Career College Association

1
Career College Association

• Trends, Policies and Issues
• Reauthorization 2003
• Nicholas J. Glakas
• National Council of Higher Education Loan
  Programs
• Sarasota, Florida
• January 9, 2003

2
The Global Education Markplace

• A few facts . . .

3
Education A Few Facts

• Education spending in the United States is 750
  billion and worldwide is over 2 trillion.
• Higher education is a 250 billion market in the
  United States.
• More money is spent in the United States on
  education than in any other industry with the
  exception of health care. Annual expenditures
  are more than Social Security and defense
  combined.
• Globally, 84 million students attend 20,000
  colleges and universities.
• 66 million adults and more than 50 of all
  employed persons participate in some form of
  continuing education.
• Less than 25 of U.S. adults have a B.A. or
  higher.

4
Education A Few More Facts

• Over half a million foreign students study in the
  United States and spend 13 billion.
• India, China and South Korea are the top places
  of origin for foreign students studying in the
  United States in 2001-02. Combined they sent
  almost 180,000 students to the United States.
• Global demand for higher education is forecast to
  reach 160 million students in 2025.
• In 1950, approximately 30 of all jobs in the
  United States required skilled labor today, 85
  of jobs require skilled labor.
• There are 9,485 postsecondary institutions in the
  U.S. Forty-seven percent (4,463) are career
  schools, institutes, colleges and universities.
• There are 6,431 Title IV participating
  institutions in the U.S.
• Thirty-seven percent are career schools,
  institutes, colleges and universities.

5
Size of Global Education and Training Market

• Global education and training market 2 trillion
• U.S. market 750 billion
• U.S. higher education market 250 billion
• Students 42 million (1990) 97 million (2010)
• U.S. online higher education market (2001) 4.5
  billion
• U.S. online higher education market (2005) 11
  billion
• U.S. corp. government training market 100
  billion
• Global corp. government learning market 300
  billion

Source ThinkEquity Partners, Eduventures.
6
Major Sectors in the U.S. Economy
Billions of GDP
Health 949 14.1
Education 740 9.5
Social Security 336 5.0
Defense 272 4.0
Total GDP 7,790 100
Education 2 trillion global market!
Source Credit Suisse First Boston
7
The Evolving Higher Education Marketplace

• The higher education market is huge
• Globally, 84 million students and 20,000 colleges
  and universities in the U.S., 16 million
  students and 9,500 colleges and universities
• Higher education is a 250 billion market in the
  U.S.
• And growing
• Domestic undergraduate enrollments will increase
  by 13 in the next decade to 21.2 million by 2010
• College less of a choice and more of a
  must-have
• With significant demand imbalance
• U.S. is only 1 of 10 countries providing a
  college education to 1/3 or more of their
  college-age populations

Source ThinkEquity Partners, National Science
Foundation
8
Education Counts
Educational Attainment Outcomes
Salary Gap between Male High School and College
Graduates
Source National Center for Education Statistics
9
The Need for Skilled Workers
of Jobs Requiring Skilled Workers
Source ThinkEquity Partners
10
The Need for Skilled Workers
Less than 25 of U.S. Adults 25 and Older have a
Bachelors Degree or Higher
75
25
Source ThinkEquity Partners
11
Higher Education Landscape

• 66 million adults and more than 50 of all
  employed persons participate in some form of
  continuing education
• 56 of the workforce, or 66 million people, is
  without an advanced degree
• Number of corporate universities skyrocketed
  from 400 in 1988 to over 2,000 today, including
  40 of Fortune 500 companies
• More than 60 of corporate universities have
  alliances with institutions of higher education,
  increasing to 85 by 2003

Source ThinkEquity Partners
12
Global Higher Education Landscape

• Over 500,000 foreign students, or 3.5 of total
  postsecondary enrollees, study in the U.S. and
  spend 13 billion
• America educates one-third of all foreign
  students
• For every foreign student studying in the U.S.,
  there are three to five students who would
  consume U.S. education online, if they had the
  access or the resources
• Potential of 1.6 million international distance
  learning candidates
• Global demand for higher education forecast to
  reach 160 million students in 2025
• Conservatively, 45 million users of online higher
  education

