By Scott Jacobs


Learning is often a matter of trial and error. You start down one road and pretty soon something on the side catches your attention so you branch off following it. Sometimes you get back on course. Sometimes you just keep branching off until you reach your final destination––which is nothing like the place you thought you were going.

I was reminded of this the other day when I noticed an ad on my Facebook page with the headline COPS (NEEDED):

“Are you 56-59? We are in Need of Police Officers. Make $55 – $68,000 Per Year! Get quick training in a few months or less. Sign up Now!”

Hey, I thought. I’m 56-59, I need another $68,000, and I’m a pretty quick learner. I clicked right through. What I discovered was the homepage of “Cash for Cops,” a come-on promotion for a variety of online universities that offer law enforcement and criminal justice courses for college credit. With those degrees in hand, the ad claimed that I and the other degree recipients would become “eligible” for $1 billion in federal stimulus money.

The advertising premise was specious to begin with, if not downright misleading. Stimulus funds for law enforcement have gone mainly to keeping current cops employed, and what’s available for continuing education is usually allocated to coursework that police departments have set up with co-operating colleges.

Nonetheless, the website directed me to 16 universities offering associate degrees in criminal justice, all via online college courses. By delving into a few of them, I learned that I could––for what amounts to about $2,000 a course­––take dozens of courses not only in criminal justice but a variety of disciplines. I could get 2-year or 4-year bachelor degree, a masters or even a doctorate, all without leaving the comfort of my home, and often on the government’s dime.

Wave of the Future

Signing up for an online course would put me in the mainstream of the fastest growing movement higher education. According to the Alfred P. Sloan Foundation, some 4 million students (roughly one of every five) will take at least one course online this year.

The typical online student today is a working adult (usually a woman) from a low or middle income family seeking a 2-year associate degree in a field like health care, business administration or another occupation (yes, criminal justice) that does not necessarily require a liberal arts education. But that profile is rapidly changing. As the technology for online learning develops––and students hover over their laptops––traditional colleges and state universities are putting their whole range of courses online. Within ten years, the Chronicle of Higher Education predicts students in general will be taking 60 percent of their classes on line.

The projected growth has set off a scramble on college campuses over how best to meet the need.  Most educators agree the gold standard has been set by the Massachusetts Institute of Technology “Opencourseware” website which in 2002 pioneered the field by putting lecture notes and reading lists for 50 courses online. By 2007, MIT was posting lectures, notes, exams and videos from virtually its entire curriculum, 1800 courses in 33 disciplines, although it still shies away from giving degrees or college credit for online enrollment.

MIT’s experiment has become a model for other online ventures. The New York Times, for instance, this month announced it will join 22 private colleges in a new Knowledge Network offering hundreds of online courses on subjects range from nurse paralegal studies to “California Wines Under $20.”  Other colleges now offer not only lectures and videos, but whiteboard discussion groups, virtual office hours, interactive webcasts, twitter feedback, even an iPhone app for people who enroll in English as a second language program.

Last year, Pearson, a world leader in educational materials, began marketing “eCollege” software that threatens to do for online course design what Word did for publishing, Photoshop did for graphics, and Final Cut did for video editing. The eCollege software is essentially a vessel into which professors can pour their course materials, but it also integrates into a college’s scheduling, grading, administrative and financial functions. Large public institutions and hidebound private colleges don’t have much use for that right now; but it is a boon to the second fastest growing trend in higher education, for-profit universities.

The Bete Noire – For-Profit Universities

What distinguishes the 16 universities offering “Cash for Cops” college courses is that all but three are “for profit” universities. Some come in Ivy shrouded names (like Ashford University and Briarcliff College) and others claim pedigrees dating back to the 1800’s, but the dominant players are all owned by a handful of recently formed corporations, all traded on Wall Street or managed by private equity partnerships hoping to cash in with an IPO.

The granddaddy of them all is the University of Phoenix founded by John Sperling. Sperling, now 88, was a rebellious professor at the University of California, a union organizer and an anti-war activist when he set out to create a new model for education in 1976. He wanted to teach his courses, his way; and the only way he could do that, he believed, was outside the traditional academia setting. Enamored by scientific innovation––he offered his first online course in 1989–– he built up the University of Phoenix as a services for fee institution, charging for every course. With the arrival of the worldwide web in the early Nineties, he took his vision of an online university public in 1994 under the name of The Apollo Group.

