CREW: Department of Education: Regarding For-Profit Education: 12/3/10 - 10-01704-F New

-------- - ------------- ------- -- -- ---------------- ,-- ~~~ ~ -~--- ~ ~~ ~ ~~-~-~--- - -~ ----
From: Nassirian, Barmak [barmak@aacrao.org]

Sent: Tuesday, April 20, 2010 1:43 AM
To: Pauline Abernathy; David Hawkins; Deanne Loonin; Rich Williams; Christine Lindstrom; jstudley@publicadvocates.org
Subject: Fwd: DB Education: Potential developments on Gainful Employment
Attachments: 0900b8c081 adfe8a.pdf
Deep Thoughts, by Paul Ginocchio.
I've been reading Michael Lewis's book on the subprime debacle. I see that the sell-side analysts have not changed in the slightest, as evident in the
science fiction opus of Mr. Ginocchio.
barmak
---------- Forwarded message ----------
From: Paul Ginocchio <paul.ginocchio@db.com>
Date: Tue, Apr 20,2010 at 1:04 AM
Subject: DB Education: Potential developments on,Gainful Employment
To:
Business Services & Education Alert: Education: Potential developments on Gainful Em~ment
Reports that GE draft contains a 70/70 completion/placement loophole
Deputy Undersecretary of Education Bob Shireman met with a group of Congressional members on Friday to review Gainfui Employment (GE). According to
comments from one Congressional staffer in attendance, Shireman stated the current GE proposai includes a 70/70 completion/ placement exception.
Cautious to read too much from one Staffer's comments
We remind investors the 70/70 exception was in an early draft of the GE proposal, but was not in the Dept of Education's (DoE) iast published draft language.
Moreover, the 70/70 proposai is clearly different from the talk of a 50/70 exception circulated last week. A few different sources confirmed the 50/70 change to GE,
so it is unclear if the OMB draft GE proposal has been changed or if Shireman was referring to an earlier draft of GE. We have been unable to reach others at this
meeting to obtain further verification of this key comment, or ascertain the motives behind Shireman making this comment to Congressional members before its
public.
A few people who attended the Friday meeting reportedly had negative experiences with For Profit schoois, according to this staffer, potentially driving support for
the DoE's current GE proposal. We do find this surprising - and without knowing what data was shared with the group regarding the effects of the DoE's GE
proposal, (including the negative effects it would have on minority student access), we are hesitant to read much into this one Staffer's account.
1
I ------- --------- ----- -- ------------------ -------------
Finally, we hear that the DoE recently met with a subset of the For Profits, suggesting the dialog on GE is still ongoing. We continue to think GE will be watered
down in the NPRM, but not be weakened to just disclosure in the NPRM or final regulation.
The following link will be available for 90 days. For more information, please click on the link for the full PDF. If you have any trouble viewing the link, copy and
paste the link in a browser. h!!I!;l{pull.db-gmresearch.com/p/137-470C/98738687/0900b8c081adfe8a.rmf
After 90 days you can access the report on our web site: h!!p:/Igm.db.com
Regards,
Paul Ginocchio
Business Services & Education
Office:+1-415-617-4207
paul.ginocchio@db.com
For additional Deutsche Bank research, visit our web site: h!!P:/Igm.db.com/eguities
Please refer to the disclaimer that applies to the research attached in this email.
(See attachedfile: 0900b8c081adje8apdj)

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contained in this communication should not be regarded as such.
2
From: Pauline Abernathy [pabernathy@ticas.org]
Sent: Friday, June 11, 2010 5:38 PM
To: Eric.Stein@do.treas.gov; MichaeI.Barr@do.treas.gov; PeggyTwohig@do.treas.gov; McGuire, MaryEllen C.; Shireman, Bob; Kvaal,
James; Gomez, Gabriella; Levine, Brian S.; Arsenault, Leigh; Hamilton, Justin
Subject: Final school certification letter to conferees from lenders, schools and students
Attachments: CoalitionSchoolCertification. pdf
Attached is a letter to the financial reform conferees from the Consumer Bankers Association, Education Finance Council, Student Loan
Servicing Alliance, National Association of Student Financial Aid Administrators, US PIRG, and TICAS in support of the private student
loan certification provisions in the House-passed financial reform bill. Lenders, schools and students agree on the critical importance of
this provision being retained in the final bill!
Pauline Abernathy
Vice President
The Institute for College Access & Success
www.ticas.org and www.projectonstudentdebt.org
TICAS: 510.318.7900 Direct: 510.318.7903
1
--- ------------- .- -------
From: Black, Andrew [ablack@fppartners.com]

