July 14, 2015

Big For-Profit Colleges Quit Trade Group APSCU


Some of the largest for-profit college companies — including, last month, DeVry and Kaplan — have recently left the industry’s main trade group, the Association of Private Sector Colleges and Universities (APSCU). The defections have come amid a rapid decline in the reputations and fortunes of many for-profit colleges — and the apparent failure of the D.C.-based trade association’s strategy to protect the industry, which in recent years received as much as $33 billion in federal aid.

Some of the companies that have left APSCU face mounting federal and state law enforcement investigations for fraud and other misconduct. Some have seen dramatic declines in share prices and student enrollments. Meanwhile, APSCU has pursued a confrontational approach to the Obama Administration’s efforts to hold bad actors accountable, aggressively lobbying lawmakers, making extensive campaign contributions, and hiring expensive lawyers to repeatedly challenge new regulations in court. But the approach recently led to defeats before two federal judges, and, although APSCU lobbyists keep pushing, it thus far has not produced legislation to overturn the Administration’s signature “gainful employment” rule, which would cut off federal aid to career education programs that consistently leave students with overwhelming debt.

Occupants of the APSCU CEO job have for years been the beleaguered servant of a group of impatient, entitled owners of oversized for-profit colleges. The previous president, Virginia Democratic operative Harris Miller, abruptly resigned soon after the Administration issued the first, watered-down-but-still-potent version of the gainful employment rule. In January 2012, with its future on the line, APSCU brought in a higher stature president, former congressman Steve Gunderson (R-WI). He was described then as a “bridge builder.” But his tenure has done little to demonstrate that.

APSCU’s most recent IRS filing shows that APSCU paid Gunderson about $470,000 in 2013, while APSCU’s executive vice president Sally Stroup, a former Bush Department of Education official, got $355,000.

Now, at a moment when APSCU’s strategy appears to have faltered, companies are leaving the organization, with DeVry and Kaplan the most recent departures.

DeVry Education Group vice president Tom Babel served on APSCU’s board of directors until June 2015. DeVry University’s then-president David Pauldine was, until 2o13, the chair of the APSCU board. But APSCU no longer lists Babel on the board and no longer lists DeVry as an association member.

Ernie Gibble, Senior Director of Global Communication at DeVry Education Group, confirmed for me today that DeVry “left Apscu at the end of June.” As to its reason, Gibble wrote, “We’re not commenting on why.”

Although DeVry has been under investigation by the Federal Trade Commission, the Justice Department, and at least three state attorneys general, its finances and reputation are seen to be in better shape than some of the other large for-profit college companies. Several industry insiders suggested to me that DeVry might be interested in separating itself from APSCU in the eyes of the Department of Education and the White House.

But APSCU may have alienated not only the Obama Administration. The group’s internal dynamics and external advocacy have long favored large publicly-traded and private equity owned companies over smaller operations. APSCU has consistently harbored fraudulent schools as members, long after their abuses of students and taxpayers have been exposed, and the group has relentlessly opposed new regulations aimed at weeding out the very worst actors.  It has thus has contributed to the public tarnishing of the for-profit college industry as a whole, hurting those honest and effective school operators who have been doing a decent job at helping students.

“I say good riddance” to the big companies that have departed APSCU, says a current owner of a small group of for-profit post-secondary schools.  “As someone who was a very active member of the organization in past, I watched with great dismay as publicly-traded and private equity took over the association and have contributed greatly to the decline of what was and should remain a very viable alternative for career-oriented education.” This owner says that in the 1990’s, the group “did a great job in representing our sector, up until these monsters started to control the association.”

Kaplan, owned by Donald Graham’s company, which previously also owned the Washington Post, has been in and out of APSCU more than once, as Graham has taken lobbying into his own hands, personally pressing his fellow Washington elites to forego tougher oversight of the for-profit college industry. At least five state attorneys general, as well as the Justice Department, have investigated or settled disputes with Kaplan in recent years. Kaplan was listed as a member of APSCU at least until May 26, 2015, when I verified its membership online for an article, and its senior vice president Rebecca Campoverde was on APSCU’s board at least into May. But APSCU no longer lists Campoverde as a board member or Kaplan as a member.

Kaplan spokesmen did not responded to my request for comment.  Nor did an APSCU spokesman respond to my questions about the company departures, or about whether APSCU has implemented layoffs or salary freezes or cuts in response to the shrinking membership base.

Other major for-profit college companies, including EDMC, ITT Tech, and Corinthian, have departed APSCU in the past year. Corinthian Colleges was a member until last year, and its CEO chaired APSCU’s political action committee. But Corinthian shut down its schools and declared bankruptcy this year amid a storm of law enforcement probes and Department of Education disciplinary measures.

EDMC and ITT are both also under investigation by multiple law enforcement agencies and have seen their enrollments and share prices drop precipitously.

But DeVry, Kaplan, EDMC, and ITT, in contrast to Corinthian, are still fighting to stay alive, and they now are seeking to do so without membership in APSCU. (Industry titan the University of Phoenix, which now has its own set of problems, has stayed out of APSCU.)

What is left of APSCU, then? Notably, some of its larger remaining members are among the few entities — Keiser, CollegeAmerica, Herzing — that have shifted from for-profit to non-profit, creating concerns that have been raised in the New York Times, Miami Herald, and elsewhere that the conversions are misusing non-profit status. Keiser’s head, Arthur Keiser, a former APSCU board chair, has long been a dominant force within the group. The increased prominence of these nouveau non-profits in APSCU is ironic given that the organization changed its name five years ago from the Career College Association to the Association of Private Sector Colleges and Universities in part to stress its private sector orientation (although these private sector entities have been receiving nearly 90 percent of their revenues from taxpayers).

Others hanging around APSCU include the still-for-profits Career Education Corporation, Globe University, and Bridgepoint Education — all of them also the subject of law enforcement probes — and American Institute, one of whose founders and board members, Arthur Benjamin, was previously the CEO of ATI, another for-profit college shut down by law enforcement amid evidence of systematic fraud. Wall Street private equity man Jeffrey Leeds, a major investor in for-profit colleges and a determined advocate against serious regulation, also remains on the APSCU board.

Career Education Corp. did not respond to my inquiry as to whether the company was planning to leave APSCU.

Funded to boost its industry’s fortunes, APSCU may instead have contributed to dragging the industry down. Now APSCU itself may be a sinking ship.

This article also appears on Huffington Post.