September 26, 2012

Chronicle of Higher Education Allows For-Profit College With High Student Loan Defaults To Sponsor And Pick The Speakers For Loan Default Event

Chronicle of Higher Education Allows For-Profit College With High Student Loan Defaults To Sponsor And Pick The Speakers For Loan Default Event

The Chronicle of Higher Education, a venerable publication read by college faculty and administrators nationwide, has been sending invitations all over Washington, inviting policy experts, Capitol Hill staffers, media, and others to an October 19 panel discussion entitled “Student Loan Default Aversion: Forum on Research and Best Practices.” According to the invitation, the “lively discussion” will address the question, “How can students reap the benefits of higher education without the fear of financial devastation in the event of a default?” It’s a sensible, important, and indeed an urgent question, given America’s mounting student debt crisis.

But the invitation asks us to “Join the Career Education Corporation and the Education Finance Council to explore” this topic, and those two enterprises are listed as the sole sponsors of the event, with the Chronicle of Higher Education as its “host.”

Career Education Corporation (CEC or CECO) is the nation’s fourth largest for-profit college, and one whose record hardly qualifies it to impart wisdom on issues of student debt. Yet, as I discovered, CEC not only is sponsoring this Chronicle event — it selected all the panelists.

When the U.S. Department of Education measured colleges this summer, under its new “gainful employment” rule, to determine which schools — because of high prices, low graduation rates, and poor job placement outcomes — left large numbers of students with unmanageable debt, 11 of 44 programs at CEC’s Sanford–Brown college flunked all three prongs of the tests, whose standards are almost absurdly low.

CEC in the past has told its shareholders that it expected to recover only about half the money it lent directly to students, meaning it made loans in cases where it knew students would be unlikely to pay them back. CEC did so, says Stephen Burd, because such losses would be outweighed by the enormous profits reaped from federal financial dollars obtained through those students:

Because any loss is more than offset by federal loans and financial aid dollars, which, despite the surge in private educational lending, still fund the bulk of tuition at proprietary schools. Say a student gets a $60,000 federal financial aid package and supplements it with a $20,000 institutional loan. The school comes out $40,000 ahead even if the borrower ultimately defaults. Plus, getting students in the door pumps up enrollment numbers, which makes for happy shareholders.

CEC’s most recent student loan default rate — 21.6 percent of its students defaulted within 3 years of leaving the school — is almost double the average rate for all U.S. colleges.

It gets worse. Last month the nonprofit group The Institute for College Access and Success (TICAS) charged, based on facts presented in Senator Tom Harkin’s recent report on the industry, that CEC may be systematically manipulating the loan default rates that it reports to the U.S. Department of Education — presumably because if those default rates get too high, the company loses its eligibility for federal student financial aid.

CEC also has been accused of misleading prospective students. Last November, its CEO Gary McCullough quit after allegations, under investigation by New York’s attorney general, of inappropriate practices in calculating — and inflating — student job placement rates. In June, the Accrediting Commission of Career Schools and Colleges (ACCSC), a body that routinely approves poorly-performing schools, directed CEC to show cause why 10 of its schools should not lose their accreditation over the job placement issue.

The Chronicle event’s other cosponsor, The Education Finance Council, is a trade association that represents non-profit student loan operations. A number of these entities have in the past engaged in questionable practices that have harmed students and taxpayers.

Barmak Nassirian, a higher education expert who until recently served as associate executive director of the American Association of Collegiate Registrars and Admissions Officers, provided his own answer to the event’s topic, how can students avoid default? — “How? Don’t attend CECO schools; don’t borrow from EFC lenders.”

Nassirian told me he is sympathetic to the Chronicle’s need to find additional sources of revenue in a challenging period for media companies. But he said, “There is a real bright line that is crossed” when a company in the journalism business “organizes a function this egregious.”  He said the event would offer “the very entities that profit from defaults, engaging in pious platitudes about default prevention.” He likened the event to “a conference about preventing lung cancer, with the tobacco companies participating and presented as credible interlocutors.” He added that “no amount of tough questioning” by the panel moderator could make such an event legitimate.

