Congress Investigates 'Lavish' Executive Pay At For-Profit Colleges

Over the past three years, lawmakers on the House Oversight and Government Reform committee have investigated bonuses and executive pay at companies that benefited from billions in taxpayer dollars: Fannie Mae, Freddie Mac, AIG and others bailed out after the 2008 financial crisis.

Now, Democrats on the committee have turned their attention to another industry whose fortunes are closely tied to federal money: for-profit colleges.

Rep. Elijah Cummings (D-Md.), the ranking member on the House oversight committee, has requested executive compensation information this week from 13 Wall Street corporations that own for-profit colleges. According to letters he sent to the companies' executives Monday, Cummings is seeking information on how what he termed "lavish" executive pay at college corporations is tied to the quality of education and student performance at such schools.

"When compared to public and non-profit schools, for-profit companies spend a smaller percentage of their funds on student education, reserving more for marketing, advertising, recruitment and other non education expenses," Cummings said. "Their student success rates are lower, and their students are more likely to default on loans. But their CEOs consistently make much more than their counterparts at public and non-profit schools."

Brian Moran, head of the Association of Private Sector Colleges and Universities, a trade group representing for-profit colleges, called Cummings' announcement "more politics." He argued in a statement that the investigation "fails to acknowledge the important role private sector colleges and universities have in educating non-traditional students to compete for jobs in a very difficult economic environment."

"Rather than singling out one sector, we hope that Representative Cummings evaluates all areas of higher education so that the true beneficiary is the student," read the statement from Moran, interim chief executive and president of the group.

Including salary, bonuses and stock options, the majority of chief executive officers at the 13 companies received more than $3 million each in compensation, according to Cummings' office and securities filings from the companies. The top executives at DeVry Inc., ITT Educational Services Inc. and the Apollo Group Inc., which owns the University of Phoenix, all received more than $6 million, according to the most recent securities filings detailing executive pay.

By contrast, the president of Harvard University, Drew Gilpin Faust, received a base pay of $714,000, and a total estimated compensation of $874,000, according to federal tax documents from the non-profit institution.

Several of the largest publicly-traded companies owning for-profit colleges receive more than 80 percent of their revenues from government student aid dollars such as Pell Grants and federal student loans. Over the past year, the Obama administration has stepped in with stricter accountability rules aimed at protecting billions of dollars in federal subsidies going to for-profit higher education.

Statistics from the Department of Education show that for-profit schools on average spend less than a third of what public universities spend on student instruction, despite high price tags for tuition. Students at for-profit colleges are responsible for an outsized share of student loan defaults: although about 12 percent of college students nationwide attend for-profit schools, the sector is responsible for more than 45 percent of federal loan defaults.

In letters to the 13 executives, Cummings wrote that he was requesting the agreements on corporate compensation "as part of an effort to determine whether your salary, bonuses and other compensation are appropriately tied to the performance of the students you educate, the vast majority of which pay for their education with federal tax dollars."

The Apollo Group noted in a filing Tuesday that a "substantial portion" of what Cummings requested was in public documents filed with the Securities and Exchange Commission, but said the company intends to "cooperate fully with Rep. Cummings to provide any necessary additional information."

A spokeswoman for Rep. Darrell Issa (R-Calif.), the chairman of the House oversight committee, did not respond to requests for comment Tuesday.

Cummings asked for the "full, unredacted copies of compensation agreements" by Dec. 23.

Last month the House oversight committee held a hearing on executive pay at Fannie Mae and Freddie Mac, the quasi-governmental mortgage giants that were rescued by the government in 2008 as the housing market collapsed. In 2009, the committee also held hearings on executive pay at major firms that received government bailout money, including American International Group Inc., Citigroup, Bank of America, Chrysler and General Motors.

Comments

[Deftguy]

06:48 PM on 12/15/2011

There is a huge problem with higher education at non profit universities, and for profit colleges. There is zero incentive to be lean and mean in terms of expenditures, and total incentive to just keep raising fee's in the name of recruiting quality talent. USC where I attended has a far larger campus than when I attended there. All of these new building cost money to maintain, and the money spent on the student is getting less and less in the process. Non profit Universities may spend more on their students, but they are still not spending enough, and certainly not as much as they are spending to maintain the campus itself, and salaries for the Professors(even the administrative staff is under paid).

[Retrofuturistic]

03:08 PM on 12/15/2011

It's the same thing with elementary and secondary for-profit charter schools. The whole thing is just a plot to 1) put public money into private hands, and 2) on the undergraduate level, to advance far-right Christian ideology.

[300millionblindmice]

09:08 AM on 12/15/2011

Shouldn't this be part of oversight of the DOE? I favor the idea of a DOE but they are failing to do their job. Just as the majority of all other departments. How can so many departments and agancies be failing? The simple answer is that that have unlimited access to money that they have not earned. Which is precisely why the establishment does not want Ron Paul's "radical" ideas of limiting the federal government. There isn't to much regulating. There isn't any regulating!

