Time for Change in For-Profit Education

July 24, 2010

The most overused political phrase – “it’s time for a change” – may be finally growing some teeth when it comes to private for-profit education. The Federal Department of Education has taken a hard line position with regards to reigning in private for-profit schools, such as ITT and the University of Phoenix, that have profited from lax Title IV Federal loan provisions.

Witness the proposed federal recommendations from the Office of Postsecondary Education, Department of Education issued June 18 2010 concerning Program Integrity Issues. Here are some of the salient points from the Federal Register Vol. 75, No. 117.

The proposed rules were “negotiated” by a committee that included public and non-public educational entities.  The proposed rules are detailed in the Federal Register. Committee members included representatives from public, private non-profit, private for-profit institutions; college presidents; admissions officers; financial aid officers; and regional accreditation bodies; career accrediting bodies; and other appropriate stakeholders.

The committee recommended rules that represent a full-on attack on questionable business practices by particular for-profit private educational programs. As has been pointed out in the press…

“Federal aid to for-profit colleges has become an issue because it jumped from $4.6 billion in 2000 to $26.5 billion in 2009, according to the Education Department, prompting concern that these students are taking on too much debt… The tougher rules would require ITT Educational Services, Career Education, and Apollo Group’s University of Phoenix to show that their graduates earn enough money to pay off their student loans.” (“For-profit colleges face tough new rules. Schools may face cuts in federal aid.” By John Hechinger and Daniel Golden, Bloomberg News May 5, 2010)

Here are a few of the proposed changes.

1. Graduate employment is a major condition for receiving Title IV loans such as Pell and Stafford. Schools will have to report on placement of graduates in occupations for their training supposedly prepares them. Remarkably, schools that specifically prepare students to enter an occupation – such as acupuncture – have never been required to report how successful their graduates are in finding work to support themselves in their chosen profession.

2. Listing the profession in the BLS Occupational Directory. The profession for which training is provided must be listed in the Bureau of Labor and Statistics.  What happens if the profession – such as acupuncture – is not listed? It is perplexing that the acupuncture leadership organizations have never bothered to collect and submit to the BLS the data required to become listed in the BLS Occupational Directory.

3. Transparency in student debt. The median loan amount for students graduating in each year must be posted at each school’s website. Obviously, the Department of Education is very concerned about “schools” that encourage student debt without advising students of the likelihood they will be able to pay back their loans once they begin working.

4. The end of State authorities that defer school accreditation to a national body. In terms of acupuncture, this means that a given State that has included the statement in statute or regulations that in order to be recognized as qualified to be licensed the student must graduate from an ACAOM accredited program…well, that will have to change.

5. Loan payback. Private for-profit schools must be able to show their graduates earn enough money to pay back their loans within 10 years and by limiting their payments to no more than 8% of their annual income.

The foregoing list is a sample of the proposed changes that are scheduled to take effect in June 2013.

Consider the implications for AOM schools.

No school or accreditation/certification body has ever published a comprehensive survey of acupuncture employment. The lone exception is the manuscript by Stumpf et.al., titled “Unveiling the United State Acupuncture Workforce” which has been accepted for publication in Complementary Health Practice Review for the fall 2010. In their review of available published data the authors conclude under- and unemployment is approximately 50% in the acupuncture field. Earnings average no better than $50,000 annually and are probably much less. If the proposed rules are adopted, schools will be required to conduct workforce surveys of their graduates or else they will no longer be eligible for federal funding. It will also be well-advised for state licensing authorities to conduct their own workforce surveys in order to have a baseline for school approval.

Transparency in student debt is a harbinger for private for-profit schools, in general, but now it could be the grim reaper for AOM schools. My co-authors and I found the following in our Workforce paper.

“…half the acupuncturists in the [NCAOM 2010] sample retained 82% of their debt, borrowing, on average, $55,948 to finance training while retaining $45,891 at the time they were surveyed (Ward-Cook et al., 2010).”

Half of the 712 licensees responding to the NCCAOM survey had only paid down $10,359 on average over their first five years “in practice” [five years was the average time in practice for NCCAOM respondents]. At five years these graduates, according to the new rules, should have paid down more than double that amount (see below)! The NCCAOM survey sampled LAc’s across the nation. The methodology was better than any other survey to date. The NCCAOM findings are valid! It does not take much imagination to guess what prospective students (or the states’ new accrediting bodies) will think when they see something like the following posted on each school’s website.

Half our graduates do not earn the minimum amount of annual income needed to pay back their loans within the ten year guideline.

