Education

Higher-Ed Hustle: For-profit colleges cast shadow over presidential race

By Michael Vasquez and Patricia Mazzei

mrvasquez@MiamiHerald.com

Hillary Clinton’s presidential campaign spent the past week touting her new plan to make college affordable — in part by cracking down on “predatory” colleges, and forcing schools to “spend federal dollars on things that benefit students, like teaching and research, not marketing campaigns.”

What Clinton didn’t mention: Her husband, Bill, has been paid more than $16 million as “honorary chancellor” of Laureate Education, the world’s largest for-profit college company. The firm is being sued by several online graduate students for allegedly dishonest practices, and a 2012 U.S Senate report found that more than half of Laureate’s online Walden University revenue went to marketing and profit.

Republicans quickly went on the attack. “Clinton’s College Hypocrisy Tour Rolls On” read the subject line from a Republican National Committee e-mail to reporters. 

What the RNC didn’t mention: The GOP field of 2016 presidential hopefuls is filled with candidates who have close ties to for-profit colleges. Marco Rubio listed two for-profit executives (and the industry’s former top Florida lobbyist) as “contributors” to his 2006 book, 100 Innovative Ideas for Florida’s Future. Jeb Bush gave a keynote speech at the for-profit industry’s Washington trade association last year, for which he was paid $51,000. 

Republican front-runner Donald Trump is being sued by New York Attorney General Eric Schneiderman over his now-shuttered “Trump University” business school. Schneiderman has said Trump University used false promotional materials and “was a scam from top to bottom.”

Trump denies the allegations, and says the investigation by Schneiderman, a Democrat, is politically motivated. 

In Florida and across the country, students who say they were victimized by for-profits are usually poor or working class. Many are single moms, or military veterans. 

At a Tuesday stop at a New Hampshire community college, Clinton vowed: “I will crack down on these for-profit colleges that are engaging in fraud and abuse of our veterans and look for ways to hold them accountable for everybody else.”

Campaign spokesman Tyrone Gayle did not respond directly to a question from the Herald about the millions Laureate Education paid Bill Clinton, who worked there for five years, and stepped down in April.

“Hillary Clinton is committed to holding schools accountable for student outcomes rather than their bottom lines,” Gayle wrote in an email.

The U.S. Senate report on Laureate did praise the company for performing better than the industry norm, with student loan default rates “significantly lower than the average, not just for for-profit colleges but for all colleges.”

Gainful employment

Higher education has long been intertwined with the American dream, but with student debt now topping $1.3 trillion, there is growing public frustration about the cost of college. And the scandals surrounding some for-profit colleges have fanned the fire.

In Florida, nearly one in five students attend a for-profit college. But it is unclear if candidates’ stances on for-profits will become a factor in the 2016 campaign. In general, the complexity of higher education means candidates can stick to talking points — like complaining about rising tuition — without having to get into policy specifics.

Last month, President Obama’s tougher rules governing for-profit colleges, known as “gainful employment,” took effect. The new rules will cut off federal funding for schools where graduates consistently aren’t making enough money to pay back their student loans. 

Clinton’s campaign said she would “strengthen the gainful employment rule.” Rubio’s and Bush’s campaigns said they would oppose it.

In his speech to the Association of Private Sector Colleges & Universities last year, Bush blasted Obama’s regulations, calling them “a sledgehammer to the entire field of higher education.”

“Governor Bush is a supporter of quality higher education institutions across the board,” spokeswoman Kristy Campbell told the Herald. She added that his speech was an “opportunity to address the group on issues facing the higher education community and a range of public policy areas.”

Some consumer advocates say the U.S Department of Education, even with Obama’s new rules, isn’t doing enough to protect students. A recent Herald investigation, Higher-Ed Hustle, found Florida’s own oversight agency routinely ignores student complaints, and is controlled by the for-profit industry, whose representatives make up a majority of its board.

The Miami Herald spent a year investigating Florida's for-profit colleges - conducting scores of interviews and reviewing tens of thousands of pages of documents. Here's what it found.

