John Wayne Asked to Fix Post-Secondary Education: An Article by Dr. Michael K. Clifford

Dr. Michael K. Clifford, Chairman of SignificantFederation, rambles on about current congressional hearings on education.

John Wayne would ride hard to round up the current "Wild West" congressional hearings on education. Only John Wayne could find the real villain in this saga to find solutions. Current discussions regarding areas like incentive compensation extend far beyond the "for-profit" or proprietary education sector into the homesteads of non-profit colleges and beyond. For example:

Presidents of non-profit colleges should be very concerned about college coaches and academic directors who receive incentive compensation for high graduation rates and high APR-NCAA’s metric that focuses on continued enrollment combined with athletic academic eligibility. The Department of Education’s NPRM (page 80) explicitly prohibits compensation based on completion rates. This practice, if allowed to continue despite prohibition, will have stampede effect across the non-profit traditional schools and affect every area of their success, not the least of which will be fundraising and corporate advertising sponsorships (i.e., beer).

Further, most non-profit traditional college and university presidents are rewarded for increased enrollments or proxies for increased enrollment. These are problematic and—like the for-profit proprietary stock bonus systems and accountant spin—provide compensation for both non-profit and for-profit leadership based on increased enrollments and surplus/profitability.

What about compensation packages in the traditional non-profit schools that include metrics for increasing ethnic or gender diversity? That too seems like “success in securing enrollments” as noted in the NPRM.

If many of these regulations are imposed upon the for-profit, post-secondary sector, the next stampede effect will be an extension of the federalization of post-secondary education, including applying these regulations to all Title IV schools.

It would not surprise me if in the coming months a think tank delved into the non-profit sector to level the playing field in these congressional hearings to truly compare apples-to-apples. The government’s measure of default rates are based on the percentage of students in default–not actual dollars.

One solution: is for the Department of Education to provide software to all Title IV schools, so reporting and trends can be accurate while verifiable in real time, versus inaccurate, unverifiable, years-old data. Software similar to what the Fortune 100 uses to monitor every business metric should be used by the Department of Education to level the playing field and create true transparency. I bet that the Gates Foundation would fund such an effort. True transparency would put sector lobbyists, short sellers, and “bad actors” out of business for good, whether non-profit or for-profit.

The lay of the land is this: (a) defaults are highest among drop outs; (b) drop outs typically occur early in a student’s academic career; and (c) the dollar amounts at stake are far lower. Opponents to for-profit education are making a tempest out of a teapot when it comes to actual dollars.

A leading analyst noted, “Drop-out rates and the term-over-term persistence rates at for-profit colleges have not worsened during the recession–they’ve only improved. This suggests that student commitment has increased (not atypical in a recession). This also suggests that increases in defaults might really be a function of U.S. employment rates–not the work being done by the schools.” Academics have always maintained that persistence can be improved by the institution’s ability to motivate a student and recruit the kind of student that is focused on graduation for career purposes.

Frankly, I have begun to re-think my original endorsement of Trace Urden of Signal Hill’s recommendation that all Title IV schools should be required to cover a large portion of the government’s liability for dropped students. While this exercise may be as painful as a hold-up for non-profit and for-profit schools alike, Trace maintains it as the only simple solution to the taxpayer exposure. Like any enterprise, to get paid, someone has to reach the finish line with the product or service. I understand the very talented Urden’s thought process and somewhat like this approach to a short-term solution.

An even greater problem? Forcing non-profit and for-profit schools to share in the default economics will only result in schools becoming more selective in students they admit. Reducing access to education for our U.S. population is a huge long-term mistake.

As the GAO reports suggested recently, demographics directly influence defaults, so we are effectively disincentivizing institutions to provide education to the underserved communities. At the risk of being called a racist, these demographics show that minorities default the highest and raise a number of questions. Should the government force schools to stop providing access to minorities who desperately need education to fulfill their dreams? Is the answer for for-profit institutions to compete for the traditional 17 to 24-year old student and turn away the working adult? Should FICO scores be used to determine who should have the right to go to a school?