The Apollo Group capitalized on the same Internet technologies as MIT, but Sperling’s company focused on professional advancement courses and associate degrees that mid-career workers could take to improve their job skills. It enticed corporations like IBM and Motorola to enroll employees as part of their professional development program. As the University of Phoenix scaled up to offer a full range of college courses to a rapidly widening range of students, corporate support waned. The University of Phoenix was becoming known as the Amway of education, and some began to raise questions about the value of a University of Phoenix degree. (Its most famous graduate is Shaquille O’Neal.)

The Apollo Group nonetheless had found a formula for success, on Wall Street at least. Today it has a market capitalization of $9.4 billion, and it has spawned a half dozen imitators, many of them led by former executives from the University of Phoenix ranks. One former CEO, who left in 2006 amid a controversy over recruiting policies, has emerged as head of a competing company called the Education Management Corporation. Other executives spun off to create the Career Education Corporation and Bridgepoint Education.

These four companies alone are the owners of American Intercontinental University, Argosy University, Axia College, Ashford University, The Art Institutes, Briarcliff College, Brown Mackie College, Colorado Technical University, Sanford-Brown Colleges, Lehigh Valley College, South University, The University of The Rockies and Western State University. Along with two other giants, Kaplan Higher Education (owned by the Washington Post Company) and Laureate Education (the former Sylvan Learning Centers), they serve well over half of the two million students now enrolled in for-profit colleges. (The rest of the for-profit category includes thousands of what used to be called vocational and trade schools for auto mechanics, cosmetologists, electrical engineers, hygienists, etc.)

Federal Dollars Open The Floodgates

By December 2007, The Apollo Group was growing at the rate of 25 percent a year. The company was operating on revenues of $1 billion a year and serving 140,000 students (60,000 of them online) at 41 campuses. The University of Phoenix was already the largest private university system in the country, and that was before the federal dollars started pouring in.

The underpinnings of higher education in America are federal student loans. Also known as Stafford loans, Perkins loans or Pell Grants, the U.S. Department of Education handed out $85 billion of them in 2007-2008.  Until 2006 federal regulations required that schools taking federal loan money provide at least 50 percent of the physical instruction at campus locations. The rule was designed to exclude correspondence schools, but the Apollo Group, working through a new trade association and a phalanx of lobbyists in Washington, convinced the Bush administration that the 50 percent rule was outdated. The regulations were rewritten and online enrollments surged.

The change had an immediate effect on the Apollo Group’s bottom line. Last year, the company reported 2009 revenues of $3.9 billion while serving 443,000 students (334,000 of them online).  Remarkably, $3.2 billion of those revenues (86 percent) now come through federal loans and grants, making the University of Phoenix by far the largest single recipient of federal student loan proceeds in the nation. And they were not the only big winners. The for-profit sector of the higher education market received $16 million (19 percent) of the $85 million in 2007-2008 student loans, according to the General Accounting Office, even though it serves only 8 percent of the students.

President Obama’s Dilemma

Just after President Obama’s state of the union speech last week, the University of Phoenix roadblocked the commercial time on all three broadcast networks to run a TV spot touting the fact it graduates 50,000 students a year. The ostentatious display was not out of character. Two years ago, it took out a similar ad in the Super Bowl. All over the Internet, in fact, and on various television channels, the University of Phoenix runs a hefty media schedule as part and parcel of a corporate strategy that spends 60 cents on sales and promotion for every one dollar it spends on instructional services. But the target of these particular ads weren’t potential students but decision-makers in Washington weighing how to meet President Obama’s goal of producing 5 million more college graduates by the year 2020.

In his state of the union address, the president proposed billions of dollars for community colleges, larger tax credits for college students and other measures he believes will encourage more people to seek college diplomas. The online universities, obviously, believe they can be a part of that enrollment growth. Whether they can participate in the programs, however, depends on two critical GAO investigations now underway that go to the heart of online education: How do students get into online programs and what happens to them when they get out?

Easy Come, Easy Go

Online universities have come under fire for their heavy-handed sales practices for many years. Websites like and bristle with complains from students who could not get promised refunds,  transfer credits or resolve their federal loan accounts. On December 14, 2009, the discontent was underscored when the University of Phoenix agreed to pay $80 million in a settlement with two employee whistleblowers who exposed shady bonuses paid to telephone recruiters––in violation of federal guidelines––for closing student contracts.

