Archives for category: For-Profit

“Social Impact Bonds,” which are a bonanza for financial investors like Goldman Sachs, is included in the new ESSA that passed the House yesterday. All efforts to strip it out must concentrate on your senators.


The matter appears in Title I, Part D, Section 4108, page 485.


Title IV, A.


And in a section called “Safe and Healthy Students.”


Social Impact Bonds are defined on page 797 as “Pay for Success.” Investors are paid off when a student is not referred to special education.


This business of profiteering in public education can only be stopped by electing people to office who will fight it.

From Beverley Holden Johns:

NOW IN S. 1177, the new No Child Left Behind law (ESEA):

You may be able to leave a message at any time, but to talk to
a live person just stay on the phone ignoring any prompts.

PLEASE SAY: S. 1177 will harm
special education. In Utah, Pay for Success (which is authorized
in the bill), funded by Goldman Sachs, resulted in over 99 percent
of children NOT being identified for special education.
(New York Times article of November 3, 2015: “Success Metrics
Questioned in School Program Funded by Goldman”).


Call your U.S. Representative at their Washington, D.C. office.

Call House Speaker Paul Ryan at 202-225-0600

Call Democratic Leader Nancy Pelosi at 202-225-0100

Call House Majority Leader Kevin McCarthy at 202-225-4000

(each of above telephone numbers are for their leadership
office within the U.S. Capitol Building)

Call the top Democrat for S. 1177, Rep. Bobby Scott at 202-225-8351
(his office opens at 7:30 AM CST)


The House amendment, but not the Senate bill, includes a definition for
‘‘Pay For Success Initiatives’’.
Amendment to strike the definition and insert the following:

—The term ‘‘pay for success initiative’’ means a performance-based grant, contract, or cooperative agreement awarded by a public entity in which a commitment is made to pay for improved outcomes that result in social benefit and direct cost savings or cost avoidance to the public sector.
Such an initiative must include—

(1) a feasibility study on the initiative describing how the proposed intervention is based on evidence of effectiveness;

(2) a rigorous, third party evaluation that uses experimental or quasi-experimental design or other research methodologies that allow for the strongest possible causal inferences to determine whether the initiative has met its proposed outcomes;

(3) an annual, publicly available report on the progress of the initiative; and

(4) except as provided as under paragraph (2), a requirement that payments are made to the recipient of a grant contactor or cooperative agreement only when agreed upon outcomes are achieved.

Unfortunately NOTHING in this definition would have stopped
what is happening in Utah and in Chicago.

As we just passed its 40th birthday, special education
faces perhaps its greatest threat since the Education
of the Handicapped Act (EHA), now the Individuals with
Disabilities Education Act (IDEA), was signed into law.

The new No Child Left Behind bill, S. 1177, as reported
by the Conference Committee between the U.S. Senate
and the U.S. House includes the permissive use of Federal
funds by States AND by local school districts FOR
Pay for Success.

Funded by Goldman Sachs, Pay for Success in Utah
denied special education to over 99 percent of the
students that were in the early childhood Pay for Success

Goldman Sachs has received a first payment of over
$250,000 based on over 99 percent of students NOT
being identified for special education.

Based on these results, Goldman Sachs may receive
an over 100 percent return on its investment as it
will receive yearly payments based on students
continuing to NOT be identified for special education
(multiple yearly payments for one student).

If special education is reduced to less than 1 percent
of students, for all practical purposes it will cease to

Goldman Sachs has also funded a Pay for Success
program for the Chicago Public Schools based on
paying Goldman $9,100 for each student, each year, NOT
identified for special education, but results for Chicago
from that program are not yet available.

Success is not the elimination of special education.
Success is not failing to identify students as needing
the specialized and individualized instruction required
by IDEA.

We simply cannot expect the general education teacher
to do it all, to know it all, and to achieve academic
excellence for each and every student.

