Thursday, May 17, 2018

Federal officials curtail probe into fraud at for-profit colleges    

They were subject to much hostile targeting under Obama so DeVoss may feel that they need a break

Members of a special team at the Education Department that had been investigating widespread abuses by for-profit colleges have been marginalized, reassigned, or instructed to focus on other matters, according to current and former employees.

The unwinding of the team has effectively killed investigations into possibly fraudulent activities at several large for-profit colleges where top hires of Betsy DeVos, the education secretary, had previously worked.

During the final months of the Obama administration, the team had expanded to include a dozen or so lawyers and investigators who were looking into advertising, recruitment practices, and job placement claims at several institutions, including DeVry Education Group.

The investigation into DeVry ground to a halt early last year. Later, in the summer, DeVos named Julian Schmoke, a former dean at DeVry, as the team’s new supervisor.

Now only three employees work on the team, and their mission has been scaled back to focus on processing student loan forgiveness applications and looking at smaller compliance cases, said the current and former employees, including former members of the team, who spoke on the condition of anonymity because they feared retaliation from the department.

Education Secretary Betsy DeVos scaled down the inquiry.
In addition to DeVry, now known as Adtalem Global Education, investigations into Bridgepoint Education and Career Education Corp., which also operate large for-profit colleges, went dark.

Former employees of those institutions now work for DeVos as well, including Robert S. Eitel, her senior counselor, and Diane Auer Jones, a senior adviser on postsecondary education.

Last month, Congress confirmed the appointment of a lawyer who provided consulting services to Career Education, Carlos G. Muñiz, as the department’s general counsel.

The investigative team had been created in 2016 after the collapse of the for-profit Corinthian Colleges, which set off a wave of complaints from students about predatory activities at for-profit schools.

The institutions had been accused of widespread fraud that involved misrepresenting the benefits of their programs, which could leave students with huge debts and no degrees.

Corinthian’s bankruptcy affected more than 2,000 Massachusetts students who had accumulated loans while attending the company’s Everest Institute campuses in Brighton and Chelsea. In 2016, the closure of ITT Tech, another for-profit institution, affected more than 550 students who attended campuses in Norwood and Wilmington. Most of those students were low-income.

Elizabeth Hill, a spokeswoman for the Education Department, attributed the reduction of the investigative group to attrition and said “conducting investigations is but one way the investigations team contributes to the department’s broad effort to provide oversight.”

She said none of the new employees who had previously worked in the for-profit education industry had influenced the unit’s work.

She also said the team’s deployment on loan forgiveness applications was an “operational decision” that “neither points to a curtailment of our school oversight efforts nor indicates a conscious effort to ignore ‘large-scale’ investigations.”

Aaron Ament, a former chief of staff to the office of the department’s general counsel who helped create the team under President Obama, said it had been intended to protect students from fraudulent for-profit colleges.

“Unfortunately, Secretary DeVos seems to think the colleges need protection from their students,” said Ament, who is president of the National Student Legal Defense Network.

Senator Elizabeth Warren, Democrat of Massachusetts, also criticized the team’s new direction.

DeVos has taken a number of actions to roll back or delay regulations that sought to rein in abuses and predatory practices among for-profit colleges — actions that Warren and other Democrats have said put the industry’s interests ahead of those of students.

“Secretary DeVos has filled the department with for-profit college hacks who only care about making sham schools rich and shutting down investigations into fraud,” Warren said.

DeVry did not respond to requests for comment, and Schmoke declined to be interviewed. Schmoke recused himself from matters involving DeVry, according to the department.

DeVry agreed to pay $100 million in 2016 to settle a separate Federal Trade Commission lawsuit alleging that it misled prospective students with ads about employment and salaries after graduation.

The Education Department announced a limited settlement with DeVry the same year after finding that the school could not substantiate claims that 90 percent of its alumni since 1975 were employed in their field of study within six months of graduating. But the investigative team continued to look into its job placement claims and other recruiting practices.

Hill confirmed the investigation, but said it had been suspended early last year before President Trump took office.

The former and current employees disputed Hill’s account and said the group and its work had become an issue of contention during meetings with the Trump transition team.

Several of the employees said that there had been a staff push to continue the investigation as recently as this year, with no result.

The group had also been looking into similar issues of recruiting and advertising at Bridgepoint and Career Education during the latter part of 2016, the employees said. Hill declined to comment on those cases.

In a statement, Bridgepoint said the company was aware of a review beginning in 2015 but had “not been made aware of any investigation or involvement by the enforcement unit.” Career Education did not respond to requests for comment.

Eitel, the senior adviser to DeVos, last year recused himself from issues involving both Bridgepoint and Career Education, where he was a top lawyer.

Jones, the senior adviser on postsecondary education, has not recused herself from matters involving Career Education, where she previously worked. The department did not say whether Muñiz had recused himself from issues involving the company.

Jones worked for about five years as a senior vice president at Career Education after serving as assistant secretary for postsecondary education for President George W. Bush. She joined the Trump administration early this year.

In a letter to DeVos last week, Warren and nine other Democratic senators called on the department to reveal the extent of Jones’s ties to the industry, suggesting she had worked “on behalf of bad actors.”

The department issued an extensive statement defending Jones, calling her background an “asset” that would advance the department’s goals. Jones has had “vast higher-ed experience in community colleges, research universities, and for-profit colleges,” it said in the statement, adding that she had spent only a fraction of her career in the for-profit industry.


