September 3, 2014

“Back to the Future” for career colleges: What we have to do to regain credibility

Many for-profit colleges get about 90 percent of their revenue from federal financial aid. For-profit schools have 13% of U.S. students by nearly half of all student loan defaults.

In this guest post, Raul Valdes Pages addresses his colleagues in the for-profit college industry. Raul Valdes Pages was the founder and CEO of Denver Technical College, a for-profit school offering associate, bachelor and master’s programs. He also has served as CEO of Sextant Education and marketing manager and vice president at DeVry. He is currently CEO of Quantum Integrations, a publishing and competency-based curriculum company. He has been a commissioner of the Accrediting Commission of Career Schools and Colleges and testified in Congress regarding skills standards legislation. You can contact him at [email protected]

Our colleges have taken a pounding in the press. This is not news. Some is undeserved, but in my opinion, a lot of the criticism is deserved. We have grown from a $4 billion a year sector in 1999 to $35 billion in 2010. With this hyper growth, we have not maintained quality standards we used to have.

Remember the answer we use to give as to how we were different from traditional colleges? We used to answer OUTCOMES. When was the last time you saw a piece credibly defending our sector on the basis of better graduation, better placement, better certification pass rates, better salaries? For me, it has been a while. Instead, we seem to have morphed into the sector that insists that it is sufficient that we admit “non-traditional” or “underserved” populations. In the process, we have become targets, as lifetime default rates for students at our schools are budgeted in the most recent Department of Education numbers at 48.4% (as compared with community colleges at 31.4%, and weighted average 17.6%).  Who designated our sector as the “protectors of minorities”? We were all about career-focused education regardless of color. It was only when spin doctors at publicly-traded and private equity-backed chains entered the field that bankers suddenly became advocates for minorities. I find this hypocrisy offensive and demeaning to all of us. Worse, it is not even believable.

This is the for-profit education sector that I remember:

Admissions: We admitted students we believed were likely graduates. We tested applicants for each program. We rejected students whom our programs could not benefit. We provided remediation no longer than one term. We had reasonable prices. We trained our admissions representatives with product knowledge, not just sales techniques. We shopped admissions for veracity and fired those caught lying. We did not allow admissions officers to talk financial aid. We provided placement data for the Institution by program. We tracked alleged misrepresentation, show rates and attrition by representative. We started paying straight salaries, not commissions, when the Department of Education changed its regulations.

Financial Aid: We talked about covering tuition but also talked about student and parent contributions. Loans to cover living expenses were discouraged. We stressed the difference between loans and grants with clear schedules of repayments for loans compared to average salaries from our institution. Students did not see a financial aid officer until they passed entrance exams, signed enrollment agreements and paid admissions application and fees. Financial aid was not part of the “closing.”

Career Services: Part-time employment, transportation, housing, personal problems, were all on the table for us to address prior to student’s start date. If a student had too many problems, we postponed the start date. If students were too broke, we got them on their feet prior to the start date. The flip side of ultra high show rates was ultra high attrition rates.

Education: The largest percentage of classes was taught by full-time faculty. They are more expensive but develop relationships with students, which helps retention. Faculty had worked in the field they were teaching in, but were also trained to teach. Commissions monitored faculty training and improvement plans. Retention of faculty was known to augur retention of students. Faculty had office hours outside the classroom to counsel and tutor. Career services and education were jointly evaluated for monthly, quarterly, yearly and cohort retention.

Placement: This used to be a totally different department than career services. Placement staff were expected to be out in the field developing relevant job leads and selling employers on the advantages of hiring your graduates. Each representative was then assigned a number of students for whom they were responsible to place at market salaries. Each individual was evaluated on percentage of students placed and starting salary. Results? Graduation rates were north of 65% for diploma programs, 45-65% for Associate and 40’s for Bachelor’s programs. Placement for all students (forget “eligible”) was in the 70’s and up. Salaries were competitive, and programs were easily financed without need for private financing nor additional academic years.

You are now saying, we do all this, nothing new. Really?

  • How many times have our colleges been cited for illegal compensation to admissions? How many misrepresentation claims and settlements? How often do you train and “shop” admissions? How often do you push students to start? Are you using stipends as a recruiting tool? Are you “open admissions” without regard to whether your program will actually help a given student?
  • What percent of your student body receives stipends? Have you been raising tuition far higher than the 2% inflation of the last few years? Is financial aid part of your “closing the sale”? Are default rates and 90-10 ratios going north?
  • What percent of your classes is taught by full time vs. part time faculty? Has the latter increased in recent years? Does your faculty tutor? Are they both experienced in the field they teach and trained to teach? How much faculty training do you provide? Is your retention deteriorating?
  • How much do you spend on career services and placement vs. what you spend recruiting? Is you graduation rate down along with placement? How about salaries?

The point to all this is that we lost our way, and we need to get better than our counterpart state schools. We charge students more (yes, I know about state subsidies). The point is that if we are loading students with more debt than state schools, we need to have considerably better outcomes. This means being more restrictive in admissions, and getting better in education, career services and placement.

A path I would follow is that of employer-based competency education. The Department of Labor, in conjunction with employers from a wide array of fields, has set up competencies made up of foundation, core and soft skills. Imagine the opportunity in front of us: Stepping forward and truly teaching what employers want, including the “soft” skills everyone says we need but hardly ever teach. I know it can be done because I have done it twice. The first effort was done before the “pyramid.” 300 Employers told us what to teach in every class and how to test for those skills. At graduation, students were required to pass a comprehensive practical and written test. A guarantee of one month’s salary was offered to employers.

In the eight years I had the program, I did not have a single student suit or compliance complaint. Retention went up. So did placement and starting salaries. 90-10 was at 52%, and the 2 year CDR was 8% and dropping when my school was bought by DeVry. We had to be more selective in admissions, and we had to get better at every outcome. Initially, revenue and profit took a hit. As the reputation of the college grew and employers referred more students to us, we far surpassed the numbers we were previously posting for profit.

It is said that every time a door closes another one opens up. Times are tough. As I write this I hear more sad news from our sector. But the way forward may be looking back. Better outcomes that used to define our sector have to be the way forward.