Pretending we can eliminate disability, pretending
that almost every student with a disability and their
parents will benefit WITHOUT the legal rights of IDEA
which are only granted when a student is identified
for special education, is to turn us back over 40 years
to the time before we had State laws and then the
Federal law requiring special education for each and
every student with a disability.

Beverley Holden Johns is a nationally recognized expert on special education. She is alarmed that the new “Every Student Succeeds Act” permits states to engage in “pay for success” plans, where investors earn money by not referring students for the services they need. Get on the phone to your Senators and Congressmen at once to stop this money-making scheme.


Johns writes:



As we just passed its 40th birthday, special education faces perhaps its greatest threat since the Education of the Handicapped Act (EHA), now the Individuals with Disabilities Education Act (IDEA), was signed into law.


The new No Child Left Behind bill, S. 1177, as reported by the Conference Committee between the U.S. Senate and the U.S. House includes the permissive use of Federal funds by States and by local school districts of Pay for Success.


Title I, Part D
‘‘(A) may include—
‘‘(i) the acquisition of equipment;
‘‘(ii) pay-for-success initiatives;”


Funded by Goldman Sachs, Pay for Success in Utah
denied special education to over 99 percent of the
students that were in the early childhood Pay for Success program.


Goldman Sachs has received a first payment of over
$250,000 based on over 99 percent of students NOT being identified for special education.


Based on these results, Goldman Sachs may receive
an over 100 percent return on its investment as it
will receive yearly payments based on students
continuing to NOT be identified for special education (multiple yearly payments for one student).


“If special education is reduced to less than 1 percent of students, for all practical purposes it will cease to exist,” says Bev Johns, Chair of the Illinois Special Education Coalition.


Goldman Sachs has also funded a Pay for Success
program for the Chicago Public Schools based on
paying Goldman on the number of students NOT
identified for special education, but results for Chicago from that program are not yet available.


“Success is not the elimination of special education.
Success is not failing to identify students as needing
the specialized and individualized instruction required by IDEA,” states Johns.


“We simply cannot expect the general education teacher to do it all, to know it all, and to achieve academic excellence for each and every student,” says Johns.


“Pretending we can eliminate disability, pretending
that almost every student with a disability and their
parents will benefit WITHOUT the legal rights of IDEA which are only granted when a student is identified for special education, is to turn us back over 40 years to the time before we had State laws and then the Federal law requiring special education for each and every student with a disability,” states Johns.


It is possible that Pay for Success is also in other
parts of the 1,059 page S. 1177.


The section quoted above is in SEC. 1020 of S. 1177,
which amends Part D of Title I of the Elementary and Secondary Education Act (ESEA), Section 1415.


For more information: 217-473-1790

When I worked in the U.S. Department of Education in the early 1990s, there was a strict code of ethics. The Inspector General’s office scrutinized every employee and transaction for any hint of personal or commercial gain. But now the Department itself is hawking products.

Reader Chiara sent this comment:

“Here’s the US Department of Education selling a product called “Edgenuity”. This reads like an actual advertisement. I wonder if the company helped draft the ad:

“Village Green uses an online curriculum, called “Edgenuity,“ which allows students to move through assignments at their own pace. Every student has a workstation where they log into their own personal Edgenuity portal and choose what to work on. Students take frequent tests and quizzes, and complete practice assignments. A data dashboard displays skills they’ve already mastered in green, those they are on track to master in blue and those they are struggling with in red.

“The main things the teachers are freed from at Village Green are quiz and test construction, grading, and designing core lessons. “However, they still have to plan the workshop and plan to re-teach Edgenuity in case a lesson is not grasped,” explained Pilkington.”

“Is it ethical (or even legal) for Obama’s ed dept to be selling tech product to public schools? Aren’t there rules or regs about this sort of thing? Where is the line between the public sector and the private sector?”

Because the government of the Phillipines has not invested in public education, multinational corporations are moving in to supply private education for the poor. Pearson and another corporation called the Ayala Group have moved in to fill the vacuum.


