A few days ago, I posted about the odd circumstance that friends of President Obama had bought one of the nation’s largest for-profit corporations that provide higher education, even though it is generally known that these “colleges” have abysmal graduation rates and are known for predatory practices.
Now, the Wall Street Journal is pointing out the irony that the Obama administration harassed these institutions, drove down their value, and former Obama staff and current friends are taking them over at a fire sale price. We know, based on the actions of the Department of Education under Arne Duncan, that the administration has no objection to for-profit charter operators. We know, from Arne Duncan’s selection of Joanne Weiss, CEO of NewSchools Venture Fund as his chief of staff, that he has a fondness for the corporate sector. We know, from Arne Duncan’s selection of Ted Mitchell, also a CEO of NewSchools Venture Fund, as Under Secretary of Education, that the Department favors entrepreneurs. NewSchools Venture Fund underwrites charter chains and education businesses. It is at the epicenter of the corporate ed reform biz.
So, I am not so sure I agree with the WSJ’s characterization of the Obama administration as hostile to for-profit ventures. I think the collapse of for-profit higher education value is due to its poor performance and its lack of value or values. The dropout rates are higher than those in nonprofit institutions, and some employers will not recognize degrees from these diploma mills.
In an editorial titled “Regulating Education for Profit,” the WSJ writes:
Check out last week’s proposed sale of Apollo Education, parent company of the University of Phoenix. When Mr. Obama was preparing to take office in January 2009, Apollo stock hit a multiyear high above $78 per share. Seven years later, after Washington’s regulatory onslaught that favored nonprofits over for-profits in doling out federal subsidies, the shares had recently fallen below $7.
The University of Phoenix was once educating close to half a million students but last month reported an enrollment below 180,000. And with Apollo recently trading below book value, it might be a real bargain—especially for an investor betting that the next Administration might go easier on for-profit colleges. Now comes news that Apollo will be sold to several private equity firms. And coincidence of all coincidences, after the sale closes the company will be run by a former top official in the Obama education department, the same outfit that led the attack on Apollo.
The Vistria Group is a Chicago private-equity firm. The company was founded around the time that Mr. Obama was beginning his second term and its founders include Marty Nesbitt, who began playing pick-up basketball with Mr. Obama years before he became President, and Tony Miller, who was the second highest-ranking official in the Department of Education from 2009 until 2013.
Once the sale closes, Mr. Miller will become chairman of Apollo’s board….
By the way, the Obama education department will have to approve Vistria’s purchase of Apollo, and we’re told the guidelines for approval are notably vague. What better way to win a regulatory blessing than have a former senior education official like Mr. Miller commune with his old regulatory comrades. Hey, Tony, great to see you; any job for me after, say, Jan. 20, 2017?….
To summarize, an Obama pal is the day-to-day boss of a department that succeeds in destroying 90% of the value of a politically targeted company. Then he leaves government, buys the company at a fire-sale price and announces that the problems that attracted so much negative government attention are ending—just in time for a new Administration that might not hate for-profit education as much as this one. Government mediation sure can be a lucrative business model.
Sad.
It upsets me how often young people get ripped off now. I went to community college 25 years ago and it was free (to me- obviously it cost money). I paid only for books as long as I kept a certain GPA. All the debt they take on so young now just seems like such a huge burden- they’re starting so far behind and then paying all that interest over decades.
I completely understand why they all seem to be flocking to Bernie Sanders. They really do get a raw deal compared to the people who went before them. Maybe they figured that out.
Diane will you run for president? It’s not too late!
I went to a community college in California about 30 years ago. It was $50 per semester plus books. Young people are getting ripped off right now.
I went to a state school when there really were state schools. I was able to work my way through with the help of mom and dad, and we were far from rich. No debt. Now days, only the wealthy can truly afford college – but isn’t that the idea?
Long Post.
I read this Wall Street Journal article depicting for-profit schools as if pure-of-heart and victims of the Obama administration “hatred.”
Not exactly.
The reports on corruption became so bad that USDE finally set up an office to deal with fraud. It is a convoluted solution that explains why more than one reporter has said the guidelines for approval Vistria’s purchase of Apollo are “cloudy,” or “notably vague.” The main hurdle for Apollo is getting cleared to receive federal funds from students, and USDE has a new obstacle.
On February 8, 2016 USDE announced: “Student Aid Enforcement Unit Formed to Protect Students, Borrowers, Taxpayers.”
“As part of the Obama Administration’s aggressive action to protect students and taxpayers, the U.S. Department of Education is creating a Student Aid Enforcement Unit to respond more quickly and efficiently to allegations of illegal actions by higher education institutions.”…”Acting Secretary of Education John B. King Jr. said: “…Let me be clear: schools looking to cheat students and taxpayers will be held accountable.”
This all-of-a-sudden attention to greed and predatory practices in for-profits is easily labeled as a response to bad publicity caused by the foot dragging of Obama and USDE on the issue of student loan debt
The new Student Aid Enforcement Unit will be led by Robert Kaye, most recently Chief Litigation Counsel and manager of enforcement in the FTC’s Bureau of Consumer Protection.
