For-profit colleges under increased scrutiny

By Laura Diamond

The Atlanta Journal-Constitution

Editor's note: This story was published in June 2010.

The nation’s for-profit colleges, which have a strong presence in Georgia, are undergoing increasing federal scrutiny over how they perform and operate.

A Senate education committee is scheduled to meet Thursday to discuss how these colleges spend federal dollars. Earlier this week, five congressmen asked the U.S. Government Accountability Office to examine the quality of academic programs and business practices at the for-profits.

Meanwhile, the U.S. Department of Education is drafting new rules calling for these colleges to be more open about how they operate and to change their aggressive recruiting tactics, which have included paying recruiters based on how many students they bring in. Other proposed changes could cut off some federal financial aid to these schools because their students have higher loan default rates.

The federal government has intensified its purview over these colleges because of the large amount of aid they receive. While these schools enroll less than 10 percent of all college students, they get more than 20 percent of federal financial aid, according to the federal education department.

For-profit universities, which cater to older and working students, represent a fast-growing segment of higher education. They tend to offer many online courses and rely more on part-time professors.

Supporters of these colleges say they provide an important alternative for students who were often neglected by traditional colleges. They explained the higher default rates by saying defaults are more common among nontraditional students -- the audience most likely to attend these colleges.

"The work at our institutions should not be defined by a select few who do not appreciate the quality of education we provide," said Jeff Leshay, a spokesman for Career Education Corp., which owns American InterContinental University, which has campuses in metro Atlanta.

A group of former employees of AIU's Dunwoody campus is suing the school and its parent company alleging the school defrauded federal grant and loan programs and illegally rewarded its enrollment counselors with bonuses based on how many students they enrolled.

Leshay said it is company policy not to comment on pending litigation, but added, "We will defend our case vigorously."

Career College Association, a for-profits trade group, has said it supports an examination from the GAO because it would rely on facts and figures and provide a "full and fair review." The group also said the education department should withdraw its proposed rule changes until the review is complete.

The University of Phoenix, another for-profit college, enrolls about 20,700 students at a dozen locations across the state. Georgia Tech, one of the state’s public colleges, enrolls about the same number of students.

Manny Rivera, a spokesman for the Apollo Group, which owns Phoenix, said that about 18 months ago the company began reviewing and changing its policies to improve academic quality, minimize student debt and ensure government funds are used properly.

He said the company supports the education department's "overall intent to protect borrowers and taxpayers." He cautioned, however, that some policy changes could have unintended consequences that limit some students' access to college.