Curtis Riep, a doctoral student at the University of Alberta in Canada writes:


Corporate-led privatisations in Philippine education are taking shape in the form of a for-profit chain of low-cost private schools – known as APEC (Affordable Private Education Centers). APEC is a new corporate entity established through a joint venture between two major multinational corporations: Pearson Plc and the Ayala Group. APEC, and its corporate shareholders, intend to capitalise on an overburdened and under-resourced system by selling for-profit education services at nominally low-fees -more than $500 per year- on a massive scale. The vast number of ‘economically disadvantaged’ Filipino youth underserved by public and other private schools represents the target market for APEC.
Low-cost, low quality
Profits accumulated by APEC are the difference in price paid by consumers in the form of user fees and the cost to produce those services, or the cost to educate each student. In an effort to minimise production costs, while increasing profit margins, APEC has implemented a number of cost-cutting techniques. These include a low-cost rent model that involves short-term leases in unused commercial buildings that lack adequate space for libraries, gymnasiums, science and/or computer laboratories.
Although this low-cost rent scheme is drastically cheaper than purchasing land and constructing proper school facilities, quality learning environments are sacrificed. Teachers hired by APEC are also typically unlicensed and, therefore, paid severely low wages. These cost-cutting techniques are intended to minimise operational costs so the corporation can remain financially sustainable and profitable. Therefore, in the business of low-cost private schooling, as one APEC school manger remarked: “sometimes quality is compromised because of the companies’ concern for making a profit.”
Further problematic is the Department of Education’s complicity in this for-profit arrangement, since it has relaxed a number of regulations that govern the provision of basic education so that APEC can implement its low-cost, for-profit schooling experiment with limited governmental restriction.
Students: cogs in the corporate machine
APEC also represents a corporate strategy designed to manufacture cheap and flexible labour required by Ayala and other multinational companies through its provision of privatised basic education that aligns with the labour needs of industry. By reverse-engineering its curriculum, APEC intends to produce graduates of a particular disposition with specific skills, values, and knowledge that can be employed in the global labour market.


In particular, APEC aims to address the skill shortage in the business process outsourcing and call center industry in the Philippines by focusing on English communication skills. In turn, APEC schools involve two forms of privatisation: de facto privatisation, in the form of user fees paid for by students in exchange for basic education, and privatisation that exists because of the increasing private control and influence in the social relations of production. This is demonstrated by the joint venture between Ayala and Pearson that aims to produce a repository of labour with the skills, knowledge and values in demand by industry.
Education corporations increasingly participate in various aspects of educational governance and provision, including the sale and provision of for-profit education services, which undermines the right to free quality education, (re)produces social inequalities, undercuts the working conditions of teachers, and erodes democratic decision-making and public accountability in education.

The new frontier for so-called reformers: monetizing public education. That is, making a profit from the classrooms, skimming off money that should go to children, to reducing class size, to the arts.


Reader Chiara describes the latest reformer plan:


“Laurene Powell Jobs, widow of Apple Inc co-founder Steve Jobs, is the lead investor who funded the buyout of News Corp’s money losing digital education business Amplify earlier this year.
A representative for Powell Jobs’ organization, the Emerson Collective, confirmed the investment in Amplify but would not specify how much of the company Powell Jobs would own or the amount paid for it.
The company’s top management, including its new Chief Executive Larry Berger, picked up a minority position in the Brooklyn-based company as part of the deal.
Rupert Murdoch’s News Corp said Sept. 30 that it had sold Amplify to a management team backed by a group of private investors for an undisclosed sum. The identity of the investors was not revealed at the time.”


So is this something that should be revealed when Jobs new ed org travels the country promoting “transformed” high schools? Is there already a model in mind for US high schools, one that involves extensive use of technology and online learning?


