Higher Learning Commission: Accreditation Is No Sign Of Quality

"Yet in practice, accreditors—who are paid by the institutions themselves—appear to be ineffectual at best, much like the role of credit rating agencies during the recent financial crisis." David Deming and David Figlio in Accountability in US Education: Applying Lessons from K–12 Experience to Higher Education (2016)

As a watchdog of America's subprime colleges and a monitor of the College Meltdown, I can tell you that institutional accreditation is no sign of quality. Worse yet, accreditation by organizations such as the Middle States Association, Western Association of Schools and Colleges, and the Higher Learning Commission is used by subprime colleges to lend legitimacy to their predatory, low standard operations. 

[Image below: DeVry University uses its accreditation to lend credibility to its brand.]

According to the US Department of Education, the Higher Learning Commission (HLC) accredits 946 Title IV schools, including some of the nation’s most well-respected public and private colleges. As the America’s largest accreditor, it is a gatekeeper to its member schools collecting close to $40B annually in Title IV funds and many billions more from the Department of Defense (Tuition Assistance) and Department of Veterans Affairs (VA) GI Bill.

The Higher Learning Commission monitors excellent schools like University of Chicago, University of Colorado, University of Michigan, Notre Dame, and University of Wisconsin. But it also accredits a number of subprime schools, including Colorado Technical University, DeVry University, University of Phoenix, Walden University, National American University, and Purdue University Global.

On the three pillars of regional accreditation: compliance, quality assurance and quality improvement, the Higher Learning Commission gets a failing grade by supporting subprime colleges.

Insiders in higher education have been well aware of the corruption inherent in accreditation, but few speak of it publicly. The way the system works, accreditors like the Higher Learning Commission receive most of their their money from member schools, which gives them a vested interest in keeping their customers viable, even among their worst or most predatory performers.

Despite protests from the American Association of University Professors, The Higher Learning Commission has been accrediting for-profit colleges since 1977 and ethically questionable schools for nearly 20 years. In 2000, Executive Director Steven Crow defended the HLC's accrediting of Jones University, an online for-profit college that is no longer in operation.

Rather than acting as auditors, higher education accreditors for decades have acted as shills for whomever they accredit, and that can include some of the most predatory and substandard schools in America.

"I really worry about the intrusion of the profit motive in the accreditation system. Some of them, as I have said, will accredit a ham sandwich, and I think it's very important for us to make sure that they're independent and not being bought off by the Internet." -Mary A. Burgan, General Secretary of the American Association of University Professors (2000)

Many accreditors are part of a larger organization called the Council for Higher Education Accreditation (CHEA), which acts more as a barrier than a supporter of educational quality.

So who's watching the accreditors? In reality, it's no one.

[Image below from CHEA shows Higher Learning Commission dues for member colleges. Over the last 30 years, the Higher Learning Commission has received millions of dollars from subprime schools like University of Phoenix.]

The US Department of Education does very little or nothing in terms of overseeing higher education quality, and the Trump-DeVos administration has done a great deal to roll back the modest regulations enacted by President Obama.

In July, an internal investigation showed that the US Department of Education was not properly watching the accreditors, and it's very likely the situation will worsen. The agency is in the process of reviewing accreditation and accreditors, but the foxes are submitting more comments then the hens.

National American University and the Subprime College Crash

Summary

• As a subprime higher education company, National American University Holdings (NAUH) has avoided media and agency scrutiny for years.
• NAUH has been losing money since 2015, with only severe cost cutting in sight.
• A former NAUH executive has filed a False Claims lawsuit alleging that the school defrauded the US government.
• Share price has been at or near $1 delisting price since March 2018.
• NAUH has mortgaged their real estate assets to stay afloat, to the tune of $8M, a big number for a small cap company.
• NAUH is underwater, with debt surpassing equity in May 2018.
• NAUH has delayed submitting its annual report to the SEC.
• NAUH has only one major investor, T. Rowe Price.

NAUH and the Subprime College Crash
While subprime college college companies like Corinthian Colleges (COCO), Apollo Group (NASDAQ:APOL), DeVry University (DV), ITT Educational Services (ESI), and Education Management Corporation (EDMC) made the greatest profits and the greatest losses over the last two to three decades, National American University Holdings (NAUH) has been flying under the radar.

The reason for so little attention: NAUH is a small cap company with about 35 small ground campuses. Their campuses are spread out across the US West and Midwest, including Ellsworth Air Force Base near Rapid City, South Dakota. The company also has a few real estate holdings in South Dakota.

NAUH's shares have never risen to the heights of other subprime colleges that have already crashed. Its peak was $12--more than eight years ago.

According to the National Center for Education Statistics, NAUH's 3-year student loan default rate is 24% and their student loan repayment rate is 27%. Their graduation rate is 13-35%, depending on the campus. 

Worse yet, NAUH is targeting service members and veterans even more as the company lies at the brink of delisting. That's something that could get negative media attention.


