" ! COMMITTEE PRINT 112th Congress 

2d Session 

S. PRT. 

112–37 

FOR PROFIT HIGHER EDUCATION: 

The Failure to Safeguard the Federal 

Investment and Ensure Student Success 

PREPARED BY THE

COMMITTEE ON HEALTH, EDUCATION, 

LABOR, AND PENSIONS 

UNITED STATES SENATE 

Volume 1 of 4—Parts I–III 

JULY 30, 2012 

Available via the World Wide Web: http://www.gpo.gov/fdsys/ 

Printed for the use of the 

Committee on Health, Education, Labor, and Pensions 
FOR PROFIT HIGHER EDUCATION: 

THE FAILURE TO SAFEGUARD THE FEDERAL 

INVESTMENT AND ENSURE STUDENT SUCCESS 

VOLUME 1 OF 4—PARTS I–III 
U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

1 

74–931 

" ! COMMITTEE PRINT 112th Congress 

2d Session 

S. PRT. 

2012

112–37 

FOR PROFIT HIGHER EDUCATION: 

The Failure to Safeguard the Federal 

Investment and Ensure Student Success 

PREPARED BY THE

COMMITTEE ON HEALTH, EDUCATION, 

LABOR, AND PENSIONS 

UNITED STATES SENATE 

Volume 1 of 4—Parts I–III 

JULY 30, 2012 

Printed for the use of the 

Committee on Health, Education, Labor, and Pensions 
COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS 

TOM HARKIN, Iowa, Chairman 

BARBARA A. MIKULSKI, Maryland 

JEFF BINGAMAN, New Mexico 

PATTY MURRAY, Washington 

BERNARD SANDERS (I), Vermont 

ROBERT P. CASEY, JR., Pennsylvania 

KAY R. HAGAN, North Carolina 

JEFF MERKLEY, Oregon 

AL FRANKEN, Minnesota 

MICHAEL F. BENNET, Colorado 

SHELDON WHITEHOUSE, Rhode Island 

RICHARD BLUMENTHAL, Connecticut 

MICHAEL B. ENZI, Wyoming 

LAMAR ALEXANDER, Tennessee 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

RAND PAUL, Kentucky 

ORRIN G. HATCH, Utah 

JOHN MCCAIN, Arizona 

PAT ROBERTS, Kansas 

LISA MURKOWSKI, Alaska 

MARK KIRK, IIllinois 

PAMELA J. SMITH, Staff Director, Chief Counsel 

LAUREN MCFERRAN, Deputy Staff Director 

OFFICE OF OVERSIGHT AND INVESTIGATIONS 

(During the 112th Congress at Time of the Report) 

ELIZABETH M. STEIN, Chief Investigative Counsel 

ELIZABETH E. BAYLOR, Senior Investigator 

RYAN K. MCCORD, Investigative Counsel 

KIA HAMADANCHY, Counsel 

BRYAN F. BOROUGHS, Congressional Fellow, 

Georgetown Congressional Law Clerk Fellowship 

ANDREA M.K. JARCHO, Senior Law Clerk 

LUCY V. STEIN, Law Clerk 

NICHOLAS J. WUNDER, Law Clerk 

SHAUNA M. AGAN, Legal Intern 

KEAGAN D. BUCHANAN, Legal Intern 

DOUGLAS S. DORANDO, Legal Intern 

(II) 
UNITED STATES SENATE 

COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS 

FOR PROFIT HIGHER EDUCATION: 