This is really cozy, these private sector/public sector relationships:


“Ms. Powell Jobs has assembled a team of advisers led by Russlynn H. Ali, who worked in the Obama administration’s Education Department as the assistant secretary for civil rights. Ms. Ali, who for the last several years has overseen education grants at Emerson, will serve as the primary public face of the campaign. Michelle Cahill, who has spent more than three decades in education, including as a senior adviser to Joel I. Klein when he was the New York City schools chancellor, has culled much of the research used on the website. ”


How much lobbying of former colleagues goes on between the private sector ed reformers and the public sector ed reformers based on this revolving door? Does this influence have anything to do with the fact that we’re seeing a huge marketing push for online learning among ed reformers in punditry and the government?

This is a must-read article by Linsey McGoey in Jacobin magazine about the big foundations–especially Gates–and how they use their alms for for-profit companies and start-ups.


McGoey of the University of Essex has written a book on the influence wielded by Gates and other big philanthropies. It’s title: “No Such Thing as a Free Gift: The Gates Foundation and the Price of Philanthropy”  (Verso).


“In 2010, the Gates Foundation offered $1.5 million to ABC News and a little over $1.1 million to NBC in 2011 “to support the national education summit.” The following year, the Gates Foundation gave another million to NBC, this time for the more vague purpose of “inform[ing] and engag[ing] communities.” Other for-profit media companies receiving Gates Foundation money in 2012 included Univision — a Spanish language broadcaster whose parent company, Univision Communications pulled in revenues of $2.6 billion in 2014.


“Traditionally, philanthropic grants to for-profits were rare, but this is no longer the case. The Gates Foundation has offered dozens of grants to for-profit companies around the world, including beneficiaries poised to profit from the Common Core standards…


“Indeed, the Gates Foundation makes similar donations all the time. Scholastic, a company that, like Pearson, is a for-profit education publisher, has received over $6 million in grant money from the foundation. A November 2011 grant of $4,463,541 was designed to support “teachers’ implementation of the Common Core State Standards in Mathematics.”


“What’s not clear is why this counts as charity. Doesn’t Scholastic stand to gain from the expansion of textbook and testing materials accompanying the Common Core standards?”


She goes on to describe other for-profits that Gates has supported, such as


“Indeed, numerous for-profit education start-ups are indebted to the foundation. Another example, BetterLesson Inc., billed as the “Facebook for educators,” circulates free online lesson plans to teachers but charges schools a service fee. It has received over $3.5 million in grant money from the Gates Foundation. BetterLesson may well prove to be a useful tool for teachers.


“But it also charges a premium for that service — a cost borne by taxpayer-funded public education institutions. At a time of growing anger over dwindling educational resources in public schools, at a time when extreme poverty is on the rise in the United States — does yet another tech start-up deserve Gates’ charity?….


“Contrary to the conventional wealth-creation narrative, large multinationals are increasingly assuming less financial risk when it comes to investing their own capital — even as they reap excessive financial rewards by exploiting subsidies from the public sector and philanthropic foundations. Companies like Mastercard are just as bullish and self-satisfied about the charity they receive as the charity they give away.


“But challenging the new corporate charity claimants will not, alone, mitigate the unrivalled power of large philanthropic funders to frame the terms of debate in the fields of education, health and global poverty or shape the policies of institutions such as the WHO.


“Over a century ago, when Andrew Carnegie published his first “Wealth” essay suggesting that private philanthropy would solve the problem of rich and poor, he was met with fierce rebuke. “I can conceive of no greater mistake,” commented William Jewett Tucker, a theologian who went on to become president of Dartmouth College, “than that of trying to make charity do the work of justice.”


“Today’s philanthrocrats share Carnegie’s gospel of wealth. To take back the mantle of justice and equality, the Left must delegitimize private foundations and refute the centrality of charity in solving the world’s most pressing problems.”

Stephanie Saul reports in the New York Times that a major for-profit “college” is expected to pay $90 million in fines for illegal recruiting practices. The corporation is partly owned by Goldman Sachs. As the story reports, the chain has collected more than $11 billion in federal aid for students (who get a lousy education: my view). These for-profit colleges make huge profits and deliver a poor education, leaving students with big debts. I will vote for any candidates who promises to cut off federal aid to for-profit colleges and  universities. They always escape unscathed, because they hire the best lobbyists from both parties.