Sent: Friday, April 16, 20102:47 PM
To: Shireman, Bob
Cc: Susan in, Chris
Subject: Slides
Attachments: ED Presentation_final.ppt
Bob - Please find the attached slides.
1
It -- --------------- --------- ------------------
From: Leahy, Matthew [mleahy@fppartners.com]

Sent: Thursday, April 22, 2010 1:55 PM
To: Bergeron, David; Shireman, Bob
Cc: Eisman, Steven; Susanin, Chris
Subject: Updated slides
Attachments: ED Presentation_new pages.ppt
David and Bob,
I have updated a few pages from the presentation from last week with new analyses that I thought you may find interesting.
Thanks,
Matt
Matthew Leahy
FrontPoint Management, Inc
1290 Avenue of the Americas, 34th Floor
New York, NY 10104
(917) 934-1794
mleahy@f[1!lartners.com
1
From: Shireman, Bob
Sent: Monday, May 24, 2010 1:23 PM
To: Martin, Phil
SUbject: FW: Updated slides
Attachments: ED Presentation_new pages.ppt
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From: Leahy, Matthew [F11ailto:mleahy@fppartners.com]

To: Bergeron, David; Shireman, Bob
Cc: Eisman, Steven; Susanin, Chris
Subject: Updated slides
David and Bob,
I have updated a few pages from the presentation from last week with new analyses that I thought you may find interesting.
Thanks,
Matt
Matthew Leahy
FrontPoint Management, Inc
1290 Avenue of the Americas, 34th Floor
New York, NY 10104
(917) 934-1794
mleahy@fppartners.com
1
Sent: Wednesday, April 21, 2010 3: 12 PM
To: Kvaal, Jarnes R.; MichaeI.Barr@do.treas.gov; Eric.Stein@do.treas.gov; Peggy.Twohig@do.treas.gov; Shireman, Bob; Plotkin, Hal;
Arsenault, Leigh; Gomez, Gabriella; Madzelan, Dan; Levine, Brian S.
Cc: Lauren Asher
Subject: Coalition letter supporting the Private Student Loan Bankruptcy Fairness Act
FYI--Attached is a letter supporting the Private Student Loan Bankruptcy Fairness Act (HR 5043) signed by 27 organizations,
representing students, colleges and consumers as well as civil rights and public policy organizations. The letter is being transmitted
today in advance of tomorrow's House Judiciary Committee hearing on the bill.
-m
Coalition letter to
Chairman C.
Pauline Abernathy
Vice President
We moved! TICAS' main number is now 510.318.7900. My direct line is 510.318.7903.
1
- -- - - --- --------------------~--~ ~ ~~--

Sent: Friday, April 30, 2010 6:58 PM
To: Kvaal, James R.; Arsenault, Leigh; Eric.Stein@do.treas.gov; Peggy.Twohig@do.treas.gov; Gomez, Gabriella; Shireman, Bob
Subject: FW: Sen. Franken bankruptcy amdt to financial reform bill
Attachments: Franken amendment.pdf; Coalition lelter to Chairman Cohen_4-22-10.pdf
FYI.
__
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;~'''~~".'""'~''~'=''_~'·~~· __ ~.~~~_~,,_~~'' ,_·_,, ~.v~~·A'·_'_"_~"~_"~'.'~~'~~."'_"'~"~'~O'·.~""'_"".".m"._.~",~«~. ,.~ ~ •
From: Luke Klipp

To: Luke Klipp
Cc: Lomonaco, Jeff (Franken); Lauren Asher; Pauline Abernathy; Connie Myers
Subject: URGENT: Sen. Franken bill on bankruptcy to drop on Monday!
On Monday, Senator Franken plans to file the Fairness for Struggiing Students Act of 2010(S. 3219) as an amendment to the financial reform bill. Senators
Durbin and Whitehouse are cosponsoring this amendment. If you would like your organization to be listed as supporting this amendment, please contact Jeff
Lomonaco on Senator Franken's staff by 5pm on Monday, May 3, at jeff 10monaco@franken.senate.g.QY. I would appreciate if it you would CC me at
!!sllim@ticas.org as well.
You received this email because your organization has signed one or more previous lelters in support of changing the treatment of private student loans in
bankruptcy. Altached are the Franken amendment and last week's lelter from 28 organizations to Rep. Cohen in support of the Private Student Loan Bankruptcy
Fairness Act of 2010 (HR 5043).
TICAS supports this important amendment and we hope your organization will as well.
Luke H. Klipp
Policy Analyst
405 14th Street, Suite 1100
Oakland, CA 94612
Main: (510) 318-7900
Direct: (510) 318-7916
Fax: (510) 318-7918
!!sllim@ticas.org
1
,