The Failure to Safeguard the Federal 

Investment and Ensure Student Success 

MAJORITY COMMITTEE STAFF REPORT AND 

ACCOMPANYING MINORITY COMMITTEE STAFF 

VIEWS 

COMMITTEE ON HEALTH, EDUCATION, 

LABOR, AND PENSIONS 

UNITED STATES SENATE 

JULY 30, 2012 
SENATOR TOM HARKIN 

Chairman 

SENATOR MICHAEL B. ENZI 

Ranking Minority Member 

OFFICE OF OVERSIGHT AND INVESTIGATIONS 

Elizabeth M. Stein 

Chief Investigative Counsel 

Elizabeth E. Baylor 

Senior Investigator 

Ryan K. McCord 

Investigative Counsel 

Kia Hamadanchy 

Counsel 

Bryan F. Boroughs 

Congressional Fellow 

Georgetown Congressional Law Clerk Fellow 

Andrea M.K. Jarcho 

Senior Law Clerk 

Lucy V. Stein 

Law Clerk 

Nicholas J. Wunder 

Law Clerk 

Shauna M. Agan 

Legal Intern 

Keagan D. Buchanan 

Legal Intern 

Douglas S. Dorando 

Legal Intern 
Table of Contents—Part I 

Page 

Executive Summary ............................................................................................. 1 

Introduction .......................................................................................................... 15 

Institutions Examined ........................................................................................ 25 

Publicly Traded Companies ............................................................................. 25 

Private Equity Owned Companies .................................................................. 27 

Closely Held Corporations ............................................................................... 29 

The Federal Investment and the Changing Sector ..................................... 30 

Increasing Federal Investment ........................................................................ 30 

Increasing Reliance on Federal Dollars .......................................................... 30 

Pell Grant Funds .............................................................................................. 31 

Military Education Benefits ............................................................................ 33 

Growth and Change in the For-Profit Sector ................................................. 37 

Why Are Companies ‘‘That Own For-Profit Colleges Financially Successful’’? ............................................................................................................... 40 

High Cost of Attendance .................................................................................. 40 

Higher Tuition at For-Profit Colleges ...................................................... 40 

Tuition Decisions Made to Maximize Revenue ....................................... 42 

Executives’ Recognition That Higher Tuition Leads to More Withdrawals ................................................................................................... 49 

Concealing the Cost of Tuition ................................................................. 51 

Aggressive and Deceptive Recruiting .............................................................. 53 

Recruiters Operate in a Boiler-Room Sales Atmosphere ....................... 55 

Misleading and Deceptive Tactics ............................................................ 61 

Techniques to Close a Sale ....................................................................... 68 

Military Focused Recruiting ..................................................................... 78 

How Are Students Performing .......................................................................... 82 

Inadequate Public Data for Meaningful Oversight ........................................ 83 

Low Student Retention .................................................................................... 84 

Worst Performing Programs ............................................................................ 85 

Online Student Retention ................................................................................ 87 

Publicly Traded Company Student Retention ................................................ 88 

Heavy ‘‘Churn’’ .................................................................................................. 89 

The Costs of Withdrawal ................................................................................. 91 

Why Do Many Students Fail to Complete For-Profit Programs? ............. 92 

Spending Choices of For-Profit Education Companies .................................. 92 

Marketing, Recruiting, and Profit ............................................................ 92 

Executive Compensation ........................................................................... 95 

Instructional Spending ............................................................................. 98 

Student Success is Divorced From Company Success ............................ 100 

Academic Quality .............................................................................................. 101 

Part-time Faculty ...................................................................................... 108 

Student Services ............................................................................................... 109 

Career Placement Services .............................................................................. 112 

Incentives for Career Services Staff ........................................................ 115 

Programmatic Accreditation and Licensure ................................................... 117 

What Is Programmatic Accreditation ...................................................... 117 

Students Are Not Informed About Programmatic Accreditation .......... 118 

(III) 
Page

IV 

Table of Contents—Part I—Continued 

A Case Study of Sanford-Brown’s Disclosures for Popular Program 

Areas ....................................................................................................... 122 

A Comparison of Multiple Schools’ Disclosure for Two Smaller Degree 

Programs ................................................................................................ 125 

Lower Licensing Exam Pass Rates .......................................................... 127 

Conclusion .................................................................................................. 128 

What Are the Consequences for Students? .................................................... 128 

High Debt .......................................................................................................... 128 

What Default Means for Students and Society .............................................. 136 