The nation’s second-largest for-profit college operator, Education Management Corporation, is expected to agree to pay nearly $90 million to settle a case accusing it of compensating employees based on how many students they enrolled, encouraging hyperaggressive boiler room tactics to increase revenue.



The civil settlement, the largest ever involving false claims made to the Department of Education, is expected to be announced in Washington on Monday. The case against the school was initially brought by whistle-blowers and joined by the Department of Justice and several states in August 2011.


Education Management could not be reached for comment.


The settlement would resolve accusations against the company under the consumer protection laws of 39 states and the District of Columbia. Two whistle-blowers, former Education Management employees whose complaints initiated the suit, are also set to receive some of the proceeds.



Students waited at an Everest campus in Industry, Calif., last week, hoping to get their transcripts and find out whether their loans could be forgiven.For-Profit Colleges Face a Loan Revolt by Thousands Claiming TrickeryMAY 3, 2015
New Federal Standard for Aid to For-Profit Colleges Draws CriticismOCT. 30, 2014
Education Management Corporation Accused of Widespread FraudAUG. 8, 2011


It was not known whether Education Management, which is based in Pittsburgh, would acknowledge wrongdoing. The company operates online and at brick-and-mortar locations in 32 states and Canada under the names the Art Institute, Argosy University, Brown Mackie College and South University.


The company was accused of violating a federal ban on per capita incentive compensation at institutions that participate in federal student financial aid programs. The ban was designed to prevent the enrollment of unqualified students.


About 90 percent of the tuition money the company collected at the four school systems — or $11 billion between July 2003 and June 2011 — came from federal aid, including subsidized loans and Pell grants to help low-income students obtain college educations, according to the accusations. The case said the revenue had been the result of the fraud.


Had the suit gone to trial, a verdict against the company could have reached into the billions. The government was believed to have accepted a lower settlement because of the financial difficulties of Education Management, part of which is owned by Goldman Sachs.


The case cast a pall over the for-profit college industry and was among the factors leading to declining enrollment at for-profit colleges. Since the lawsuit’s announcement, the company’s price per share has dropped to 8 cents from about $22.

Faculty members, staff, and students are unhappy with the selection of Margaret Spellings as the new president of the University of North Carolina. Her experience as Secretary of Education for President George W. Bush propelled her into this position.

In this article, two faculty  members–Altha Cravey,  associate professor of geography at the University of North Carolina at Chapel Hill, and Robert Siegel, associate professor of English at East Carolina University–challenge Spellings’ lucrative association in recent years with predatory for-profit institutions and a debt-collection agency. They believe that her background does not fit the needs of a world-class institution that seeks to provide high quality at relatively low costs for students.

They write:

UNC needs a president who will help the university system continue to give students the best education possible while avoiding unnecessary tuition hikes. Unfortunately, Spellings’ background of supporting for-profit colleges who prey on students – and then profiting off those same students when they default on their loans – suggests that she and the Board of Governors have very distinct priorities.

Spellings made over $330,000 working for the Apollo Group, the parent company of University of Phoenix, a for-profit online college that has been widely criticized for taking advantage of its students and delivering poor results. Although federal education funds account for nearly 90 percent of the company’s revenue, graduation rates were as low as 4 percent under Spellings’ tenure.


The Apollo Group’s corporate goals are to increase shareholders’ profits by lowering standards and raising admission and fees. The company has even come under fire for targeting veterans to obtain G.I. Bill funding. After a federal investigation into the Apollo Group’s practices, the for-profit company laid off 600 workers and closed 115 “campuses” – while its founder received a $5 million “retirement bonus.”

The investigation found that students who attend for-profit colleges end up defaulting on their student loans at nearly three times the rate of students who attended public and nonprofit schools. As a result, nearly half of all student loan defaults nationwide are from students who attended for-profit colleges.

That’s why it is particularly troubling that Spellings also served as board chair of the Ceannate Corporation, a student loan collection agency. Student loan debt now accounts for the highest percentage of consumer debt, and despite widespread calls to reform the student loan industry, Spellings and the Ceannate Corporation have simply profited off of it….