According to the rantings and ravings of gunslinger Mr. Steve Eisman, subprime mortgage populations should rent rather than own, and by translation, low-income populations in education should be relegated to a permanent underclass, without opportunity for a better life! Default risk share tactics are a Band-aid solution to the plight of for-profit schools—perhaps until the next scandal emerges. Should for-profit schools be saved at the expense of populations that will no longer be served? Public institutions currently lack neither the resources nor the discipline to expand services efficiently. Should we now tell our low-income communities that we are now creating roadblocks for investments by the private sector? With less incentive to run institutions that serve low-income, high-risk students, fewer institutions will be open with denied access to the largest segment of the U.S. population that needs education.

Now let’s put the road apple on the table—the problem is rather simple–it’s one of academic quality. We really don’t know if it exists quantitatively.

There needs to be real reform, particularly in the cooperative process between the Department of Education and the accrediting commissions, with solutions marrying realities with what is needed:

· Technology will solve a lot of these problems.
· Yearly reviews are needed, rather than ten-year reviews.
· Real-time, better data collection will truly assess all metrics of quality.
· Measurement tools are needed to assess the quality of an institution rather than the quality of the student population that opts to attend a specific institution.
· Perhaps the DOE should manage each student’s EPortfoilio rather than the accrediting commissions.

The Spellings Commission had a lot of this correct. We need annual testing via the peer review system supported by real-time technology generating metrics at post-secondary institutions by specific vertical degree program. There needs to be complete transparency across non-profits and for-profits. We need to demonstrate quantitative improvements with respect to collaboration, critical thinking, and communication for the working adult and compare it to traditional schools in the areas of reading, writing, and mathematics, all integrated with the K-12 system via technology.

Frankly, it is frustrating that not once in the publically traded company conference call transcripts do we see much about tangibly improving the academic performance of the academic institutions. Measuring default rates are a lazy, poor substitute for a metric on academic quality. It’s like trying to hunt bad guys with an old gun. Pretty soon it’s going to backfire.

We need the Department of Education to focus on not tearing down the accrediting process, but rounding up a technology-focused task force of leading academics, technologists, and business people to work together for a congruent system across all Title IV institutions. The lynch mob on Capitol Hill is nothing more than special interest groups taking self-serving potshots.

One leading analyst noted, “My biggest gripe with the idea of default risk share is one of AFFORDABILITY. Remember, tuition prices are artificially set by government oversight through the bizarre and counterproductive 90/10 Rule in tandem with the requirement that students take the maximum dollars from Title IV funds. Why should the government penalize an open enrollment institution because the student views the money as theirs in a piggybank for their use without school oversight? It’s the government’s poor stewardship of public funds that causes the problems. The institution has no authority over student-borrowed funds because it belongs to the student—yet it has to bear the consequences of such a bad policy?”

While a very painful campfire conversation needs to occur about a focus on academic quality, academic administration, and technology to create accurate yearly real-time assessments and outcomes, sharing default risk does nothing to address the real concerns long term. During the congressional hearings, the problem with the woman at Sanford-Brown wasn’t that she was defaulting on the loans—it’s that she received access to government Title IV money, administered by the government not the school, for a non-accredited program. SHE WAS PLAYING WITH LOADED DICE. THIS IS ABSOLUTELY UNACCEPTABLE. The conversation about real changes in the accreditation process led by a non-antagonistic cooperative commission of servanthood rather than self-serving leaders representing all stakeholders appointed by the Department of Education is the real solution that I would pray the Harkin hearings produce.

What we need now is John Wayne to help us with his persona that spanned three decades making him the world’s most recognizable brand. John Wayne would step into this mess with two specific goals: (1) restore order; and (2) punish the bad guys!

Michael Clifford

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