Higher Unemployment ..................................................................................... 138 

Credentials in Lower Demand Careers .......................................................... 139 

Why is This Happening? ..................................................................................... 140 

Accreditation ..................................................................................................... 141 

Structural Defects in the Accrediting Process ........................................ 142 

Accreditors Are Not Equipped to Properly Regulate Large For-Profit 

Institutions ............................................................................................. 144 

Higher Learning Commission of the North Central Association of 

Colleges and Schools .............................................................................. 146 

Federal Law and Regulation ........................................................................... 153 

Evasion of Regulatory Requirements .............................................................. 159 

90/10 Strategies ......................................................................................... 159 

Student Loan Default Rate Management and Manipulation ................ 174 

Return of Title IV Funds .......................................................................... 185 

Job Placement Rate Manipulation ........................................................... 187 

The Consequences of Inaction .......................................................................... 194 

What Needs to Be Done? ..................................................................................... 196 

Enhanced Transparency .................................................................................. 197 

Stronger Oversight ........................................................................................... 199 

Meaningful Protections .................................................................................... 200 

Table of Contents—Part II 

Page 

Alta Colleges, Inc. (19,190 students, based in Denver, CO ............................... 206 

American Career Colleges, Inc. (4,761 students, based in Irvine, CA .......... 235 

American Public Education (77,000 students, based in Charlestown, WV) .. 249 

Anthem Education Group, Inc. (12,792 students, based in Phoenix, AZ) ..... 265 

Apollo Group, Inc. (470,800 students, based in Phoenix, AZ) .......................... 284 

Bridgepoint Education, Inc. (77,179 students, based in San Diego, CA) ...... 308 

Capella Education Company (38,634 students, based in Minneapolis, MN) 334 

Career Education Corporation (118,205 students, based in Schaumburg, 

IL) .......................................................................................................................... 351 

Chancellor University LLC (739 students, based in Seven Hills, OH) .......... 380 

Concorde Career Colleges, Inc. (7,952 students, based in Kansas City, 

MO) ........................................................................................................................ 391

Corinthian Colleges, Inc. (113,818 students, based in Santa Ana, CA) ......... 408 

DeVry, Inc. (130,375 students, based in Downers Grove, IL) ............................ 435 

ECPI Colleges, Inc. (13,119 students, based in Virginia Beach, VA) ............... 454 

Education America, Inc. (10,018 students, based in Heathrow, FL) .............. 469 

Education Management Corporation (158,300 students, based in Pittsburgh, PA) ............................................................................................................. 485 

Grand Canyon Education, Inc. (42,300 students, based in Phoenix, AZ) ..... 513 

Henley Putnam University (515 students, based in San Jose, CA) ............... 531 

Herzing, Inc. (8,253 students, based in Milwaukee, WI) ................................... 540 

ITT Educational Services, Inc. (88,004 students, based in Carmel, IN) ....... 558 

Kaplan Higher Education Corporation (112,141 students, based in New 

York City, NY) ...................................................................................................... 592 

The Keiser School, Inc. (18,956 students, based in Fort Lauderdale, FL) ..... 623 

Lincoln Education Services Company (33,175 students, based in West 

Orange, NJ) .......................................................................................................... 639 
Page

V 

Med-Com Career Training/Drake College (2,692 students, based in Elizabeth, NJ) ............................................................................................................... 658 

National American University Holdings, Inc. (8,255 students, based in 

Rapid City, SD) .................................................................................................... 671 

Rasmussen Colleges, Inc. (17,090 students, based in Minnetonka, MN) ....... 693 

Strayer Education, Inc. (60,711 students, based in Arlington, VA) ................ 713 

TUI Learning LLC (7,307 students, based in Cypress, CA) .............................. 728 

Universal Technical Institute, Inc. (21,000 students, based in Scottsdale, 

AZ) ......................................................................................................................... 738 

Vatterott Education Holdings, Inc. (11,163 students, based in St. Louis, 

MO) ........................................................................................................................ 756

