For-profit colleges face mounting scrutiny

The former instructor, who now works as a hiring manager, said if he reviewed a job applicant’s resume that showed he or she had graduated from the University of Phoenix in the past five years, the applicant would instantly be crossed off his list of potential hires.

“I would not even consider them,” he said. “The [University of Phoenix] program has been so watered down, it’s not even close to what it used to be.”

Rivera, the university spokesman, said the company lowered the minimum student age to 18 in response to “the number of younger working learners desiring admission and the gradual shift of our curriculum to accommodate a stronger general education component for students who had little or no previous college experience.”

He said the age requirement shift didn’t change Phoenix’s clientele.

“With the working learner demographic shifting to include a younger student who increasingly had little previous exposure to higher learning, University of Phoenix evolved into a truly comprehensive institution, capable of serving an expanded student population, inclusive of younger, less academically experienced students who, despite their youth, were still considered ‘nontraditional,'” he said.

SEC probes Apollo’s accounting practices

In late October, Apollo said the Securities and Exchange Commission (SEC) had launched an “informal inquiry” into its revenue accounting practices, its second SEC probe this year.

SEC inquiries often end without finding harm done by the company. Still, the probe comes at a time when ED is keeping an eye on the sector at large.

In a Congressional hearing earlier in October, Mary Mitchelson, an inspector general of the Education Department, described investigations of different schools’ attendance-tracking and financial aid practices. She said the government would continue to pursue cases of “diploma mills” and eligibility exams.

In February, a separate division of the SEC said it was looking into Apollo’s revenue recognition practices. Nearly all of Apollo’s revenue comes from student tuition. Federal student loans from the government make up nearly 90 percent of the University of Phoenix’s tuition income.

The “revenue recognition” issue revolves around how Apollo determines when a student drops out of a class, the refund that student gets, and how much income Apollo can leave on its balance sheet, and for how long.

Apollo says it stops recognizing revenue when a refund is processed for a student that has dropped a class, according to attendance records—a “seemingly straightforward” method, said Morgan Stanley analyst Suzanne Stein.

The worst-case scenario would be an accounting restatement and fraud charges as a result of the inquiry, Stein said. She added that was unlikely, and also that there was “no reason” to think the inquiry would be expanded to the rest of the industry.

For-profit colleges defend practices, deflect criticism

Decision makers at well-known commercial college chains have countered mounting public skepticism by announcing new measures designed to trim the growing number of students defaulting on their loans after three years.

San Diego-based Bridgepoint Education, parent company for University of the Rockies and Ashford University, released a statement Dec. 8 that detailed plans to help students manage loan payments once they’ve left school or graduated.

Denny Carter

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