The Department of Education followed up the settlement by convening a panel to rewrite online sales procedures and last week proposed tough new guidelines outlawing “bonuses, commissions or other incentive compensation” for student recruiters. Because online universities have an open admissions policy (as do many other colleges), the sales force plays a critical role in deciding who gets admitted. Anyone with a high school diploma or GED qualifies; but if you lack a diploma, you can still get a student loan by passing a federally-mandated ABT test measuring your “ability to benefit.”

During an investigation into for-profit college loan procedures last year, the GAO concluded the ABT test isn’t worth the paper it’s printed on. Some recruiters at publicly traded schools were caught referring students to “diploma mills” where they could get fake diplomas without taking the ABT test. At another publicly traded school, GAO investigators on two separate occasions found test administrator gave students answers to questions and, if they still got them wrong, changed the answers themselves. In addition to having little control over field testing,  the GAO found that the department of education failed to review or provide proper oversight for the publishers who were making up the tests being administered.

High Default Rates

The same GAO report found that students using government loans to attend for-profit schools are 2 1/2 – 4 times more likely to default on those loans than other college students. Four years into the loan repayment schedule, 23.3 percent of borrowers attending for-profit schools were in default on their student loans compared to 9.5 percent of borrowers from public school and 6.5 percent from private non-profit schools. (The default rate at the University of Phoenix, specifically, was 16 percent after three years. A comparable four year rate, usually higher, was not available.)

There are a number of reasons why the default rate is higher. The online universities tend to attract older, working students from low and middle-income backgrounds. Their priorities of work and family often outweigh even the best intentions to pay back student loans, and as many as 50 percent come from families with no college background, another barometer of how likely students are to repay loans. But the losses are significant and may turn out to be the sub-prime crisis of the student loan industry.

An Ominous Alert

With student aid poised to expand greatly under the Obama administration, the Department of Education will have to examine whether the education provided by these for-profit online universities is worth the money that is going into them. On that score, there is still more cause for concern.

The warning comes in the form of a December 17, 2009 memorandum from the inspector general of the Department of Education about his investigation into the Higher Learning Commission (HLC) of the North Central Association of Colleges and Schools.

The North Central HLC is one of six regional accrediting agencies that certify the academic qualifications of the nation’s colleges and universities. It regularly reviews and accredits 10,000 schools (including Notre Dame, Northwestern and Ohio State) but it also seems to be the accrediting agency of choice for many of the most prominent private online universities, including the University of Phoenix.

In a heavily redacted “alert” about the HLC’s 2009 decision to accredit American International University­––a subsidiary of the Career Education Corporation–– the inspector general blistered the commission for ignoring “significant issues” raised by its own investigative team about AIU’s academic standards. The North Central HLC’s standards for certification, the inspector general said, are either so low or the commission is so weak it is unable to take effective action when faced with the overwhelming evidence its team found of AIU non-compliance.

“HLC’s accreditation of AIU calls into question whether it is a reliable authority regarding the quality of education or training provided by the institution,” the inspector general concluded, adding, “Since HLC determined that the practices at AIU meet its standards for quality, without limitation, the Department should be concerned about the quality of education or training at other institutions accredited by HLC.”

What’s It Worth?

In the end, if an online education is really a private enterprise, then the only thing that matters is whether the stakeholders are getting what they pay for. Wall Street investors backing these online investors are clearly doing all right, but they are making their profit almost entirely off government money. That is why it is doubly important to make sure students are getting the rewards promised in the advertisements and the public is getting graduates who have knowledge commensurate with their degree.

Newsweek editor Jon Meacham recently wrote a column reflecting on the high cost of a liberal education like the one he got at the University of The South in Sewanee, Tennessee, and the new alternatives available through the Internet. Meacham admits he harbors some prejudice since Newsweek, like Kaplan, is owned by the Washington Post Company. Nevertheless, he believes online education is “one of the great democratizing stories of recent years . . . digital educational enterprises are to the 21st century what public universities were in previous generations: accessible and more affordable means for people to better their minds and their lives.”

The value of an online education depends on the confidence we place in the people who are providing it. “If the country is to prosper––economically, culturally, morally––we have to trust in the institutions, old and new, that nurture creativity, and then hope for the best,” Meacham says. Those are words I can agree with. But I still think it’s going to be a long time before I walk into an online university through a door marked “Cash for Cops.”

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