Walden, LLC (47,456 students, based in Minneapolis, MN) .............................. 777 

Table of Contents—Part III 

Page 

Minority Committee Staff Views ...................................................................... 793 

Table of Appendixes 

Page 

Appendix 01: Definitions ....................................................................................... 799 

Appendix 02: The Committee Investigation ........................................................ 804 

Appendix 03: Methodology .................................................................................... 816 

Appendix 04: The Committee Document Request and Compliance .................. 828 

Appendix 05: The Undercover General Accountability Office Recruiting Investigation, Report and Corrections ................................................................... 851 

Appendix 06: Responses of Companies to Documents Being Made Public ....... 854 

Appendix 07: Fall Enrollment, 2001–2010 .......................................................... 1024 

Appendix 08: OPEID Numbers Controlled by Each of 30 Companies Examined, Fiscal Year 2010 ......................................................................................... 1027 

Appendix 09: Funds Reported Pursuant to 90/10 Rule by Company, Fiscal 

Years 2006–10 ...................................................................................................... 1033 

Appendix 10: Estimated Federal Revenues, Fiscal Year 2010 .......................... 1038 

Appendix 11: Post 9-11 GI Bill Disbursements to 30 Companies Examined 

and Cumulative Data .......................................................................................... 1039 

Appendix 12: Tuition Assistance and MyCAA Disbursements to 30 Companies and Cumulative Data Fiscal Years 2009 and 2010 ................................... 1041 

Appendix 13: Pell Grant Disbursements, Award Year 2007–10 ........................ 1043 

Appendix 14: Tuition and Fee Comparison ......................................................... 1044 

Appendix 15: Retention and Withdrawal ............................................................ 1055 

Appendix 16: Trial 3-Cohort Default Rates by Company, Fiscal Years 2005– 

8 ............................................................................................................................. 1062 

Appendix 17: Executive Compensation ................................................................ 1066 

Appendix 18: Revenue, Expenses, and Profit (Operating Income), Fiscal 

Years 2006–10 ...................................................................................................... 1071 

Appendix 19: Revenue, Profit, (Operating Income), Marketing, Fiscal Year 

2009 ....................................................................................................................... 1076 

Appendix 20: Per Student Spending on Profit, Fiscal Year 2009 ...................... 1077 

Appendix 21: Integrated Postsecondary Education Data System Per Student 

Spending on Instruction, Fiscal Year 2009 ........................................................ 1078 

Appendix 22: Per Student Spending on Marketing, Recruiting, and Admissions, Fiscal Year 2009 ........................................................................................ 1079 

Appendix 23: Per Student Spending on Instruction at Comparison Institutions in Other Sectors .......................................................................................... 1080 

Appendix 24: Employment Distribution by Company, Fiscal Years 2006– 

10 ........................................................................................................................... 1083 

Appendix 25: Documents Produced to the Committee ....................................... 1087 
VI 

In accordance with Rule XXV of the Standing Rules of the Senate, the 

U.S. Senate Committee on Health, Education, Labor, and Pensions (the 

committee) holds legislative jurisdiction over all proposed legislation, messages, petitions, memorials, and other matters relating to education and 

student loans and grants. Proprietary schools and institutions of higher 

education, henceforth referred to as for-profit colleges, fall under this jurisdiction both as academic institutions and as eligible recipients of Federal 

loans and grants provided through Title IV of the Higher Education Act. 