Source ThinkEquity Partners
13
Number of International Students at U.S. Colleges
Universities 1975-2002
Source Institute for International Education,
Open Doors 2002.
14
Number of International Students at U.S. Colleges
Universities From Top Ten Places of Origin,
2001-02
Source Institute for International Education,
Open Doors 2002.
15
Future Demographic Trends

• OVER THE NEXT 50 YEARS
• U.S. population will grow by 50
• 275 million in 2002
• 395 million in 2050
• Immigration will increase by 80 million
• Under 17 population 100 million or 1 in 4
• Elderly population will double 20 of total
  population
• Racial Mix
• White 50 of the U.S. population
• Hispanic 25
• Black 15
• Asian 10

16
The For-Profit Sector

• The Career College Association is a voluntary
  membership organization of private, postsecondary
  schools, institutes, colleges and universities
  that provide career-specific educational
  programs. CCAs 1,000 members educate and
  support more than a million students each year
  for employment in over 200 occupational fields.
• CCA member institutions cover the full gamut of
  postsecondary education from short-term
  certificate and diploma programs, to two- and
  four-year associate and baccalaureate degrees, to
  masters and doctoral programs.
• Most CCA member institutions participate in
  federal student financial assistance programs
  under Title IV of the Higher Education Act.
• In addition, over the past four years CCAs
  Foundation has provided more than 17,000
  scholarships to high school graduates attending
  CCA member schools, institutes, colleges and
  universities.

17
Size of the the U.S. Postsecondary For-Profit
Sector

• There are 9,485 postsecondary institutions in the
  U.S. Forty-seven percent (4,463) are career
  schools, institutes, colleges and universities.
• There are 6,431 Title IV participating
  institutions in the U.S. Thirty-seven percent
  (2,355) are career schools, institutes, colleges
  and universities.

Source National Center For Education Statistics,
Postsecondary Institutions in the United States
1993-94 and 1998-99.
18
Non-Profit and For-Profit
Distinctions in Higher Education

• Non-Profit
• Tax-exempt
• Donors
• Endowment
• Stakeholders
• Shared governance
• Prestige Motive
• Cultivation of knowledge
• Discipline-driven
• Quality of inputs
• Faculty power

• For-Profit
• Tax-paying
• Investors
• Private investment capital
• Stockholders
• Traditional management
• Profit motive
• Application of learning
• Market-driven
• Quality of outcomes
• Customer power

Source Richard Ruch, Higher Education, Inc., The
Rise of the For-Profit University. Baltimore
The John Hopkins University Press, 2001.
19
Postsecondary Education Companies
Company of Campuses Enrollment Total Programs
Apollo Group/U. of Phoenix 65 133,700 Bachelors Doctorate
Career Education Corp. 43 50,400 Diploma Masters
Corinthian Colleges, Inc. 63 35,000 Diploma Masters
DeVry, Inc. 26 56,000 Associates Masters
Education Management Corp. 40 39,000 Non-degree Doctorate
ITT Educational Services, Inc. 74 33,000 Associates - Bachelors
Kaplan Higher Education 44 20,000 Diploma Bachelors
Strayer Education, Inc. 20 16,500 Associates Masters
Whitman Education Group, Inc. 22 9,000 Diploma Doctorate
20
The Reauthorization of the Higher Education Act

• CCA Reauthorization Preparations

21
CCAs Reauthorization Preparations

• Identified our key issues for reauthorization
• Finalizing legislative handbook for CCA
  membership Capitol Hill
• Three key studies completed or ongoing
• Submitted key issues at the request of House
  Education Subcommittee
•  Prepared a CCA Board-approved strategic lobbying
  plan
• Being updated quarterly
• Discussed at all CCA speaking engagements
• Implemented by CCA members and staff
• Established a reauthorization budget
• Will cover costs of various studies
• Will include regional dinners and reauthorization
  workshops
• Additional amount retained in reserve  
• Formalized input from membership
• Presidents Advisory Council
• Small College Advisory Council
• Entire CCA membership review of issues

