As federal scrutiny of for-profit colleges tightens, two prominent proprietary institutions have decided to discontinue the practice of enrolling students who do not have a high-school diploma or a GED but who pass a basic-skills test that allows them to qualify for federal student aid.
Corinthian Colleges Inc. announced last week that it would stop using the tests, known as “ability to benefit” tests. In doing so, company officials cited the tendency of students who qualify by passing the tests to have higher default rates on their loans than their peers who didn’t take the test, as well as new federal rules that will change how colleges are held accountable for those defaults. Corinthian’s decision follows a similar move by Kaplan Inc., which discontinued use of the tests last fall at some of its institutions.
The ability-to-benefit tests aren’t widely used in higher education as a whole, but a number of colleges allow students who pass them to enroll.
In explaining Corinthian’s decision, Kent Jenkins Jr., a spokesman for the institution, said students who take the ability-to-benefit test tend to default on their loans at twice the rate of other students. For-profit colleges like Corinthian and Kaplan will need to manage their default rates better, because starting in 2014, the Education Department will hold colleges accountable for defaults of student cohorts for three years after the students graduate or leave college, a year longer than under current law.
Peter C. Waller, chief executive of Corinthian, announced the decision to drop the test last Friday. He said the shift to a three-year measurement, as well as changes in student lending that have put more responsibility on colleges for default management, left them “no choice” but to discontinue enrollment of students who do not have a high-school degree or a GED.
“We’re in a better position today to take the steps that will help us reduce risk and preserve our ability to succeed in the future,” Mr. Waller said. “Current public policy on cohort default rates has the unfortunate effect of creating disincentives to serve [ability-to-benefit] students.”
About 15 percent of Corinthian’s students in the last academic year used the ability-to-benefit test. The company, which operates more than 100 campuses across North America, estimates it will lose 16,000 potential students and about $120-million in the next fiscal year as a result of this decision, but it will also lose the risk of higher default rates those students would bring. The 15-percent enrollment of ability-to-benefit students was a decrease from 24 percent the previous year, credited to a greater focus on default management at Corinthian, as well as the growth of its online division, which does not enroll such students.
For Kaplan, meanwhile, Michele Mazur, a spokeswoman, said discontinuing ability-to-benefit enrollment was neither a financial decision nor one that was based on the new three-year measure of default rates. Ms. Mazur said many of Kaplan’s campuses stopped enrolling students who passed the test before the three-year window was approved by Congress. She said the systemwide decision, made in October, was mostly about Kaplan’s overall concerns with ability-to-benefit, or ATB, students.
“Although we initially began admitting ATB students several years ago as a way to serve this most-underserved student population, over time we developed serious concerns about ATB students’ performance,” she said.
Ms. Mazur said the decision to stop enrolling them has benefited both Kaplan and people who would have been those students."No one gains when students do not successfully complete their programs and get a job,” she said.
Worries About Students’ Success and Defaults
The Education Department released data showing what institutions’ cohort-default rates would be if a three-year measurement period were already in place. An analysis of that data shows that rates at 183 for-profit colleges were at least 15 percentage points higher in a three-year period than a two-year window, which is the government’s current tracking period. In that same period, only 20 nonprofit colleges had increases that large.
Deborah Cochrane, program director at the Institute for College Access and Success, a group that advocates for college affordability, said colleges have a responsibility to make sure that students can succeed after graduation, and the three-year period helps hold institutions more accountable.
“If ability-to-benefit students are of a particular concern, I think the colleges can give them the support they need to succeed at the same level as other students,” Ms. Cochrane said. “On the other hand, if they know these students aren’t able to succeed at the same rate and they can’t offer the support needed to help them, they shouldn’t be loading up students who they know are more likely to fail.”
Earlier this summer, the Education Department proposed a number of new rules that affect for-profit colleges and ability-to-benefit tests, including those that would establish new requirements for student-aid eligibility and put in place further checks to ensure that tests are being administered fairly and properly.
These rules were proposed because of Government Accountability Office concerns that there hasn’t been enough oversight of the ability-to-benefit tests, which must be approved by the Education Department before they are used. Private publishers certify and monitor test administrators. In October, the Education Department said it was putting in place better monitoring practices, a move that was deemed necessary after a GAO report found that testing officials at a for-profit college helped students cheat on an ability-to-benefit test. In general, widespread cheating was not found at colleges that use the tests, but the report cautioned that the lapse in oversight was allowing unqualified students to get federal aid.
“To decrease the likelihood that students will default on their loans, it is critical that [the Education Department[ increase its oversight of federal student-aid eligibility requirements to make sure that only students who have the ability to benefit receive federal funds to attend college,” the report stated.