If $45,000 is the average existing debt across the schools that responded to the NCCAOM survey [ed. survey respondents were actually individual licensees but, nevertheless, represented schools across the nation] then there are going to be about 18% with higher debt.

Of course, that assumes a normal distribution (bell curve). If the distribution is actually skewed – which we believe it probably is – then the proportion of schools with above average student debt could easily be as high as 30%. In other words, without this primary source of revenue – Title IV student loans – these schools will soon be out of business.

How much income is required to pay back $45,000 in 10 years when payments are limited to no more than 8% of income? A licensed acupuncturist would need annual earnings of $56,250 to meet these criteria. The NCCAOM reported in 2010 that 70% of LAcs earn less than $60,000. Forget for the moment NCCAOM’s attempt to make an ugly statistic look a little better. The median (mid point in the distribution) has to be lower than $60,000 and in all likelihood it may be quite a bit lower than $56,250. We believe the median LAc income may be closer to $35,000. In the best case half of all LAcs are unable to pay back their loans. In the worst case that figure may be 70%. The schools from which these LAcs graduated are at risk of losing the primary source of their revenue.

Change – wearing a hood and carrying a scythe – may have arrived for for-profit private acupuncture schools.

4 Responses to “Time for Change in For-Profit Education”

  1. Hi Steve –

    Thanks for all your work. I look forward to reading your published paper in the near future.

    Is there any chance that you know when the NCCAOM survey respondents graduated from their respective AOM schools? I have been unable to find this data anywhere. My graduating class (OCOM Sept 2009) has an average student loan debt of $88,000. Even the simple the lag time in survey administration, data analysis and publication of the results may be painting a better picture than what recent graduates (08 or 09) are dealing with as their loans enter repayment.

    Thanks again – Shauna

  2. Shauna – Training program information does not appear in the NCCAOM Job Task Analysis report. The closest you can come is Graph 8 on page 20 which describes the respondent distribution across states.

    http://www.nccaom.org/exams/pdfdocs/jta/NCCAOM2008JTA.pdf

    It does not appear that NCCAOM went through the schools to encourage respondents to complete the survey. NCCAOM appears to have used their certification database. Since I have not seen the actual questionnaire so I cannot tell you whether school of graduation data were collected. Of course, the new Title IV regs propose that schools provide a much higher standard of transparency on their individual websites. How do I would be interested to know how you know the average loan debt of your grad class? This piece of info will be one of the required web posts under the new regs.

  3. I think you overlook some aspects. My student loan has an interest rate of about 2.25 % and my residencial mortgage twice that, and my office mortgage three times that. Of course I am unmotivated to repay the student loan and stretched it as long as possible (25 years) in order to repay all other loans first.
    I do think state acceditation is a problem, and so is the fact that the schools tend to be involved in deceiving their students about the acceditation and value of the education. In reality, acupuncture schools, as a rule, are not fully accedited colleges, which means you cannot ever transfer any credit or progress to any postgraduate degree at a fully accrdited college with the credits your received at your acupuncture school.

  4. Angela – Thank you for the additional points. Your home loan rate is approaching your student loan rate! You suggest that students face choices about which loan to pay. Most, like yourself, choose to forego the much smaller loan with the low low rate because the fed will not chase them.

    Of course, the fed has now figured out this seemingly “poor” choice is a function of high unemployment in the profession(s) for which you were trained. The fed had also figured out the obvious “culprits” are the places doing the training for a career that is no more likely to come about than flipping a coin and the groups that accredit them.

    You are correct about the absence of transferability of AOM coursework. How can this be when the courses were taken at a “College” that was “accredited” by a Dept of Ed entity (that would be ACAOM)? Senator Harkin’s investigative committee has correctly surmised something is wrong with the schools and the accreditation process.

    In the case of the big for-profit private institutions, i.e., ITT and U of Phoenix, the issue is there are not enough site visitors and not enough site visits; matters that reside with the regional accreditation agencies (e.g., WASC, etc.) that accredit most colleges and universities from Stanford to Portland Community College.

    However, with the AOM “schools” the situation is different. AOM schools – excepting a couple – never seek regional accreditation because the requirements are too stringent and the schools know they would not pass muster. So the AOM profession has its own accreditation body that is approved by the DOE and that approves only AOM programs. Note the difference. Regional accreditation agencies approve SCHOOLS. Professional accreditation bodies approve PROGRAMS. This is why your AOM credits are not accepted at any regionally accredited college or university. Because even though the AOM school you graduated from may call itself a college or university, it is not.

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