With more than $30 billion a year in Department of Education, Pentagon, and VA money going to these for-profit colleges, and, more importantly, with the futures of U.S. students on the line, government authorities have every right to demand accountability, integrity, and good performance from the schools. The companies cannot have a presumptive, permanent entitlement to take our money and to enroll these students, many of them service members, returning veterans, single parents, students of color, immigrants, and others struggling to build better futures. The presumption, instead, should be that the government seal of approval, and money, should only go to schools that truly are earning it.
The Pentagon thus acted entirely appropriately in temporarily halting its Tuition Assistance payments for service members to enroll as new students at the University of Phoenix, and banning the school's recruiters from military bases, pending a review of evidence of deceptive recruiting and violations of regulations exposed by the respected Center for Investigative Reporting (CIR). (McCain, in his speech, sniffed that CIR is "an outfit that none have ever heard of.") The Pentagon's October 7 letter also cited the ongoing investigations of the school by the FTC and California attorney general Harris, and it called the University of Phoenix's alleged violations of the rules "disconcerting."
The CIR report found that the University of Phoenix paid the military for exclusive access to bases, held resume workshops for troops that actually served as efforts to recruit them to the school, and, without permission, included military insignias on "challenge coins" that recruiters gave to service members.
As noted, government funding to the University of Phoenix is not a minor matter. In fiscal 2012, the school's parent company, Apollo Education Group, received $3.7 billion in taxpayer-funded student aid: $3.4 billion from the Department of Education, $32 million from DoD, and $206 million from the Department of Veterans Affairs. This amounts to more than 80 percent of the company's revenue. Apollo has been the largest recipient of DoD student aid of any higher education institution in the U.S.
And while some students report they are satisfied with the education they received at the University of Phoenix, the overall record is weak. Department of Education data has shown that the University of Phoenix's graduation rate is less than 15 percent, and about 25 percent of its students default on their loans within three years of leaving school. The school spends about 27 percent of its revenue on marketing and recruiting. A 2012 Senate report found that the University of Phoenix spent $892 per student on instruction in 2009, compared to $2,225 per student on marketing, and $2,535 per student on profit.
Meanwhile, the price tag is high. Tuition for an associate's degree in business at the University of Phoenix Online is $24,500, while the same degree costs $4,087 at Phoenix College in the Maricopa Community College system in Arizona. A bachelor's in business at the University of Phoenix costs $74,575, while the University of Arizona charges $44,200 for the same degree.
A letter sent on Tuesday to Secretary of Defense Carter from a coalition of organizations (in which I participate), signed by more than thirty groups, including the Air Force Sergeants Association, the Association of the U.S. Navy, Blue Star Families, Iraq and Afghanistan Veterans of America, Paralyzed Veterans of America, Student Veterans of America, Veterans Education Success, Veterans for Common Sense, Veterans Student Loan Relief Fund, VetJobs, VetsFirst, and Vietnam Veterans of America, as well as the Leadership Conference on Civil and Human Rights, League of United Latin American Citizens, and many others, supported the Pentagon's investigation of the University of Phoenix and cited, as support, the complaints of hundreds service members and veterans "who experienced deceptive recruiting" by the University of Phoenix. The letter says that the experience of these men and women
over the past decade, and through 2015, demonstrate a pattern consistent with the allegations made by current law enforcement investigations. Service members' complaints regarding the University of Phoenix tend to fall into three categories: (1) service members who were signed up for loans without their knowledge or permission, after being promised they would incur no loans; (2) service members who were misled about the cost and tuition increases at University of Phoenix; and (3) service members who were misled about the accreditation and transferability of University of Phoenix credits.
Despite this dismal record, last week, McCain, along with Republican Senators Jeff Flake (AZ) and Lamar Alexander (TN), chair of the Senate education committee, wrote to Secretary of Defense Ashton Carter calling on him to "reconsider" the Department's action. Their letter -- bearing the signatures of the two powerful Senate committee chairmen -- demands that the Pentagon provide a trove of answers and documents justifying its action.
But given all the evidence that for-profit colleges are ripping off students and taxpayers, what, to borrow Senator McCain's words, is this really all about? Do Senator Durbin and other critics of predatory for-profit colleges actually have some sort of ideological bias against a certain kind of college? Why would we? Or is the hidden agenda on the other side?
With many big for-profit colleges getting 90 percent or more of their revenue from federal taxpayers, the industry has an enormous incentive to keep the money flowing. And given their apparent need to use deceptive marketing and recruiting to sell overpriced, poor-value programs, the predatory schools want that money to come without any real accountability requirements. So they have every incentive to use campaign contributions to buy friends in Washington, and that's exactly what they do.
McCain and his letter co-authors Flake and Alexander all have received significant campaign contributions from Apollo executives. Indeed, the company is the largest donor in the 2016 election cycle to both Flake and Alexander.
Apollo also pays an army of DC lobbyists to work its will on Capitol Hill.
And, of course, the University of Phoenix is a big employer in McCain's home state, with a loud presence symbolized by its ownership of the name of the stadium where the NFL Arizona Cardinals play football.
Meanwhile, the Wall Street Journal editorialists have long boosted the for-profit college sector, especially as big banks like Goldman Sachs and Wells Fargo, and wealthy private equity firms took major ownership stakes.
Why, really, would small-government conservatives like Senator McCain and the WSJ editorial page want to defend the record of Phoenix and other bad actors -- weak performance at high price, plus evidence of fraud and abuse, costing taxpayers billions each year, and ruining the career prospects and financial futures of our veterans and countless others?
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