Sent: Sunday, April 25, 2010 9:42 AM
To: Gomez, Gabriella; Manheimer, Ann; Shireman, Bob; Arsenault, Leigh; Yuan, Georgia; Dannenberg, Michael; Kanter, Martha; Plotkin,
Hal; Kvaal, James R.; Gordon, Robert M.
Cc: Jamienne S. Studley; Lauren Asher; Chris Lindstrom
Subject: Tricaucus briefing on Friday
In case you did not hear about it, CCA faced a barrage of critical questions and comments from tri-caucus staff at Friday's gainful employment
briefing, I was not present but have spoken to several people who were, and I have never heard of a Hill briefing like what they described. One tri-
caucus staffer described staff as "hammering" CCA, and another person present said they "ate Harris alive." Among those making critical comments
and questions were staff from Hinojosa, Grijalva, Lee, and Clarke's offices. No staffers spoke in support ofCCA's position. Jeff Appel from Miller's
staff witnessed the grilling but did not speak. No doubt that CCA has supporters on the tri-callcus, but clearly it has many very vocal opponents as
well. I'll follow up with Jeff and the other staff present but wanted to make sure you were aware of what happened. Pauline
From: Paul Brathwaite [mailto:pbrathwaite@podesta.com]

Sent: Wednesday, April 21, 2010 12:00 PM
Subject: You1re Invited: What Is Gainful Employment?
Briefing on Gainful Employment
You1re Invited
Friday, April 23, 2010

2:30 - 3:15 pm
Room 2261
Rayburn House Office Building
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Pauline Abernathy
Vice President
2
Sent: Tuesday, April 20, 2010 3:45 PM
To: Manheimer, Ann; Arsenault, Leigh; Gomez, Gabriella; Kvaal, James R; Shireman, Bob
Cc: Debbie Frankie Cochrane
Subject: . CCA outreach to Mayors against gainful employment
FYI-- I just got the email below from a former colleague in the Philadelphia Mayor's office. As you'll see, EDMC has hired a firm to get
local electeds and others to send letters to Senators Casey and Specter asking them to oppose the gainful employment regulation
and to urge ED to let "Congress handle this issue instead." Mayor Nutter will not be signing this letter but it would be worth the
Administration reaching out to the conference of mayors and other state and local elected associations on this issue.
Text of email sent to mayor's office:
We are working as local consultant for EDMC, the parent company of the Art Institute of Philadelphia The US Department of Education has proposed a rule that
would make entire programs ineligible for federal Title IV aid (like Pell grants) if they fail to meet a certain debt-to-income ratio for students upon graduation. It's a
bit wonky, but what it boils down to is concern that programs like those offered at the Art Institute of Philadelphia could be impacted if this rule goes through and
could limit access for students, and adults switching or starting careers to obtain degrees in such career tracks like graphic and fashion design, culinary arts,
filmmaking and photography and more.
We're seeking to build support from individuals and organizations that can attest to the importance of these programs for career training and education in the
Philadelphia region and the importance of these careers to our local economy. We're asking for a show of support in the form of written letters to our Pennsylvania
Senators, Arlen Specter and Robert Casey about this issue, expressing support for AI Philadelphia and its programs, explaining how important they are for those
seeking to start careers in the aforementioned arenas, and asking Senators Casey and Specter to contact the Dept of Ed to oppose this rule and have Congress
handle this issue instead.
Pauline Abernathy
Vice President
510.883.7303 www.ticas.org
1
Sent: Monday, April 12, 2010 9:54 AM
To: Swarthout, Luke (HELP Committee); Nassirian, Barmak; Shireman, Bob; Kvaal, James R.
Cc: Juliano, Robin (HELP Committee); Debbie Frankie Cochrane; Lauren Asher
Subject: RE: Calculating the Contribution of Demographic Differences to Default Rates
I haven't read Mark's paper but the CCA-commissioned report by CRA used the same data set, and the findings actually support
the need to define gainful employment. After controlling for demographic factors using regression analysis, CCA/CRA found
that default rates at for-profit schools are still twice that at other schools. (Their Table 7 indicates that after
controlling for demographics, for-profit default rates declined from 2S% to 12%, and the four-year public rate dropped from
6% to 3%, so the for-profit rate was still more than four-times the public 4-yr rate after controlling for demographics.
They don't site the 2-yr public numbers but based on the graph their default rates are half the for-profit rates after
controlling for demographics.) I believe Mark found similar but not as large differences after adjusting for demographics.
I don't know what he did differently. Thoughts?
-----Original Message-----
From: Swarthout, Luke (HELP Committee)
[mailto:Luke_Swarthout@help.senate.gov]
To: Pauline Abernathy; 'Nassirian, Barmak'; 'Shireman, Bob'; 'Kvaal, James R.'
Cc: Juliano, Robin (HELP Committee)
Subject: FW: Calculating the Contribution of Demographic Differences to Default Rates
Is this paper wholly worthless because it's making assumptions based on