Spellings’ defense of for-profit colleges is perhaps just as disturbing as the predatory practices these institutions use to fleece students. “(For-profit colleges) invented higher education in a way that was more convenient for working adults, and many in traditional higher education have responded,” she told the Board of Governors. “The reason I did it was because I learned a lot about how we can serve our students and think of them as customers in providing a product in convenient ways for them.”

In another article, Glenda Elizabeth Gilmore, a professor of history at Yale University who holds UNC degrees, cites statements that Spellings has made recently and in the past that cast doubt on her willingness to welcome gay students and faculty on campus. Gilmore insists that Spellings must publicly accept UNC’s non-discrimination policy  or resign.

Spellings seems unwilling to do that. When asked at the news conference about her past comments regarding gay citizens, she responded, “I’m not going to comment on those lifestyles.” Then she explained her demand as secretary of education that PBS refund federal money spent on the animated program “Buster the Bunny” because it included four gay characters among many. Her opposition, she said, was “a matter of how we use taxpayer dollars.”

Part of her job as president of UNC will be to “use taxpayer dollars” to foster a welcoming environment and combat discrimination based on sexual orientation. Moreover, she actually has the responsibility to “comment on those lifestyles” by demonstratively welcoming them to UNC.



Peter Greene educated himself about “social impact bonds” and has graciously taken on the task of explaining what they are and how they work.


He writes:


Here’s the basic structure of a Social Impact Bond. Note: I am not an economist, banker, or investment counselor, nor do I play one on TV, so I may cut a few corners here.


My house is drafty. My windows leak and my heating bill is $10,000 a year.


My landlord goes to the bank. She says, “Banker, I would like a bond of $4,000 for new storm windows. I think they would reduce my annual heating bill by $3,000.”


And the investor issues a bond for the program costs, in return for which he gets a healthy cut of the $3K saved by installing the new windows. My landlord’s savings from the successful Stop Freezing My Butt Off Social Program become the bond holder’s profit– but only if our goals are met.


Typically a third party will come in to judge the result, making sure that I didn’t just turn the thermostat down or it wasn’t just a warm winter or my landlord didn’t actually save $6K and hide it from the bondholder. Also, it’s worth noting that bonds generally come with negotiated maturity dates, at which point the original loan amount is to be paid back. And remember kids– bond holders are different from investors. An investor owns part of the company, but a bondholder is just a fancy debtor, and as such has legal priority for being paid back.


In this example, the government is, more or less, my landlord. For a more thorough explanation, we can look here. Here’s the shortened version of their explanation:


In the classic… social impact bond, a government agency sets a specific, measurable social outcome they want to see achieved within a well-defined population over a period of time. …The government then contracts with an external organization—sometimes called an intermediary—that is in charge of achieving that outcome. … The intermediary hires and manages service providers who perform the interventions intended to achieve the desired outcome. Because the government does not pay until and unless the outcome is achieved, the intermediary raises money from outside investors. These investors will be repaid and receive a return on their investment for taking on the performance risk of the interventions if and only if the outcome is achieved.


Okay, Watch Carefully Now


From New York Times coverage of a SIB program that failed. “Social Impact Bonds offer a strikingly different way to pay for social programs. Governments, rather than tapping taxpayers, can turn to outside investors and philanthropists for funds, and reward them only for programs that work.” If the program fails, the taxpayers are off the hook. If it succeeds, the bond holders are paid off with what would have been taxpayer savings of taxpayer dollars.


But the finances get muddier because in the couple of years we’ve been trying this, we’ve learned a useful insight:


“The tool of ‘pay for success’ is much better suited to expanding an existing program,” Andrea Phillips, vice president of Goldman’s urban investment group, said in an interview on Wednesday. “That is something we’ve already learned through this.”


But issuing bonds for existing programs means we’ll have public and private money swimming in the same pool.


For the rest, and the links, open the article.


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