Nassirian argues that an essential cause of student defaults when it comes to for-profit colleges is fraudulent or misleading conduct by these schools.  “CECO is a particularly questionable actor” in this regard, he said. Unless such misbehavior is directly criticized by the panel, then it would be “a cruel joke on anyone coming to the event with an open mind who wants to actually understand the problem of defaults.”

The Chronicle, of course, is not the first media outlet to present a policy event with corporate sponsors. It happens all the time these days, as financially challenged publications seek to sustain themselves. This week, Patrick Pexton, the ombudsman of the Washington Post, addressed criticisms that the Post allowed the American Petroleum Institute, the main lobby group for the oil and gas industry, to sponsor “Washington Post Live” events on energy policy at the Democratic and Republican national conventions. As Pexton noted, many other Washington-based publications hold policy events with sponsorship from corporate sponsors —  the National Journal, the Atlantic, the Wall Street Journal, Politico, and others.

The Washington Post, by the way, cannot be compromised by the for-profit college industry for the simple reason that it is the for-profit college industry: Its wholly-owned subsidiary, Kaplan, Inc., from which the Washington Post Co. derives the majority of its revenue, is one of the biggest players in that business. There is plenty to suggest that this ownership has affected the paper’s coverage of the contentious for-profit college issue.

Meanwhile, the largest for-profit college company, the University of Phoenix, has been the lead sponsor of NBC’s Education Nation events, and also has sponsored education policy events held by The New Yorker.

The for-profit college industry, fighting against Obama Administration reforms that would hold the worst actors in its sector accountable for abuses that have ripped off veterans, low-income people, and many other students, has spent millions to purchase the allegiance of Members of Congress and nonprofit groups, as well as press outlets. What makes this situation even more  disturbing is that the major players in this industry receive around 86 percent of their revenue from federal financial aid — meaning you and I, and the taxpayers, are actually paying for them to curry favor with these entities and sponsor these events.

As much as spokespersons for these media companies protest otherwise, events with such sponsorships often avoid sharp criticism of the sponsored companies and their industries. The Washington Post events at the conventions featured just one tough critic of the oil and gas industry, Rep. Ed Markey (D-MA).  While such corporate support can make a difference in facilitating public debate and supporting worthy institutions, I don’t think many of these sponsors are funding these policy events out of the goodness of their corporate hearts. They hope to buy legitimacy in front of a policy and media audience.  And some likely hope to skew not only the event itself, but also future coverage of their industry by the media company, which may be hoping for repeat sponsorship of future events.

For several years the Apollo Group, which operates the University of Phoenix, has “presented” the online education page of GOOD magazine.  The page has almost never addressed the for-profit college controversy, which has been heavily covered by mainstream press and education media alike. Except that GOOD ran an infographic that misleadingly implied that for-profit colleges are less dependent on federal aid than state colleges; it showed that for-profits get most of their revenue from student tuition and fees, without noting that most of these costs are paid through federal student grants and government-backed loans. The graphic was labeled as “A collaboration between GOOD and Design Language, in partnership with University of Phoenix.” Earlier this year I spoke with GOOD’s editor Ann Friedman, who, after noting that the sponsorship agreement predated her arrival, said that the University of Phoenix did not make suggestions about what issues to cover, and that GOOD’s lack of coverage of for-profit colleges was explained by the fact that the main focuses of the page were innovation and K-12 education. (Shortly after we spoke, GOOD laid off Friedman and most of her editorial staff.)

The Chronicle of Higher Education itself allowed the University of Phoenix to sponsor its 2009 “Leadership Forum,” and was criticized by its former reporter Stephen Burd for that sponsorship and for what seemed to him to be a biased series of articles that praised, and glossed over the abuses of, the for-profit college industry.