Some accrediting agencies have also been criticized for lax enforcement. The U.S. Department of Education wields the power to police for-profit schools, and that agency’s future posture will be determined by who occupies the White House.

“It matters a lot who the president is,” said Matthew Boulay, a former U.S. Marine who fought in Iraq. “And anyone who’s taking these schools’ money should be suspect.”

Boulay is the executive director of the Veterans’ Student Loan Relief Fund. The program provides scholarships of up to $5,000 to veterans “who believe for-profit education companies have deceived them.” More than 30 such scholarships have been awarded. 

For-profits aggressively recruit veterans in part because GI Bill money falls under a federal loophole. Although for-profits are capped at getting 90 percent of their revenue from federal taxpayers, GI Bill money doesn’t count against this cap. Instead, the GI Bill money goes into the “other” 10 percent category.

That means for every veteran a school signs up, it can sign up nine more students using Pell grants and federal loans. 

Supporting the end of the so-called “90/10 loophole” would be a good way for candidates to show they value veterans, Boulay said. 

“It’s not easy to come home from war,” Boulay said. “It’s particularly difficult to come home from war and then be cheated.”

Clinton’s “New College Compact” proposal would close the 90/10 loophole. Bush’s campaign, when asked for his position, did not provide a response. Rubio’s campaign noted that he co-sponsored legislation in 2012 that would provide educational counseling to veterans, but that bill — which didn’t pass — did not address the 90/10 loophole.

Ties to Corinthian

For years, for-profit colleges have been accused of predatory tactics and taxpayer fraud. In May, scandal-plagued Corinthian Colleges, which operated Everest University and other brands, declared bankruptcy. Corinthian’s implosion marked the largest school collapse in U.S. higher education history and came amid widespread allegations that the school falsely inflated its job placement rates.

Last year, as Corinthian was beginning to unravel, Rubio wrote to the Department of Education asking the feds to “demonstrate leniency” with the company. The letter was first reported by Bloomberg

“Senator Rubio felt it was important to protect the thousands of students in Florida from being punished and having their educations disrupted while the investigation was underway,” his campaign told the Herald. “Ultimately it was found that Corinthian was misreporting information to attract prospective students, which is wrong and unacceptable for any institution of higher education.”

Rubio’s links with Corinthian go back many years. As an up-and-coming state lawmaker in 2006, Rubio wrote 100 Innovative Ideas for Florida’s Future

A longtime Corinthian executive vice president, Mark Pelesh, is listed as a “contributor” in the acknowledgment section of Rubio’s book. A year after the book was published, Pelesh wrote an op-ed in the Tallahassee Democrat praising Rubio's “Idea #12,” which would push traditional schools such as community colleges to accept transfer credits from for-profit schools. 

Rubio himself had been a transfer student in the early 1990s and dealt with the hassle of transferring credits. But Corinthian had been sued, multiple times, by students who said school recruiters made false promises that their credits would transfer to traditional schools. 

After Rubio’s 100 Ideas came out, Florida lawmakers asked for a study of whether colleges were creating “unnecessary barriers” to the transfer of credits. 

Pelesh stayed at Corinthian until 2013. In April, he wrote a $2,700 check to Rubio’s campaign. Between his Senate and presidential campaigns, Rubio and his affiliated political committees  have received at least $59,400 in for-profit industry contributions, including $12,600 linked to Corinthian.

Pelesh declined to comment for this story. The Herald asked Rubio’s campaign if Pelesh helped write Idea #12. 

The response: “Senator Rubio and his staff have discussed a wide variety of education reforms with a number of different experts and industry leaders in higher education.” 

In Congress last year, Rubio sponsored a bill that would have created a path to federal jobs for for-profit college graduateswho are typically shut out of those positions.

“Those who have the skills and aptitude to be successful in a job deserve the opportunity to be considered for employment, even if they learned the trade from a non-traditional source,” Rubio said at the time. The bill didn’t pass.

Another Rubio proposal, the Student Right to Know Before You Go Act, would require universities to tell incoming students what jobs and salaries they can expect with a given degree — a requirement for-profit schools might find difficult to fulfill. 