Senate rules also provide that the committee shall study and review, on 

a comprehensive basis, matters relating to education. In April 2010, under 

the leadership of Chairman Tom Harkin, the committee initiated an oversight into the proprietary sector of higher education. The majority staff 

offers this report to the committee with accompanying minority staff views. 
(1) 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
30 
31 
32 
33 
34 
35 
36 
37 
38 
39 
40 
41 
42 
43 
44 
45 
46 
47 
48 
49 
50 
51 
52 
53 
54 
55 
56 
57 
58 
59 
60 
61 
62 
63 
64 
65 
66 
67 
68 
69 
70 
71 
72 
73 
74 
75 
76 
77 
78 
79 
80 
81 
82 
83 
84 
85 
86 
87 
88 
89 
90 
91 
92 
93 
94 
95 
96 
97 
98 
99 
100 
101 
102 
103 
104 
105 
106 
107 
108 
109 
110 
111 
112 
113 
114 
115 
116 
117 
118 
119 
120 
121 
122 
123 
124 
125 
126 
127 
128 
129 
130 
131 
132 
133 
134 
135 
136 
137 
138 
139 
140 
141 
142 
143 
144 
145 
146 
147 
148 
149 
150 
151 
152 
153 
154 
155 
156 
157 
158 
159 
160 
161 
162 
163 
164 
165 
166 
167 
168 
169 
170 
171 
172 
173 
174 
175 
176 
177 
178 
179 
180 
181 
182 
183 
184 
185 
186 
187 
188 
189 
190 
191 
192 
193 
194 
195 
196 
197 
198 
199 
200 
201 
202 
203 
204 
205 
206 
207 
208 
209 
210 
211 
212 
213 
214 
215 
216 
217 
218 
219 
220 
221 
222 
223 
224 
225 
226 
227 
228 
229 
230 
231 
232 
233 
234 
235 
236 
237 
238 
239 
240 
241 
242 
243 
244 
245 
246 
247 
248 
249 
250 
251 
252 
253 
254 
255 
256 
257 
258 
259 
260 
261 
262 
263 
264 
265 
266 
267 
268 
269 
270 
271 
272 
273 
274 
275 
276 
277 
278 
279 
280 
281 
282 
283 
284 
285 
286 
287 
288 
289 
290 
291 
292 
293 
294 
295 
296 
297 
298 
299 
300 
301 
302 
303 
304 
305 
306 
307 
308 
309 
310 
311 
312 
313 
314 
315 
316 
317 
318 
319 
320 
321 
322 
323 
324 
325 
326 
327 
328 
329 
330 
331 
332 
333 
334 
335 
336 
337 
338 
339 
340 
341 
342 
343 
344 
345 
346 
347 
348 
349 
350 
351 
352 
353 
354 
355 
356 
357 
358 
359 
360 
361 
362 
363 
364 
365 
366 
367 
368 
369 
370 
371 
372 
373 
374 
375 
376 
377 
378 
379 
380 
381 
382 
383 
384 
385 
386 
387 
388 
389 
390 
391 
392 
393 
394 
395 
396 
397 
398 
399 
400 
401 
402 
403 
404 
405 
406 
407 
408 
409 
410 
411 
412 
413 
414 
415 
416 
417 
418 
419 
420 
421 
422 
423 
424 
425 
426 
427 
428 
429 
430 
431 
432 
433 
434 
435 
436 
437 
438 
439 
440 
441 
442 
443 
444 
445 
446 
447 
448 
449 
450 
451 
452 
453 
454 
455 
456 
457 
458 
459 
460 
461 
462 
463 
464 
465 
466 
467 
468 
469 
470 
471 
472 
473 
474 
475 
476 
477 
478 
479 
480 
481 
482 
483 
484 
485 
486 
487 
488 
489 
490 
491 
492 
493 
494 
495 
496 
497 
498 
499 
500 
501 
502 
503 
504 
505 
506 
507 
508 
509 
510 
511 
512 
513 
514 
515 
516 
517 
518 
519 
520 
521 
522 
523 
524 
525 
526 
527 
528 
529 
530 
