“The unscrupulous culture of the for-profit college industry”

     It's been another fun-packed week for the for-profit college industry. Below, read about Westwood College and the class action suit being pursued against it. Plus: the Dept. of Ed is on the hot seat for sitting on its hands while for-profits pretty much did as they pleased.
     Who's to blame?
     Enjoy the show while it lasts. When all the dust settles, no doubt the for-profits will pick up where they left off, gradually taking over higher ed in this country. The bubble will grow bigger. It will burst. The taxpayer will again be expected to clean up the mess.
     Don't mean to be negative. But Good Lord!
     At a recent hearing, a honcho at the Government Accounting Office was asked whether the massive problems that have been found at for-profits were a lack of regulation or a failure of enforcement. His answer: “Probably both…. Given what we saw, it certainly appeared a little bit like the wild, wild west out there, if you will. So that would indicate that there is not a lot of regulatory infrastructure in place overseeing or enforcing.” (See)
     Gosh, I'm told that some people like the wild, wild west. Imagine that!

In Lawsuits, Former Students Accuse Westwood College of Widespread Deception (Chronicle of Higher Education)

     Long before it was spotlighted in a U.S. Senate hearing last week as an example of aggressive and misleading recruiting tactics at for-profit institutions, Westwood College "flourished in the unscrupulous culture of the for-profit college industry," say former students in two separate lawsuits filed on Wednesday.
     The college and its top executives "engage in deceptive trade practices at every step of the process from recruitment to postgraduate job placement," claim the lawsuits, one of which was filed in federal court in Colorado and the other in a state court in California. College officials "follow a simple formula: Recruit those with the greatest financial need and enroll them in high-cost institutions to maximize the amount of federal funding" they receive, the lawsuits say.
     In a written statement sent to The Chronicle Thursday night, Westwood officials strongly denied the allegations.
. . .
     In return for enrolling high numbers of students, the lawsuits allege, recruiters are compensated with free trips and other incentives—in one case cited in a court document filed with the complaints, "a fun-packed fully paid vacation in sunny Cancun."
     That document is a copy of a May 2008 e-mail that begins "Ay Caramba" and exhorts recruiters to do their best to gain "Elite" status and win the trip. Another exhibit shows the company's training materials, including advice to the admissions representatives: "Call new leads within 15 minutes; Call 3 times 1st and 2nd day."
. . .
     In April 2009, [Alta Colleges, Westwood's parent company] paid $7-million to the federal government to settle allegations that Westwood had obtained federal student aid by falsely claiming that it complied with state-licensing requirements. Such licensing is required to receive federal aid. The company maintained that it acted lawfully but said it settled to avoid the time and expense of a legal fight….
. . .
     The college has said that the practices highlighted at [a recent] hearing were "unauthorized actions taken by a few Westwood employees." Still, it announced this week that it would alter some of its admissions and recruiting policies, and pledged to "set a new standard for the student-enrollment process."….

Did the Department Drop the Ball? (Inside Higher Ed)

     The Government Accountability Office’s “secret shopper” investigation of recruiting practices at for-profit colleges was a mixed blessing for the U.S. Department of Education.
     At one level, the findings presented at last week’s Senate Health, Education, Labor and Pensions Committee hearing were a vindication. Videotaped evidence pointed to fraud at four colleges, and questionable or deceptive practices at all 15 campuses investigated. But, at the same time, GAO’s discoveries have put the Education Department on the defensive, trying to explain why it hasn’t done more to prevent recruiters from making deceptive statements to potential students. There are already rules on misrepresentation and incentive compensation of college employees for securing enrollments – which the department is expected to tighten in its final regulations, to be published by Nov. 1 – and while weak rules may be part of the problem, they’re not the whole story.
     Could the department have conducted its own secret shopper investigations and cracked down on aggressive recruiting practices before Congress and GAO got involved? Has the department failed to use all the tools in its existing enforcement toolbox as frequently and as well as it could have?
     To most observers, the answer to both questions is yes….
. . .
     One reason policing hasn’t been aggressive, says [Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers], is because of the melding of democracy and bureaucracy at the Education Department, with political appointees, including the secretary, leading an agency of career civil servants.
     “We’ve had cycles of some of the very people that the department should have been investigating invited in to run the place,” he says, referring to several former for-profit executives who joined the department during the George W. Bush administration. “Civil servants understand that showing excessive zeal on behalf of the taxpayers and the students will not be a smart long-term career move. Being aggressive under one administration might work, but under the next it will get you pushed out.”
     The department’s Office of Inspector General examines passively, performing audits and investigations only after it receives a complaint or other indication of wrongdoing at an institution. Since 2005, OIG has issued 37 reports on postsecondary institutions and accreditors, 21 of which involved for-profit colleges.
     But the Obama administration has in recent months begun introducing new consumer protection functions….

Moody's Warns Nonprofit Colleges They Could Be Next (Inside Higher Ed)

     Officials at nonprofit colleges may be enjoying the rough ride that their for-profit counterparts are getting from lawmakers and federal regulators, but they shouldn't get too cocky – they could be next, Moody's Investors Service warned Thursday. In a "special comment" report, which is available only to Moody's subscribers, the ratings agency said that the tougher scrutiny of cost and outcome measures in for-profit higher education (and the attendant negative news media coverage) could slow enrollment growth among commercial institutions and create some short-term opportunity for public and private nonprofit colleges. But echoing warnings that some higher education officials themselves have made, Moody's warns that the Education Department could seek to apply to nonprofit as well as for-profit colleges metrics that link graduates' debt burdens to their salaries. "If regulators require all higher education institutions to meet new metrics based on allowable post-graduate debt and salary levels, student demand at some traditional colleges could suffer, causing weakened cash flow and revenues," Moody's writes.