Rubio has pushed for other changes, including allowing schools to bypass the traditional accreditation process, that could benefit for-profits — though Rubio doesn’t frame it that way.

In a speech last month, Rubio blasted existing colleges and universities for wielding too much power.

“Within my first 100 days, I will bust this cartel by establishing a new accreditation process that welcomes low-cost, innovative providers,” Rubio said.

$27K for Bush

Like Rubio, Jeb Bush’s ties to the industry date back years.

Two weeks ago, Bush attended a Fort Lauderdale fundraiser chaired in part by Belinda and Arthur Keiser, who operate Keiser University. A “chair” must commit to raise at least $27,000 for Bush’s campaign.

Arthur Keiser is arguably the most politically influential for-profit college owner in Florida. Though the Keiser University schools have switched to non-profit status, Keiser still operates some for-profit campuses under the name Southeastern College. In 2001, then-Gov. Bush appointed Keiser’s operations chief, Peter Crocitto, to Florida’s for-profit college oversight agency.

And as governor, Bush took other actions that also benefited Keiser. He signed a 2003 law creating the state’s first financial-aid program for for-profit college students, something Keiser had lobbied for. In 2005, Bush appointed Belinda Keiser to the board of Workforce Florida, the agency overseeing regional training centers that provide grants for adults to go back to school.

“I’m proud to support Jeb Bush,” Arthur Keiser said in a statement to the Herald. “I have donated to both Republicans and Democrats who I believe will provide strong leadership for our country. I think that Jeb Bush would be a great president and provide the leadership America needs. Additionally, he is a statesman who understands the value of Higher Education.”

Aside from Keiser, Bush has ties to Randy Best. Best is a longtime Bush family fundraiser and chairman of Academic Partnerships, a for-profit firm that partners with public colleges to help them market online degrees. 

In 2013, Bush and Best co-authored an op-ed called “Higher Ed in 2018” for the Inside Higher Ed news website. The essay stressed the importance of online education, as well as serving the growing market of international students:. “We believe that public universities that have moved with urgency to embrace this new reality will thrive.”

A few months before Bush’s op-ed, his hometown public university — Miami’s Florida International University — was in an uproar over Academic Partnerships. Some faculty complained that the company, which began working on an FIU MBA program in 2009, had been picked without their input. And there were rumors the deal would be expanded. 

Initially, Academic Partnerships’ share of the corporate MBA tuition revenue was about 70 percent; FIU later renegotiated that to about 45 percent. To date, Academic Partnerships has been paid $19.7 million.

It was Jeb Bush who introduced Academic Partnerships to FIU’s former president, Mitch Maidique, according to former provost Douglas Wartzok.

FIU administrators in 2013 acknowledged they were considering a second contract with Academic Partnerships — an international program called “FIU Global.”

“It seems like political pressure is being put on FIU to do this thing,” associate professor of history Brian Peterson told FIU President Mark Rosenberg at a faculty meeting.

Rosenberg dismissed the idea of political interference, but e-mails first reported by the International Business Times show Bush repeatedly pressed Rosenberg to expand the contract.

“How can we expand the relationship to other degree programs?” Bush wrote Rosenberg on Oct. 4, 2011.

“Are there any other degree programs that you are considering pursuing?” Bush wrote Rosenberg about two months later.

A year later, Rosenberg wrote Bush that FIU was “moving ahead” with plans to add a second contract.

Bush responded: “Thanks president mark.” 

After the 2013 Herald story on FIU’s faculty backlash, the university abandoned its push for that second contract.

As Bush was gearing up his presidential run, Best, the company chairman, told the Washington Post the former governor was paid a $60,000-a-year fee, and also given ownership of a small amount of stock.

“Governor Bush was a senior adviser to Academic Partnerships,” his campaign told the Herald for this story. “He was not a lobbyist.” 

On March 11, Best contributed $100,000 to the political committee promoting Bush’s campaign, Right to Rise USA. 

A year earlier, Academic Partnerships paid Hillary Clinton $225,500 for a speaking appearance.

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