2011-12-12 "House Democrat Probes Executive Pay at For-Profit Colleges; Maryland Representative Seeks Salary Details at 13 Schools Reliant on Federal Student Aid" By MELISSA KORN from "Wall Street Journal"
The top Democrat on The House Oversight Committee has launched an investigation into executive pay practices at for-profit colleges. Thirteen school operators, including University of Phoenix parent Apollo Group Inc. and DeVry Inc., have been asked to provide information on executive salaries, bonuses and other compensation in order to determine whether their pay is "appropriately tied" to student performance.
For-profit colleges have been a divisive topic on Capitol Hill. Many Democrats have spoken out in support of tighter regulation of the industry's use of federal student aid, while a number of Republicans have argued that any investigation into their recruiting and pay practices or student-loan default rates should also include a look at non-profit and public schools.
Rep. Elijah Cummings (D., Md.), the ranking Democrat on the House Oversight and Government Reform Committee, is following in the footsteps of Sen. Tom Harkin (D., Iowa), who in 2010 held a series of hearings critical of the industry.
"The American taxpayers fund these schools through billions of dollars in tuition assistance, but there is little evidence that lavish executive pay is linked to the well-being of the students they are supposed to educate," Mr. Cummings said in a statement. "Congress has a responsibility to ensure that taxpayer funds are being used first and foremost for the benefit of students, not to line the pockets of corporate executives." (According to a June 2010 report by Mr. Harkin, cited by Mr. Cummings's office, for-profit colleges received nearly $24 billion in Pell grants and federal loans in the 2008-2009 academic year.)
Many of the companies earn close to 90% of their revenue from Title IV federal student aid, which includes Stafford loans and Pell grants. Their students often take on more debt and default on those loans at a higher rate than their counterparts at non-profit and public colleges, according to data from the U.S. Department of Education.
CEOs at the largest publicly-traded for-profit school operators often receive compensation in the seven-figure range, including base salary, stock and options awards, non-equity incentive compensation and perquisites such as travel and security services.
At Apollo Group, for example, co-CEOs Charles Edelstein and Greg Cappelli received total compensation of $1.64 million and $1.66 million, respectively, in fiscal 2010. University of Phoenix, which contributed 91% of Apollo Group's total $4.73 billion in revenue in fiscal 2011, received 86% of its revenue from Title IV federal aid programs.
Meanwhile, DeVry CEO and President Daniel Hamburger received total pay of $6.14 million in fiscal 2011, which ended June 30. That company posted revenue of $2.18 billion for the year. DeVry's Title IV figures for 2011 haven't yet been released. In 2010,Title IV funds comprised 71% of revenue.
Last summer, the U.S. Department of Education issued a rule that would penalize programs – potentially cutting them off from federal student aid -- for graduating students with heavy debt loads, in an attempt to ensure that schools are training students for jobs that would enable them to repay their loans. But the final rule was watered down after a strong lobbying effort by schools.
Although the House reform committee has focused recently on executive pay at companies that receive taxpayer support, it's unclear how far Mr. Cummings will get in this latest probe.
Rep. Darrell Issa (R., Calif.), the committee's chair, has been a vocal critic of other investigations into the schools. He questioned the veracity of a 2010 U.S. Government Accountability Office report that had been commissioned by Sen. Harkin, which found that a number of colleges used misleading and aggressive tactics to recruit students. The report was later revised and corrected, though the GAO continues to stand by its ultimate findings.
A representative for Mr. Issa wasn't immediately available for comment.
Mr. Cummings asked that the companies provide the requested information by Dec. 23.
The other companies named in the probe are: Bridgepoint Education Inc., Capella Education Co., Career Education Corp., Corinthian Colleges Inc., Education Management Corp., Grand Canyon Education Inc., ITT Educational Services Inc., Washington Post Co.'s Kaplan Inc., Lincoln Educational Services Corp., Strayer Education Inc. and Universal Technical Institute Inc.