As the debate on these issues has heated up in the years since — and as it has become crystal clear that many actors in this industry are blatantly ripping off students and taxpayers — some of the Chronicle’s coverage has been much tougher, and the publication has some outstanding journalists on its team. Just a few weeks ago, the Chronicle reported on TICAS’s charges against CEC, and the Chronicle itself investigated the issue of default rate manipulation last year.

So why is the Chronicle now willing to present a public collaboration with CEC, on an issue where CEC appears to be part of the problem, rather than the solution?

I spoke with Jeffrey Selingo, the Chronicle’s Editor at Large, and formerly its chief editor. Selingo is set to moderate the panel discussion. There are many prominent critics of the for-profit college and student lending industries based in Washington, yet I didn’t see any of them listed on the panel. I asked Selingo if any of the scheduled panelists had been critical of these sectors. He said he didn’t know; he hadn’t picked the panelists. He said it was “hard to get balance sometimes” in putting together a panel.

One well-known speaker on the panel is Douglas Holtz-Eakin, a former top Bush Administration official who is president of the corporate-funded advocacy group American Action Forum. He has publicly criticized efforts by the Obama Administration to impose tougher accountability standards on for-profit colleges. Vince Sampson, president of the event’s cosponsor, the Education Finance Council, is also on the panel.  (Other panelists include University of Louisville assistant professor Jacob P.K. Gross, who has expressed concern that open access colleges “will be penalized [for higher than average default rates]”; Carrie Hansen, Product Manager at NorthStar Education Services, who “was a key driver in the launch of NorthStar’s Cohort Management Services program that uses data to drive outreach and successful borrower engagement”; and Terry Hartle, the chief lobbyist for traditional higher education at the American Council on Education.)

Selingo said that issues related to student defaults exist across the various sectors of higher education. “Are the for-profits worse? Yes,” he said. He’s right about that: For-profit colleges have about 13 percent of U.S. students but 46 percent of loan defaults. Selingo said that he wanted the panel to address reforms that would apply to all sectors, like better matching of students to schools and using income-based repayment to reduce debt loads for students.

Selingo disputed the idea that accepting such event sponsorships might sway the Chronicle’s coverage of an issue or industry, or the events themselves. He added, “If we had to put every single advertiser through the same filter — do we agree with them? — we wouldn’t have any advertisers.”

So who did pick the panelists for this event? Selingo referred me to Michelle Thompson, Associate Publisher, Marketing & Audience Development, at the Chronicle.  Her answer: CEC is selecting the program.” Career Education Corporation picked all the speakers for this event, she confirmed.

The Chronicle gets credit for disclosing that fact, once I asked them. But it does raise concerns when a media outlet, in exchange for a sponsorship fee, allows an outside party to determine the program and speakers for a public discussion of issues in which that outside party plays a controversial role.

Thompson said the integrity of the panel would be assured by having Selingo as the moderator — “Jeff will bring that level of dialogue to this panel.” Selingo had told me, “I plan to ask tough questions,” but “whether there are panelists who can answer them, I don’t know.”

Thompson formally confirmed that CEC and EFC are paying the Chronicle to sponsor the event, although she declined to disclose the amounts paid.  She told me, “We have never allowed our advertiser-based support to affect our journalistic integrity.” But the Chronicle is allowing its advertiser to determine the composition of an event that the Chronicle is presenting as a program of its own.  It’s renting out its reputation.

I know these folks are running a business, and it’s a business that benefits a lot of people, and it’s a difficult time to turn a profit or even stay alive. But they are in the journalism business, and I have to agree with Barmak Nassirian. This Chronicle event, sponsored only by CEC and EFC and without including any of their prominent critics, is like an event on “Guarding The Henhouse,” sponsored by The Fox. It has the potential to mislead attendees, and it weakens the credibility of the institution hosting it.


This piece also appears on Huffington Post.