Seize the moment on new education bill

They seriously think the black/white gap can be closed.  They have learned nothing from experience

LAST WEEK, the state Senate approved the most consequential piece of education legislation Massachusetts has seen in a quarter-century.

Fully implemented, the measure would pour more than $1 billion in new money into the public schools on an annual basis — providing a critical update to a funding formula that has failed to keep up with the ballooning costs of health care and special education.

By most accounts, action is long overdue. Although the Commonwealth’s schools are leading the nation by many measures, officials need to take steps to close the achievement gap separating white students from their black and brown peers.

But the bill isn’t perfect. Lawmakers must identify the resources to pay for this important investment.

The last time Beacon Hill made a transformational investment in K-12 education was in the 1990s. Former senate president Tom Birmingham, an architect of that effort, says legislative leaders made education a priority and fended off “scores of suitors” for state funding for other priorities.

But they also benefitted from a comparatively rosy budget outlook. The economy boomed in the mid-1990s, tax rates were relatively high, and health care costs ate up a relatively small portion of the budget.

Today, Medicaid is a huge expense, and tax rates are substantially lower. Lawmakers can’t just change the education funding formula and assume they’ll find the money in the coming years. They’ll need to identify a substantial revenue source in advance.

If they identify that money, they’ll need to deploy it in a smarter way. The genius of the 1990s education reform push was that it paired new funding with higher standards — helping to create the best public education system in the country.

The Senate bill, approved last week, has nothing to say about standards and does little to push the education system in new directions, even though the persistence of the achievement gap between white and minority students demands it.

A more creative approach might involve setting aside money for a competition between districts aimed at producing high-quality, evidence-based programs for closing that gap. The state could also provide incentives for districts to launch more innovation schools — unionized alternatives to charter schools, with many of the same autonomies.

The Legislature weighs big new spending on the schools only once a generation. With new money comes a rare opportunity to improve education for the children who need it most. Lawmakers shouldn’t waste it.


What Universities Need: More Skin In The Game

In the last couple of years, there are more cries for universities to have more “skin in the game,” that is to say greater incentives to show improved performance. The distinguished banker and financial scholar Alex Pollock, now of the R Street Institute, has written frequently about this:  he should have “Let's have skin in the game” inscribed on his tombstone when he passes on.

The context in which “skin in the game” is most discussed is with regards to student loans. When students default on their loans, it imposes a cost on U.S. taxpayers. Many schools accept a large number of applicants that they know are extremely risky and unlikely to graduate.  At some schools the six-year graduation rate is under one-third: there are at least two dropouts for every successful recipient of a bachelor’s degree. The admission and retention policy decisions of these schools ultimately impose a significant burden on taxpayers, as many of these dropouts simply do not repay their loans.

“Skin in the game” can work in various ways. Perhaps colleges could be made liable to repay at least part of the defaulted loan, maybe beyond a certain baseline expected default rate that arises from unanticipated adverse circumstances such as an accident or illness impeding an ability to work. A rule like this would impact most severely on schools with mediocre academic reputations, few endowment resources, and a high proportion of low-income, first-generation, and minority students.

Therefore a criticism of skin in the game is that it is inconsistent with the egalitarian view that higher education is a means to lessening economic and educational inequalities. But should the government be heavily subsidizing schools that fail to do what college should do–educate students well while helping them obtain productive remunerative employment? College dropouts are not only indebted but often perceived as failures.  How is economic justice promoted by high numbers of college dropouts?

As stated in previous blogs, higher education needs more “creative destruction” to deal with the imbalance between high enrollments and the considerable but less robust needs of the American labor market. Skin in the game is one way of helping achieve needed downsizing.

The concept of “skin in the game” already applies to most students, who pay tuition fees and forego income-producing employment in order to attend school. The graduation rates are higher at private schools that on average are more expensive than at lower cost public schools. As a general proposition, where students have more skin in the game, they have greater incentives to graduate in a timely manner, four years instead of five or six years - or not at all. . One of the problems with free tuition proposals is that by largely removing skin in the game for students, they dull incentives to excel academically.

The use of skin in the game can go even further: to other members of the university community and even to whole institutions. As often is the case, Purdue University under President Mitch Daniels is leading the way. Purdue is investing in some of its own students through Income Share Agreements, previously discussed here. The school pays some or all the cost of attending Purdue in exchange for a share of post-graduate income. If students fare well after graduation, reflecting presumably skills taught at Purdue, the university benefits. Highly endowed private schools perhaps ought to devote at least a small portion of their endowment to similar programs.

In what is often regarded as the first great work in economics, Adam Smith noted that professors at Oxford University were more effective teachers when they had skin in the game. Students paid the professors fees –the more students a professor had, the greater his income.  Today, by contrast, often professorial compensation has little correlation to clearly identifiable performance indicators.

A large portion of compensation of CEOs and other high-level employees in profit-seeking businesses comes in the form of bonuses, stock options and the like–employees clearly have skin in the game. We could do more of that in higher education as well, although admittedly it is difficult since the “bottom line” of universities is often difficult to define and measure. However, for higher education to become better, cheaper and more responsive to the needs of its customers and society, it needs sharpened incentives at all levels, that is more skin in the game.


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