Career College Association

Trends, Policies and Issues

Reauthorization – 2003

Nicholas J. Glakas

National Council of Higher Education Loan Programs

Sarasota, Florida

January 9, 2003

The Global Education Markplace

A few facts . . .

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.

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.

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.

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

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

Education Counts

47%

112%

0%

20%

40%

60%

80%

100%

120%

1971 2000

Salary Gap between Male High School and College GraduatesEducational Attainment Outcomes

Source: National Center for Education Statistics

The Need for Skilled Workers

28%

45%

65%

85%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1950 1991 2000 2005E

% of Jobs Requiring Skilled Workers

Source: ThinkEquity Partners

The Need for Skilled Workers

Adults with Bachelor's or Higher Degree

Adults without Bachelor's or Higher

Degree

75%

25%

Less than 25% of U.S. Adults 25 and Older have a Bachelor’s Degreeor Higher

Source: ThinkEquity Partners

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

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

Number of International Students at U.S. Colleges & Universities 1975-2002

155000

286000

342000

387000

453000

515000

583000

0

100000

200000

300000

400000

500000

600000

700000

1974/75 1979/80 1984/85 1989/90 1994/95 1999/2000 2001/02

Source: Institute for International Education, Open Doors 2002.

Number of International Students at U.S. Colleges & Universities From Top Ten Places of Origin, 2001-02

6683663211

49046 46810

28930 26514

12518 12091 11614 11606

0

10000

20000

30000

40000

50000

60000

70000

India China S. Korea Japan Taiwan Canada Mexico Turkey Indonesia Thailand

Source: Institute for International Education, Open Doors 2002.

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%

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. CCA’s 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 master’s 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 CCA’s Foundation has provided more than 17,000 scholarships to high school graduates attending CCA member schools, institutes, colleges and universities.

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.

Non-Profit and For-Profit Distinctions in

Higher Education

Non-ProfitTax-exempt

Donors

Endowment

Stakeholders

Shared governance

Prestige Motive

Cultivation of knowledge

Discipline-driven

Quality of inputs

Faculty power

For-ProfitTax-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.

Postsecondary Education Companies

Company # of Campuses

Enrollment Total Programs

Apollo Group/U. of Phoenix 65 133,700 Bachelor’s – Doctorate

Career Education Corp. 43 50,400 Diploma – Master’s

Corinthian Colleges, Inc. 63 35,000 Diploma – Master’s

DeVry, Inc. 26 56,000 Associate’s – Master’s

Education Management Corp. 40 39,000+ Non-degree – Doctorate

ITT Educational Services, Inc. 74 33,000 Associate’s - Bachelor’s

Kaplan Higher Education 44 20,000 Diploma – Bachelor’s

Strayer Education, Inc. 20 16,500 Associate’s – Master’s

Whitman Education Group, Inc.

22 9,000 Diploma – Doctorate

The Reauthorization of the Higher Education Act

CCA Reauthorization Preparations

CCA’s 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 President’s Advisory Council Small College Advisory Council Entire CCA membership review of issues

Assembled a coordinating council of Washington representatives Monthly meetings of this Legislative Advisory Council. Lobbying teams created based on issues of interest

CCA’s 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.

The Reauthorization of the Higher Education Act

CCA Reauthorization Issues

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

Reauthorization – Issues (continued)

50% Telecommunications Rule Accountability

Probably off the table: 12-Hour Rule Incentive Compensation

Transfer of Credit

Issue: CCA’s 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.

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 Proposal:Use the results of the study and its simulation model to develop specific proposals. Anticipated completion the end of January.

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 institution’s

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.

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.

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.

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.

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 Proposal:The 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 Department’s ability to make ad hoc policy should be replaced with a

clear set of rules.

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.

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.

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.

Career College Association

Nicholas J. Glakas

NickG@career.org

Phone: 202/336-6754

www.career.org