Businessweek: Fact vs. Fiction

Fact v. Fiction Re BusinessWeek “For-profit Colleges: Scooping up the Stimulus” (March 12, 2009)

BW - The University of Phoenix and others are cashing in… President Barack Obama’s stimulus package directs billions in new funding to higher education. Poised to cash in on the largesse are a group of large for-profit universities that specialize in scooping up student aid dollars… Career-oriented schools such as University of Phoenix… have been benefiting from lean times as adults scramble for credentials they hope will help them find work. The stimulus enacted last month will accelerate this trend by providing an additional $15 billion in Pell Grants for students over the next two years.

FACT - The stimulus legislation’s $500 Pell increase serves to replace existing Stafford dollars for low-income students. One form of funding replaces the other; there is no net gain.

BW - Officials at public universities and community colleges, many of which have cut enrollment because of tightening budgets, protest that Phoenix and similar for-profit institutions use questionable methods to lure students.

FACT - This is a myth perpetuated by those who are philosophically opposed to the concept of student recruitment. Our recruiters provide prospective students with detailed, informative information so they can make responsible enrollment decisions. The real testament to our marketing success is the number of enrollments generated by referrals from our almost one million satisfied students and alumni – and their employers. They are the most honest arbiters of our academic quality and they will always be the final arbiters of where they wish to spend their tuition dollars. In addition, students enroll in and pay for only one course at a time. If they are not satisfied with the University after trying a course, they can transfer to another college or university, still having earned the credits for which they worked.

BW -  In 2004 the Education Dept. blasted Phoenix for fostering a corporate culture in which “ethics often are set aside” in a race to increase enrollments and profits. The agency charged that Phoenix paid recruiters solely based on the number of students they signed up, a practice barred by the Higher Education Act. Without admitting wrongdoing, Phoenix resolved the case for $10 million, the largest settlement of its kind.

FACT - The allegations contained in this flawed and dated report have been largely discredited in recent years. University of Phoenix and the Department of Education settled the matter for amount immaterial to the University’s parent company. Following this settlement, the Arizona State Board for Private Postsecondary Education opened a complaint to investigate the matter because, if true, the report’s allegations could also violate Board statute and rules. After several months of diligence, University of Phoenix received a letter stating that the Arizona Board had voted unanimously to dismiss the complaint because their staff was unable to substantiate the report’s allegations.

BW - Graduation rates at some for-profit schools tend to lag overall levels, at least by the federal standard. The Education Dept. measures the percentage of first-time undergraduates who obtain a degree within six years. Phoenix has a rate of 4%, among the lowest, according to the government.

FACT - This 4% figure was generated by the federal government’s Integrated Postsecondary Education Data System (IPEDS) and it is grossly misleading in that it applies to only 5.81 percent of our online student population, meaning it excludes almost 94 percent of our total student population. The government system is flawed and antiquated in that it collects and reports completion rates only for those students who enter with zero college credits. Given the nontraditional students served by University of Phoenix – working adults, single parents and first generation college students – all but approximately 6 percent of our students enroll with existing college credits. When our entire student population is taken into account, University of Phoenix’s graduation rates are comparable to conventional four-year colleges and universities. And in a comparison of students who enter college with “risk factors” that often contribute to their dropping out, such as working full time or being a single parent, our rates of completion for a bachelor’s degree are substantially higher than for institutions overall. University of Phoenix’s graduation rates have been validated by numerous accrediting bodies and by state boards of higher education in the 39 states in which we operate.

BW - Students who attend for-profit schools tend to carry heavy debt loads.

FACT - University of Phoenix’s student debt levels are no heavier than what is reported nationally for both public and private, non-profit four-year colleges and universities, as compared to data reported by the Institute for College Access and Success’ October 2008 report, Student Debt and the Class of 2007. Additionally, our most recently reported student loan default rate of 7.2 percent is well below the national average for comparable schools.

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