CAPPS News & Notes from CA & Around the Country, Posted: July, 2010
Sign of the Times: Boom to Bust
July 26th, 2010
It is a close call as to who does more negative reporting about Private Postsecondary Schools, the LA or NY Times. In the interests of homerism, we will call it slightly in favor of the LA Times. They win on the basis of longevity in publishing critical articles about our sector. Nationally, California has the reputation of being ground zero for organized opposition to our sector and the Times certainly played its part in building that reputation.
The latest Times article (click here) was published Sunday, July 26 which was mostly a repeat of the charges leveled against our sector in a hearing (polite word to use) conducted by Senator Harkin of Iowa. Mr. Harkin, who invited one School representative and multiple critics of our sector, including his main witness, who is Wall Street short seller (makes money off of stocks going down), to elaborate on the ills of our sector.
In going for the "shock and awe" in writing the article the Times reporter did not mention the following:
- Even Senator Harkin admitted that the overall sector was clean; all he is after is a few "bad apples"
- The reason that our sector is the fastest growing sector in Higher Education is that the overwhelming number of students today are "non-traditional" (do not go from HS to College full-time) and are choosing to attend Institutions that are time flexible, often on-line, allow specialty educational areas and complete more quickly than "traditional" Institutions of Higher Education and often have job placement attached to the specific training.
- If you add tax payer dollars in the form of State subsidies to individual student costs in public institutions and compare the dollar amount against Federal loans and grants that our student use to attend our Institutions, the difference are not large at all (and that is without factoring in the millions spent on Division I Football by say for example Iowa State)
- When you compare non-profit and for-profit "like" programs the default rates are close. What Mr. Harkin and the Times do not discuss is that the middle and upper income, mostly high academic performing students of say University of Iowa, do not look like, do not have the same income and family support or the same academic prep that students in our sector have. One analysis indicates that about 3% of UOI looks like the large majority of our students (poor, minority and female). Hard times bring hard decisions, if the choice is between rent and a student loan payment, the rent wins every time. Does that mean the education was non-quality? Apparently for some.
- Even the Department of Education has admitted that its Default data is "subject to revision" government speak that it may not be correct, which is where the Chronicle of Higher Education got its data that it in turn related to the Times.
- And lastly, the Inspector General who testified that "70%" of her cases involved for-profit Institutions, neglected to mention the actual number of cases she was looking at and how long ago those cases were? Now that's an interesting follow-up story for the Times.
Given the thousands of for-profit Institutions in the United States, there are always horror stories, but if you want to focus on unmanaged loan debts by students in our sector who comprise 10% of Higher Education in our Country, you also need to look at the other 90% of students, starting with those undergraduate and graduate students shelling out well over $100,000 for a six year degree. If we focus on the dollar volume, not the percentage, a more meaningful discussion re taxpayer "busts" would have some relevancy. What the Times article gives us is a true apples versus oranges comparison where the apples are being targeted for not being an orange.
EDFUND STILL FOR SALE
Lots of eyebrows went up when the Governor proposed a sale of EdFund to help the State deficit some years ago. Lots of eyebrows are still going up considering Edfund contributes tens of millions of dollars to the State General fund (77 million this year for Cal Grants) and a final sale may be imminent (probably after this years budget is resolved).
Having a fire-sale at the bottom of a market is never a good idea for anything from a car to a home or to a Guarantee Agency. Given where the loan Industry is at and the outstanding reputation and the continuing ability of EdFund to grow as a loan default prevention organization, we hope that someone looks at the long-term financial benefit of keeping EdFund and making more money over the long term than a one-time risky sale that reaps relatively smaller dollars.
BPPE APPROVALS TIME FRAMES LAG
To no one's surprise the approval times for Institutions submitting approvals is stretching out well past one hundred days. The worst case scenario that was imagined by the Legislature and the Governor was a very slow start to implementation of AB 48. Well, we have it. Given the short staffing at the BPPE, they probably should be given a medal for getting the work that they are doing out, but it still is hurting institutions that are caught in the hurry up and wait situations that occurred during the BPPVE days.
The early feedback is that a lot of the initial applications are not passing muster with the BPPE. The old days of putting together an inaccurate or incomplete application and trying to cure it during the BPPE review, appear to be long gone.
We can only hope that when the Legislature gets ready to keel-haul the BPPE for a slow start up, they acknowledge their part in the budget process.
NO ANNUAL REPORTS UNTIL 2011
BPPE is indicating that they want 2010 data for the first Annual Report to be submitted at the end of 2011. BUT, Institutions are going to have to be reporting 2009 data for their School Performance Fact Sheets, so keep working those graduates for information.
REGS, REGS, REGS
More regulations dealing with discipline and enforcement will shortly be released by the BPPE. These regulations, while not pleasant to read, will remove the ability of BPPE staff members to do what the Independent Monitor talked about in his BPPVE report, namely practice "legalized extortion," by holding Institutions approvals hostage until certain demands were satisfied. If an Institution is cited there will be opportunity for informal and/or formal resolution but it will take a totally different track and final negative actions will be posted on the BPPE website.
FLIGHT SCHOOLS & CPPEA: WILL IT FLY?
After living for a decade or longer under an MOU between the old BPPVE and the FAA which basically granted Flight Schools an exemption from the expired Reform Act, the new CPPEA does not have the same MOU provisions and the Flight Schools have mounted stiff opposition to being included in CPPEA.
They are seeking a legislative delay in determining which "schools" fall under the CPPEA and which do not. It's clear that many of the individuals who offer lessons at an hourly rate with no enrollment agreement are "hobby" or "avocational" educational services and exempt from CPPEA. It is clear that a number of flight schools offering Flight Instruction are covered under the CPPEA. And there are a bunch of Schools in the middle which is where the BPPE regulatory problems lie. As Lucy says, It will take a whole lot of "splaining" to sort this out and a year delay seems pretty reasonable.
What is not reasonable is to argue that because a Federal or State Agency other than the BPPE looks at your business you are entitled to an exemption automatically. Clearly most CAPPS members would be exempt as well if that were the case.
FEES, FEES, FEEEEEEEEEEEEEES!!
Here is the bad news, the BPPE Annual fee letter which will be mailed to members as their anniversary dates appear, will ask for .075 of all gross income for the last year as you fee, capped at $25,000. This fee will be assessed against each main (as defined under CPPEA, not your Accreditor or DOE). In doing the math, if your main grosses a little over 3.3 million, you will pay the max 25K fee, per main. Some members have five or more mains which will max out ($125,000) in Annual Fees.
CPPEA allows for an Institutional appeal based on the language that the fee must be proportional to the BPPE costs of oversight. 125K would pay for 1-2 full time BPPE staff to do nothing but oversight that specific Institution. An excellent argument can be made that the fee is not "proportional."
Old BPPVE annual fees were .054 but were capped at $8,000 per main.
CAPPS is on this.
Members are always invited to email CAPPS at info@cappsonline.org or call the office at (916) 447-550 to discuss the ramifications of any of the above.
We hope you enjoy this CAPPS ongoing sector service.