[mashtoe]

04:20 AM on 12/15/2011

What about investigating state universities? The President of University of Washington makes over $500,000/year and it keeps going up! In 5 years it will be at a million. Yet our Democrat governor says students should keep paying more!

[zSpin2001]

08:37 PM on 12/15/2011

If you get a degree from UW, then you are likely to get a job. If you get a degree from University of Phoenix, then you are much less likely to get a job, but UofP made 3.7 Billion dollars of the 3.9 Billion dollars (Appolo ed group) from your tax money. How much money did UW make from your tax money? $0.00.

[Dave Harpe]

02:09 AM on 12/15/2011

The problem with any "for profit" school, hospital, retirement fund, or anything else is the fact that profit comes first, then comes executive pay, (Some times it's the reverse of that.) and then, finally, if there is any money left, it goes to the actual job the company is supposed to do. That's exactly why the prices of most things are so high, and quality is so poor. It's also why we work long, hard hours for small paychecks. The extreme inefficiency of these corporations is what is making this country, and this economy weak. It has not always been like this, and it does not have to be like this now.

[jcd8822]

09:55 PM on 12/14/2011

Congress needs to investigate Congress to find how they are making outlandish sums of money and how its members are getting wealthier each year. Clean up your own back yard Congress.

[lowrychris]

08:34 PM on 12/14/2011

Has anyone asked Representative Cummings for a copy of his budget and compensation to his staff? As a member of Congress, would he count all of the free benefits he is able to take advantage of, including the retirement account, and war chest (donations from supporters) that he is able to keep?

Does anyone else find it ironic that a congressman is making a public relations move about how other companies spend money?

[PhilipTaylor]

07:53 PM on 12/14/2011

Washington Post Owns and Profits from "for profit Kaplan University," one of the largest in U.S.  Researching the industry reveals training is often for OUTSOURCED JOBS (off-shore).  In September, a federal judge refused to dismiss lawsuits by former employees accusing Kaplan of violating the Higher Education Act to get federal funding and profits by recruiting unqualified students, misrepresenting students' academic progress, manipulating job-placement statistics and paying recruiters bonuses based on NUMBER students enrolled. 

 

Just ONE example of the massive fraud by “For Profits”- internet is filled with similar stories including K-12 schools funded by taxpayer dollars.

[Thanks to CarolAB]

[Mondayboy]

07:41 PM on 12/14/2011

Is education a human right? Like water and healthcare? If that is the case then they should be viewed as such and taken out of the for profit realm. Can you imagine for profit water utility? We already know what for profit healthcare looks like- do you want more of that?

[Mondayboy]

07:30 PM on 12/14/2011

Ah Congress is simply jealous. Don't they know that it takes very hard work to lure ignorant and desperate people to take unpayable student loans to obtain degrees that will not even be accepted for janitorial jobs. They - Congress, pull the same ploy with the American people every time to vote for them - they shouldn't be jealous.

[ursasr]

07:14 PM on 12/14/2011

a waste of time. for profit colleges, are very, very into on line teaching with little oversight of students actual amount of learning. rep boehner is very hooked into, what amounts to welfare fraud and wont let any house probe hurt his friends.

[bart4u]

03:19 PM on 12/14/2011

Many of these schools give false hopes to kids just to get their student loan money.

[K August]

01:53 PM on 12/14/2011

"Statistics from the Department of Education show that for-profit schools on average spend less than a third of what public universities spend on student instruction, despite high price tags for tuition."

1/3....... in a few years it will be 20%......
Corporations should NOT be in the education business.

What this article didn't mention is the massive amount of fraud that happens when public education goes private. Some states have banned some of these private corporations from doing business in their states...... that's how bad they are!

Next time you hear some politician saying the Dept of Education should be abolished..... now you know why. For profit corporations don't want any oversight as they spend "education" dollars on everything but education.

[acalm]

11:24 AM on 12/14/2011

Wall Street owns the for profit colleges and are funded by government grants. Time to get these people out of our wallets. The bail out stoped but the money continues to flow into their coffers. Any other Congressman want to step up. Mitch McConnell, Jim DeMint, Paul Ryan...anyone?

[Bigspot]

12:22 PM on 12/14/2011

Liz Warren?

[K August]

02:01 PM on 12/14/2011

Those 3 probably own stocks in these corporations.
Why do you think the GOP in states are diverting so much public education money into private for profit education schools?
It's not just higher education that's being milked for profits......it's all schools now.

School vouchers are nothing more than government welfare subsidies to For Profit companies
and many have been caught falsifying their student head counts.....because the government pays them "per student".

[Cyberfox]

09:00 AM on 12/14/2011

While congress is at it, they should investigate the lavish pay at public colleges. Football coaches who make $500,000 or more a year is simply ridiculous.

[bebby37]

09:26 AM on 12/30/2011

I absolutely agree with you. Football and Basketball programs in schools are a real thorn in my side. I think at the college level they are nothing but farm teams for the pro's and they should be subsidizing these programs at the college level. In high school the football and basketball programs should be required to share with other programs, such as golf, arts, etc.