Downward Trajectory
NAUH has made some money by scavenging from other failed schools, including Everest College (once part of the infamous Corinthian Colleges), ITT Tech, Brown Mackie College, Wright Career College, Career Point College, and Westwood College. But overall it has been on a three-year streak of earnings losses. NAUH's last reported gains were in February 2015.

Revenues are also down, way down. According to NAUH's last quarterly report, "FY 2018 annual revenues were $77.2 million, compared to $86.6 million in the prior year."

National American University's campuses are small, but most are too expensive to maintain. It appears that more than a dozen schools have closed or are in the process of closing.

Revenue + Earnings
(2015) 117.9M (-6.7M)
(2016) 96.1M (-8.2M)
(2017) 86.6M (-7.8M)
(2018) 77.2M (-12.3M)

Nearly all students are now learning online or through hybrid education. NAU has 4,6817 students in its online programs, 617 students at its campuses, and 747 students attend hybrid learning locations.

Enrollment
(2015) 9,519
(2016) 8,185
(2017) 6,703
(2018) 5,648

In 2016, National American University began closing campuses.  In 2018, they continue to consolidate and downsize.  


National American University Campus Populations 
(Source: National Center for Education Statistics)

Salem, VA  980

It Gets Worse
National American may gain some attention--in a bad way--because it shows few signs that it can survive.

The 2018 year started out rough, with the unsealing of a False Claims lawsuit by a former NAUH official. The lawsuit alleged that the school defrauded the US government out of millions of dollars in a student aid program, unlawfully paid bonuses to university employees for recruiting students and rigged the accreditation for its medical assisting program.

As part of its cost cutting, almost all of NAU's students are now online, which usually results in lower graduation rates--and more students who cannot repay their student loans.

NAUH has now been been forced to mortgage its properties for $8M in order to maintain liquidity. The loan is with Black Hills Community Bank. While the conditions may be favorable, maybe too favorable, business deals like this sound reminiscent of other subprime colleges before they failed.

NAUH Cash (in thousands)

(2015) 23,300

(2016) 21,713

(2017) 11,974

(2018) 5,324

NAUH's debt surpassed its equity value in May 2018. 

At this point, only one investor stands between NAUH and delisting--T. Rowe Price, a huge company that can afford to lose a little money in spots. But with all other institutional investors out, how long will T. Rowe Price keep their shares?

The Slow-Motion Collapse of America’s Largest University

[While most of my higher education analysis has been statistical in nature, it’s important to look at qualitative and historical aspects of higher education. The collapse of University of Phoenix is one of those important stories.]

From 1976 to the early 2000s, the University of Phoenix established itself as a leader in educational innovation for working adults.

Hundreds of the school’s campuses and learning sites dotted the American landscape, conveniently located near interstate off ramps. Phoenix turned hotel meeting rooms and retail spaces into learning centers for busy strivers. For those who could not attend those schools, University of Phoenix created an online presence that was unsurpassed, with small class sizes and working professionals with real world experience as instructors. 

Phoenix’s founder John Sperling was considered a genius for bringing education to adult professionals and other nontraditional students. A former university professor and self-described enemy of the academic elite, Sperling became friends with the political and business elite. Higher education’s billionaire was a notable friend of California Congresswoman Nancy Pelosi--and he appeared on Oprah.

Like the prosperity preachers who filled American television, Sperling offered the keys to success to anyone who would listen. Instead of Jesus, though, he was selling higher education.

In 2007, the limitations of online education, the adjunctification of labor, and the University of Phoenix became more evident in a New York Times article that revealed the school’s subprime graduation rate.

Rather than improving educational quality, Phoenix and its parent company, Apollo Group, became all about the numbers. At the highest level, Apollo was shooting for a half million students, which sounded laudable. Apollo Group branched out into associate degrees, and it reached out to students outside North America.

But the truth is that the company had to cut corners to meet these numbers.

In a scheme called “The Matrix”, enrollment representatives were rewarded for meeting enrollment numbers. And with that, enrollment representatives would do almost anything to get asses in classes.  Apollo Group’s CEO Todd Nelson took the school to its highest numbers. But these numbers would come at a cost. The school faced enormous pressure from federal and state agencies.

The 2010 Harkin Commission and Aaron Glantz’s investigations with the Center for Investigative Reporting a few years later showed Phoenix to be a school that would use any means necessary to make a profit. Phoenix became a joke in popular culture, skewered by comedians John Stewart and John Oliver.

[In recent years, University of Phoenix's Wikipedia page looked more like a criminal rap sheet than an institution of higher education.]

With the doubling of class sizes, that motivation has been stripped away. I can barely keep up with the minimal requirements of my job, to say nothing of the additional effort I used to put in. There is no time for extras; the students are a blur. I find myself hoping they drop out and doing little to nothing to keep them in class, because each drop equals a bit of relief for me.--University of Phoenix instructor, 2018

In 2016, Apollo Education Group was taken over by Apollo Global Management, a corporate behemoth  known to buy failing companies and stripping them of assets, and then selling them at a profit. Along with the sale, friends of President Obama--Tony Miller and Marty Nesbitt--were brought in to make the deal seem to be an act of educational reform. 