531 
532 
533 
534 
535 
536 
537 
538 
539 
540 
541 
542 
543 
544 
545 
546 
547 
548 
549 
550 
551 
552 
553 
554 
555 
556 
557 
558 
559 
560 
561 
562 
563 
564 
565 
566 
567 
568 
569 
570 
571 
572 
573 
574 
575 
576 
577 
578 
579 
580 
581 
582 
583 
584 
585 
586 
587 
588 
589 
590 
591 
592 
593 
594 
595 
596 
597 
598 
599 
600 
601 
602 
603 
604 
605 
606 
607 
608 
609 
610 
611 
612 
613 
614 
615 
616 
617 
618 
619 
620 
621 
622 
623 
624 
625 
626 
627 
628 
629 
630 
631 
632 
633 
634 
635 
636 
637 
638 
639 
640 
641 
642 
643 
644 
645 
646 
647 
648 
649 
650 
651 
652 
653 
654 
655 
656 
657 
658 
659 
660 
661 
662 
663 
664 
665 
666 
667 
668 
669 
670 
671 
672 
673 
674 
675 
676 
677 
678 
679 
680 
681 
682 
683 
684 
685 
686 
687 
688 
689 
690 
691 
692 
693 
694 
695 
696 
697 
698 
699 
700 
701 
702 
703 
704 
705 
706 
707 
708 
709 
710 
711 
712 
713 
714 
715 
716 
717 
718 
719 
720 
721 
722 
723 
724 
725 
726 
727 
728 
729 
730 
731 
732 
733 
734 
735 
736 
737 
738 
739 
740 
741 
742 
743 
744 
745 
746 
747 
748 
749 
750 
751 
752 
753 
754 
755 
756 
757 
758 
759 
760 
761 
762 
763 
764 
765 
766 
767 
768 
769 
770 
771 
772 
773 
774 
775 
776 
777 
778 
779 
780 
781 
782 
783 
784 
785 
786 
787 
788 
789 
790 
791 
792 
793 
794 
795 
796 
797 
798 
799 
800 
801 
802 
803 
804 
805 
806 
807 
808 
809 
810 
811 
812 
813 
814 
815 
816 
817 
818 
819 
820 
821 
822 
823 
824 
825 
826 
827 
828 
829 
830 
831 
832 
833 
834 
835 
836 
837 
838 
839 
840 
841 
842 
843 
844 
845 
846 
847 
848 
849 
850 
851 
852 
853 
854 
855 
856 
857 
858 
859 
860 
861 
862 
863 
864 
865 
866 
867 
868 
869 
870 
871 
872 
873 
874 
875 
876 
877 
878 
879 
880 
881 
882 
883 
884 
885 
886 
887 
888 
889 
890 
891 
892 
893 
894 
895 
896 
897 
898 
899 
900 
901 
902 
903 
904 
905 
906 
907 
908 
909 
910 
911 
912 
913 
914 
915 
916 
917 
918 
919 
920 
921 
922 
923 
924 
925 
926 
927 
928 
929 
930 
931 
932 
933 
934 
935 
936 
937 
938 
939 
940 
941 
942 
943 
944 
945 
946 
947 
948 
949 
950 
951 
952 
953 
954 
955 
956 
957 
958 
959 
960 
961 
962 
963 
964 
965 
966 
967 
968 
969 
970 
971 
972 
973 
974 
975 
976 
977 
978 
979 
980 
981 
982 
983 
984 
985 
986 
987 
988 
989 
990 
991 
992 
993 
994 
995 
996 
997 
998 
999 
1000 
1001 
1002 
1003 
1004 
1005 
1006 
1007 
1008 
1009 
1010 
1011 
1012 
1013 
1014 
1015 
1016 
1017 
1018 
1019 
1020 
1021 
1022 
1023 
1024 
1025 
1026 
1027 
1028 
1029 
1030 
1031 
1032 
1033 
1034 
1035 
1036 
1037 
1038 
1039 
1040 
1041 
1042 
1043 
1044 
1045 
1046 
1047 
1048 
1049 
1050 
1051 
1052 
1053 
1054 
1055 
1056 
1057 
1058 
1059 
1060 
1061 
1062 
1063 
1064 
1065 
1066 
1067 
1068 
1069 
1070 
1071 
1072 
1073 
1074 
1075 
1076 
1077 
1078 
1079 
1080 
1081 
1082 
1083 
1084 
1085 
1086