22
CCAs Reauthorization Preparations (continued)

• Implemented a grassroots lobbying effort.
• Legislative Action Network in operation
• Goal of 200 CCA members for Hill Day
• Total CCA member involvement during
  reauthorization
• Effective PAC Operations
• 100 CCA members
• CCAPAC contributed to 81 Congressional candidates
  in 2001-2002.
• Excellent relations with key participants in
  Reauthorization
• White House
• Senate and House Leadership
• Congressional Education Committees and staff
• Department of Education
• State Associations
• Key Business Associations
• Selective Higher Education Associations.

23
The Reauthorization of the Higher Education Act

• CCA Reauthorization Issues

24
CCA Reauthorization - Issues

• Transfer of Credit (study)
• Return of Federal Funds (study)
• 90-10 (study)
• Financial Responsibility
• Single Definition of Higher Ed Institution
• Federal Investment (Loan Limits)
• Provisional Certification
• Judicial Review

25
Reauthorization Issues (continued)

• 50 Telecommunications Rule
• Accountability
• Probably off the table
• 12-Hour Rule
• Incentive Compensation

26
Transfer of Credit

• Issue CCAs Foundation commissioned the
  Institute for Higher Education Policy to study
  the relationship between credit transfer of
  students who attend nationally accredited
  institutions to regionally accredited
  institutions. The study found a strong pattern of
  full acceptance of credit for virtually all
  institutions that are regionally accredited, but
  acceptance for only a small percentage of
  institutions accredited by national accrediting
  bodies.
• CCA Proposal Revise section 1094(a) to add a new
  required condition in the program participation
  agreement signed by institutions participating in
  the Title IV student aid programs as follows
  (25) The institution will not exclude transfers
  of credit earned by students completing courses
  of programs from other eligible institutions of
  higher education on the basis of the agency or
  association that accredits such institutions,
  provided that the agency or association is
  recognized by the Secretary pursuant to Subpart 2
  of Part H of this Act, and will base decisions on
  whether to accept such credits solely on whether
  the courses or programs are equivalent in content
  to those offered by the institution and the
  student has completed the course or program at
  the required level of proficiency.
• Revise section 1099b(a) to add a new required
  recognition criterion for accrediting agencies
• (9) such agency or association shall not adopt
  or apply standards, policies or practices that
  restrict transfers of credits between eligible
  institutions of higher education as defined by
  this Act that are accredited by an agency or
  association recognized by the Secretary under
  this Subpart.

27
Return of Title IV Funds

• Issue Return of Federal Funds has been one of
  the most controversial provisions of the 1998
  reauthorization. CCA has commissioned a major
  study to determine the extent of harm to students
  and institutions.
• CCA ProposalUse the results of the study and its
  simulation model to develop specific proposals.
  Anticipated completion the end of January.

28
90-10 Rule

• Issue As part of the 1998 HEA Amendments,
  Congress modified the 85-15 rule to allow no more
  than 90 of a proprietary institutions revenue
  to be derived from Title IV. Subsequently, the
  Department of Education changed the definitions
  of eligible revenue to make compliance more
  difficult.
• CCA Proposal CCA has contracted with the
  American Economics Group for a comprehensive
  study of the effect of the 90-10 rule on students
  and institutions. Upon completion of the 90-10
  study, CCA will determine the alternative
  proposals that have the greatest aggregate
  benefits for the largest number of institutions
  and students.