[Image below: Apollo Education still has more than two dozen lobbyists in DC, but the money to Washington may be dwindling. Source: Open Secrets]



In 2018, the school’s marketing strategy has been to look backward, at the deceased founder John Sperling, and the adult night classrooms that are all but gone.  

In a Trumpian world where history doesn't matter, the University of Phoenix is an unexamined relic of the 20th century.  Enrollment is down an estimated 80 percent from its peak and more than 450 campuses and learning sites have closed.  At least half of the campuses that have remained open are no longer taking new students, suggesting that they will close in the next 18 months. 

Purdue University and Its Subprime College Cousin Committing Fraud

Purdue University Global is not Purdue University. It's far from it. In fact, Purdue University Global is actually the former Kaplan University, a once declining for-profit college with a subprime history.
Purdue Global, the real Purdue's subprime cousin, is an open enrollment institution with more than 30,000 working class students. In 2016, then known Kaplan University included more than 6,000 military service members and 5,800 military veterans. The school today still heavily targets them.

[Purdue University Global is targeting service members and veterans through Army Times, Navy Times, and Marine Times, using practices that may violate DOD rules.]

The faculty, comprised mostly of poorly paid adjuncts, may be good, but not great. There are a handful of small campuses, from South Portland, Maine to Omaha, Nebraska. But most of Global's students are working exclusively online, which enables the school to keep costs down.

Purdue University Global's graduation rate and student loan debt numbers are all subprime. The newly rebranded enterprise has a 23-39% graduation rate, a 25% student loan repayment rate, and a 5-year student loan default rate of 53%. But you won't find the information if you type in "Purdue University Global."

As of August 8th, the College Navigator and College Scorecard have no consumer information for Purdue University Global. Instead, you have to search for Kaplan University, its former name.

According to the College Scorecard, the median income for those who have attended Kaplan University/Purdue Global is $33,500 a year --far from the $55,000 that Purdue University students make after attending, and not enough to pay off student loans.

Purdue Global's Concord Law School has a California Bar pass rate of 16-27%.

The school's subprime status hasn't stopped Purdue University Global from using its Big 10 cousin's history and prestige and fraudulently offering a "world-class education" to unwitting customers.

This bait and switch ploy is not happening without the consent of the older, wealthier cousin, Purdue University. Purdue University now owns the school once known as Kaplan University.

[Image below: The lush Purdue University campus in West Lafayette, Indiana is used to sell Purdue University Global. But credits from Global may not transfer from the subprime college to the Big 10 school.]

[Below: Purdue University President Mitch Daniels is also a Senior Administrator at Purdue University Global.]

[Image below: Purdue University Global uses a predatory lead generator, QuinStreet, to find unwitting consumers.]

[Image below: Purdue University Global online enrollment representatives use the prestige of Purdue University to peddle the school.]

False and misleading information like this will not put Purdue University Global on the map. Consumers will eventually see through the deception. But it will make Purdue University, the real Purdue University, the target for government fraud investigations.

Subprime College Crash Continues Under the Radar

The subprime college crash continues for the seventh consecutive year with little attention from the government or media.

Subprime is a more appropriate name than for-profit, because several non-profit schools offer limited value at a high price. Campus closings, steep decreases in enrollment, low student loan repayment rates, low graduation rates, and low returns on investment are strong  indicators of "subprime."

University of Phoenix, now part of Apollo Global Management, continues to close campuses. In total, they have closed more than 450 campuses and learning sites. I expect UoPX to close half of their remaining campuses in the next 12-18 months.

Art Institutes are closing most of their campuses in 2018 after being taken over by Dream Center Education Holdings.  David Halperin has been covering the story in the Huffington Post, but it has received little attention.  Argosy University, another system of DCEH schools, is teaching out at least 14 campuses.




DeVry University will be closing more campuses after their parent company, Adtalem, dumped their brand and practically gave it away to Cogswell Education/Palm Ventures. They have already closed eight sites in 2018. Over the past few years, DeVry has closed 44 of their 90 learning sites.

National American University (NAUH) is in major trouble. Their stock price has been struggling at $1 a share, making it vulnerable to delisting. T. Rowe Price is keeping it propped up. NAUH recently mortgaged their real estate for $8M.



Zenith (ECMC) is completely out of subprime college ownership. The former Corinthian Colleges was propped up by the non-profit student loan company with help from the government.

Kaplan University is now operating as Purdue University Global. But the school remains a subprime effort despite fraudulent claims that it offers a "world-class education."

Ashford University (Bridgepoint) continues to profit amidst state and federal investigations, but enrollment is down as it pursues non-profit status.

Strayer is buying out Capella. The new company is still STRA, but it's known as Strategic Education.