmned that Bridgepoint is only subject to
OIG audit review, and is not the subject of a formal OIG investigation or referral to the U.
Department of Justice.
We, of course, respect Mr. Sorenson's views and the OIG's expertise on its own statutory anthorit
However, we believe the information presented here sufficiently shows that Bridgepoint's recOf
and 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 feder
regulation exists in Bridgepoint records and can be discovered by the DOE.
We respectfully offer that the OIG may not be accustomed to conducting an investigation of the
we see as necessary to uncOver Bridgepoint's violation or to imposing sanctions that woul
remediate waste of tax-payer funds. We have not found record of any sanction significant!
impacting the operations of a For-Profit in an exhaustive review of public OIG and Department f
Justice records. The only substantial sanction of a For-Profit we found arose from the OIG's p t
audit of Apollo Group, Inc. and resulted in a sanction which had minimal impact on Apollo
Secretary Duncan
May 17,2010
Page 3 of3
subsequent growth and which was dwarfed by Apollo Group's settlement of a qui tam lawsuit
brought on behalfof the government
Nonetheless, we think the OIG and the DOE have the statutory authority to investigate these
violations, should do so, and should impose appropriate sanctioDS. We think that in order to
remediate violations and assure a judicious use of tax-payer funds, an appropriate sanction would be
more severe than the past sanctions arising from OIG audits of For-Profits.
The DOE's most recent data on official cohort defuult!ales show that. For-Profits collectively have a
cohort default tate that is more than double ~ ave~ of public and private non-profit institutions.
Bridgepoint derived approximately 85% of its total revenue, or approximately $386 mifJion, in 2009
alone from tax-payer funds administered via Title IV. Bridgepoint will collect at least $600 million
in revenue this year, going by the rate ofns most recent quarter. Clearly, addressing potential waste
of tax-payer funds at Bridgepoint is an important and urgent matter.
The For-Profits' are only able to maintain extraordinarily high profit margins through government
funding and through a misrepresentation of the quality of the education based strict1y on
accreditation. This misrepresentation is used in marketing to individuals who may be especially
susceptible to boiler room sales tactics. 1bis system aligns economic incentives against providing a
quality c::ducation. DOE sanctions which are not severe enough to be economically IOOaDingful
provide further incentive fOT For-Profits to violate federal regulation.
DOE action to address Bridgepoint's incentive compensation scheme, which violates already lenient
fedeml regulation, will allow for a less vietimization-prone enrollment process, will mitigate perverse
economic incentives against quality education, and will safeguard against waste oftax-paycr funds.
Ifwe can provide any information to assist the DOE in this endeavor. we are happy to do so.
Sincerely,
C~r~!£~~!\>
Director
co: Roben Shireman, Deputy Undersecretary

Office of the UndersecretaJy . I
Kathleen S. Tighe, Inspector General

Office of Inspector General
William Tliggart, Chief Operating Officer

Federal Student Aid
For additional recipients see Distribution List
Enclosure

CREW: Department of Education: Regarding For-Profit Education: 12/3/10 - DMadzelanemail - Crew01704

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From: Pauline Abernathy [pabernathy@ticas.org]

From: Pauline Abernathy [pabernathy@ticas.org]

«ITT and DV Upgrade.pdf»

From: Pauline Abernathy [pabernathy@ticas.org]

«TICAS Memo Discharge Dates April 201 a.doc»

From: Pauline Abernathy [pabernathy@ticas.org]

Inside Higher Ed: For-Profit, for African-Americans?

«4-2-10 Inside Higher Ed.doc»

From: Pauline Abernathy [pabernathy@ticas.org]

Daniel Webster College ends flight program

Michael Brindley can be reached at 594-6426 or mbrindley@nashuatelegraph.com

From the recent Bloomberg article:

From: Pauline Abernathy [pabernathy@ticas.org)

From: Luke Klipp

Dear coalition partners,

From: Pauline Abernathy [pabernathy@ticas.org]

«Senate CFPA and private loans - final.doc»

From: Pauline Abernathy [pabernathy@ticas.org]

From: Connie Myers [mailto:connie.myers@nelsonmullins.com]

Statement of Lauren Asher CONTACT: Edie Irons

Statement on Today's Student Loan

This message is intended exclusively for the individual or

To ensure compliance with the requirements imposed by the

Scnt using BlackBerry

••••• Original Message •••-

FrQm: e--Dear Colleague

From: 'Tnc Honorable Jared Polis

New York Times:

"In Hard Times, Lured Inlo Trade School and Debt"

Jared Polis Patrick Murphy

Member of Congress Member of Congress

In Hard Times, Lured Into Trade School and Debt

By PETER S. GOODMAN <http://topics.nytimes.com/top/reference/timestopics/people/g/peter s goodmanJindex.html?inline=nyt-

A spokeswoman for the school's owner, ITT Educational Services <http://topics.nytimes.com/top/news/business/companies/itt-

The Career Education Corporation <http://topics.nytimes.com/top/news/business/companies/career-education-

The Apollo Group <ht1;p://topics.nytimes.com/top/newslbusiness/companies/apono group/index.html?inline=nyt-org> ~ which

"They have a basic money-making machine," Mr. Newburg said.

More Bills Than Paychecks

But promotional materials convey a sense of promise.

When he tried to refinance, the school turned him down, he says.

From: Pauline Abernathy {pabemalhy@ticas.org]

«Gainful Employment Letter 3.2010PDF.PDF»

From: Pauline Abernathy [pabernathy@ticas.org]

FYI-Tomorrow's front-page NYT 2,400 word, article is posted at

In Hard Times, Lured Into Trade School and Debt

"They have a basic money-making machine," Mr. Newburg said.

More Bills Than Paychecks

But promotional materials convey a sense of promise.

Pearl District. "It doesn't really give them any edge."

When he tried to refinance, the school turned him down, he says.

From: Pauline Abernathy [pabernathy@ticas.org]

FYI. TICAS statement released today below.

Statement of Lauren Asher CONTACT: Edie Irons

Statement on the Need for Student Loan Reform to be Included in

From: Pauline Abernathy [pabernathy@ticas.org]

FYI. Really disturbing.

Your Taxes Support For-Profits as They Buy Colleges (Update1)

Barbara Brittingham, director of the Commission on Institutions of Higher Education, declined to

Growing Suspicions "

In an unusual move in credential-conscious academia, ITT Educational also named an assistant

Matthew Mcinnis, a flight operations major, stayed at Daniel Webster.

To contact the reporter on this story: Daniel Golden in Boston at dlgolden@bloomberg.net