Kaye will report to Jim Runcie, the Chief Operating Officer of the Office of Federal Student Aid, under the oversight of the Under Secretary Ted Mitchell.
Kaye will also work closely with James Cole Jr., General Counsel, Delegated the Duties of Deputy Secretary, to establish policies and practices.
If you can make up an organizational chart showing where the power to make decisions rests, it seems to be with a Deputy Secretary or an Acting Secretary or an Under Secretary’s CEO– with Kaye somehow “leading” this new mini-bureaucracy of about 50 people with four sub-divisions. The Unit is scheduled to receive $13.6 million if Obama’s budget.
“The Enforcement Unit will consist of the following four divisions:
Investigations Group — to identify potential misconduct or high-risk activity among higher education institutions and protect federal funding.
Borrower Defense Group —to provide legal analysis, support and advice concerning claims of borrowers of Direct Loans. The unit will analyze claims to make determinations of injury, investigate institutions in connection with borrower defense claims and coordinate with federal and state agencies regarding those claims.
The Administrative Actions And Appeals Service Group (AAASG) –to impose administrative actions such as Emergency, Termination, Limitation, Suspension or Fine actions. This group will continue to resolves (sic) appeals by program participants from final audit and final program review determinations, initiate debarment and suspension actions, and issue school revocation and denials of re-certification.
Clery Group — to ensure institutions comply with the Jeanne Cleary Act, requiring colleges and universities participating in federal financial aid programs to disclose campus crime statistics and security information.
The new overarching unit will collaborate with, and incorporate evidence gathered in investigations by, partner state and federal agencies, in building cases against institutions of higher education. The unit will also collaborate with the Program Compliance Unit regarding evidence which may impact ongoing program compliance reviews.
Count the layers of “collaboration” if you can. The sleeper is that this new enforcement unit will, if it works, apply all institutions of higher education with students who are enrolled under federal grants.
There is more. http://www.ed.gov/news/press-releases/student-aid-enforcement-unit-formed-protect-students-borrowers-taxpayers
So how does this create some uncertainty for Apollo?
Here are some excerpts fromApollo’s Feb, 8, 2016 ”forward looking statements” filed with the SEC noting some “risks and uncertainties in the purchase.” Begin quote
“Actual plans implemented and actual results achieved may differ materially from those set forth in or implied by such statements due to various factors, including without limitation:
(i) the impact of increased competition from traditional public universities and proprietary educational institutions;
(ii) the impact of the initiatives to transform University of Phoenix into a more focused, higher retaining and less complex institution, including the near-term impact on enrollment;
(iii) the impact of Apollo Education Group’s ongoing restructuring and cost-reduction initiatives;
(iv) impacts from actions taken by our regulators that could affect University of Phoenix’s eligibility to participate in or the manner in which it participates in U.S. federal and state student financial aid programs;
(v) further delay in the University’s pending recertification by the U.S. Department of Education for participation in Title IV student financial aid programs, or any limitations or qualifications imposed in connection with any recertification;
vi) the impact of the U.S. Department of Defense (“DoD”) action to place University of Phoenix on probation in relation to participation in the DoD’s Tuition Assistance Program for active duty military students;
(vii) the impact of any reduction in financial aid available to students, including active and retired military personnel, due to the U.S. government deficit reduction proposals, debt ceiling limitations, budget sequestration or otherwise;
(viii) changes in regulation of the U.S. education industry and eligibility of proprietary schools to participate in U.S. federal student financial aid programs;
(ix) changes in University of Phoenix enrollment or student mix;
(x) the impact on student enrollments of the announcement of the merger and general economic conditions;
(xi) third parties may claim that Apollo Education Group’s products and services infringe their intellectual property rights;
(xii) fluctuations in non-U.S. currencies that could impact reported operating results of foreign subsidiaries;
(xiii) uncertainties associated with the proposed sale of Apollo Education Group, the expected timing of completion of the proposed merger, the satisfaction of the conditions to the consummation of the proposed merger, the receipt of the regulatory approvals required for the merger on the terms expected or on the anticipated schedule, the ability to complete the proposed merger and the impact of such proposed merger on Apollo Education Group’s businesses, employees, students and suppliers; end quote.
and more.
Apollo is clearly at the mercy of USDE insiders who can and likely will cut through the FOG. Without federal funds deployed for profit, Apollo cannot survive.
http://www.sec.gov/Archives/edgar/data/929887/000119312516453050/d133358dex991.htm
Opportunists! Obama helped drive down the value. I don’t believe he did it on purpose, but I do believe his staffers turned it to their advantage….probably with his blessing.
Obama does everything on purpose and is one of the most lethal enemies of public education. He and low class wife have both been helping to shut down Chicago Public Schools for two decades.
They should both be shipped off to a giant food processor factory where they can both be processed into dog meat . . . .
No surprise! He’s a Chicago BOY! But Renember, Hillary is no better.
Reblogged this on David R. Taylor-Thoughts on Education.
Please explain how investors make money. Do they cut costs and skim profits off the top? Where is the verification of this process? What other ways do they make a return on their investment?
Susybelle Gosslee Dallas, Texas 214-732-8610