29
Financial Responsibility

• Issue The higher education community and the
  Department of Education have gained five years of
  experience in applying the financial
  responsibility regulations adopted in November
  1997. While the regulations have been an
  improvement over the requirements previously used
  to measure financial responsibility, there are
  still serious problems with the manner in which
  the Department judges the financial stability of
  institutions.
• CCA Proposal Only historic goodwill should be
  used in determining the ratios and calculating
  the composite score additional goodwill booked
  as a consequence of an acquisition would not be
  deducted. After an acquisition, this additional
  goodwill would be recognized on a gradual basis
  over a five-year period. This treatment of
  goodwill would be conditioned on the acquirer
  being creditworthy at the time of the acquisition
  as measured by the strength factors for its
  primary reserve and equity ratios.
• The language of the statute should clearly state
  that the Secretary will permit accounting
  treatments that are in accordance with GAAP.

30
Single Definition of a Higher Education
Institution

• Issue 1998 HEA Amendments moved toward enacting
  a single definition for the purpose of providing
  equal access to all Title IV programs. Separate
  definitions still remain in Section 101 of the
  Act.
• CCA Proposal Revise the Act to include
  proprietary institutions in Section 101 and
  delete Section 102.

31
Federal Investment in Postsecondary Education

• Issue The federal grant and loan programs have
  not kept pace with inflation. Grants now account
  for less than one fourth of federal financial
  aid.
• CCA Proposal Increase funding to the Pell Grant
  program thereby increasing the maximum award
  levels, and explore other innovative proposals
  such as the concept of front-loading federal
  grant aid to provide increased assistance to
  students during their first two years of
  postsecondary education.
• Increase the loan limits of the subsidized and
  unsubsidized federal student loans as much as
  feasible within the constraints of budget
  considerations, with special consideration given
  to students who are in year one and two where
  assistance is often needed the most.

32
Provisional Certification

• Issue Provisional certification is a status that
  carries both limitations and risks that fully
  certified institutions do not face. The
  Department of Education takes the position that
  the Secretary may terminate the provisional
  certification of institutions as a response to
  allegations of regulatory violations. In such
  cases, the institutions do not have the due
  process protections that would be provided in a
  Limitation, Suspension Termination action or an
  emergency action.
• CCA ProposalThe law should be changed to create
  an exemption from the requirement that an
  institution be placed on provisional
  certification upon a change of ownership that
  results in a change in control when a change
  transfers ownership to a person or entity that
  has an established track record of regulatory
  compliance, which could be judged by whether the
  acquiring institution is itself fully certified
  and is permitted to use the advance payment
  method.
• Additionally, the Departments ability to make ad
  hoc policy should be replaced with a clear set of
  rules.

33
Judicial Review

• Issue The Department of Education has used an
  obscure provision in the HEA to persuade some
  federal courts to deny educational institutions
  their day in court.
• CCA Proposal Amend Section 432(a)(2) of the HEA
  to allow court review.

34
50 Telecommunications Rule

• Issue During the 1992 HEA Amendments, Congress
  enacted the 50 telecommunications rule. The rule
  stipulates that institutions are not eligible to
  participate in Title IV programs if they offer
  more than 50 of their courses via
  telecommunications or correspondence or if 50 or
  more of their regularly enrolled students are
  enrolled in telecommunications or correspondence
  courses.
• CCA Proposal CCA supports modification of the
  50 rule to allow increased flexibility for
  students in meeting their educational goals.

35
Accountability

• Issue The Administration has indicated that,
  just as performance measures were the centerpiece
  of the recent K-12 reauthorization, it will seek
  to import into the postsecondary education arena
  some measure of institutional effectiveness. CCA
  formed a Task Force to formulate recommendations
  for reasonable, workable accountability measures
  in higher education.
• CCA Proposal Create an Institutional Report
  Card based on a general framework with three
  constituent parts
• Input measures to assess the resources and
  capacity to deliver educational services
• Output measures to provide information on
  graduations/completions and
• Outcomes measures to demonstrate value added to
  students.

36
Career College Association

• Nicholas J. Glakas
• NickG_at_career.org
• Phone [phone]
• www.career.org