96/01 Longitudinal data? The for profit sector looked radically different-so it would strike me that on that basis alone
this whole thing is fraudulent.
From: Kantrowitz, Mark [mailto:Mark.Kantrowitz@Monster.com]
Sent: Monday, April 0S, 2010 4:31 PM
To: FINAID-L@LISTS.PSU.EDU
Cc: Kantrowitz, Mark
Subject: Calculating the Contribution of Demographic Differences to Default Rates
Default rates differ according to type of college and loan program. Some of the differences in default rates are due to
demographic differences among the colleges and loan programs and some of the differences are due to other factors.
I have developed a mathematical methodology for determining the contribution of demographic differences toward overall
default rates.
1
------------- -------------- ---------
The method factors default rates for a set of borrowers dis aggregated by a demographic characteristic into a dot product of
prevalence and default rate vectors. An adjusted default rate is calculated by substituting the prevalence vector for a
different set of borrowers, showing what the default rate for the first set of borrowers would have been if it had the same
demographic distribution as the second set of borrowers. The contribution of the demographic differences to the difference
in default rates is calculated by subtracting the adjusted default rate from the original default rate and dividing the
result by the difference in unadjusted default rates for the two sets of borrowers.
The fuil report can be found at

http://www.finaid.org/educators/20100405demographicdifferences.pdf
The report develops the mathematical model and applies it to a variety of demographic factors to determine their
contribution toward the differences in default rates.
Some of the key findings of the report include:
1. Risk factors that affect persistence and attainment

account for 60.1% of the difference in default rates
between for-profit and non-profit colleges and 38.6%
of the difference in default rates between for-profit
colleges and public colleges. For-profit colleges
serve a much higher risk mix of students. The risk
factors included delayed and part-time enrollment,
working full-time while enrolled and single parent
status, among other factors.
2. Pell Grant recipient status accounts for 32.9% of the

difference in default rates between for-profit and
non-profit colleges and 30.7% of the difference in
default rates between for-profit and public colleges.
3. Household size accounts for 20.8% of the difference in

default rates between for-profit and non-profit colleges
and 16.6% of the difference in default rates between
for-profit and public colleges.
4. Parent educational attainment of a Bachelor's degree

accounts for 18.1% of the difference in default rates
between for-profit and non-profit colleges and 7.9%
of the difference in default rates between for-profit
and public colleges.
5. Dependency status accounts for 17.2% of the difference

in default rates between for-profit and non-profit
2
colleges and 14.3% of the difference in default rates
between for-profit and public colleges.
6. The distribution of colleges according to level and

control in the FFEL and Direct Loan programs accounts
for 44.7% of the difference in default rates between
the two loan programs for the FY2007 cohort and about
all of the differences in default rates for the
FY2006 (97.9%) and FY200S (108.0%) cohorts.
7. The distribution of dollar loan volume according to

type of loan (e.g., un subsidized Stafford, subsidized
St~fford, PLUS and consolidation loan) accounts for
86.9% of the difference in projected long-term default
rates in the FFEL and Direct Loan programs in FY2009
and 84.0% in FY2008 as reported in the education
appendixes to the President's FY2011 and FY2010 budgets.
Please note that the contributions of individual demographic factors cannot be added together because of a high degree of
overlap among the demographic factors.
While these results may demonstrate that demographic differences account for 60.1% of the difference in default rates
between for-profit and non-profit colleges, that also means that 39.9% of the difference in default rates is not due to
demographic differences. The adjusted default rates at for-profit colleges are still higher than the default rates at non-
profit and public colleges. The remaining differences may be due to differences in institutional quality.
The report includes two main recommendations:
1. College cohort default rates should be split into two

default rates, one for Pell Grant recipients and one
for Pell Grant non-recipients, and only the latter used
to determine institutional eligibility for federal
student aid funds. This would avoid penalizing a college
based on the degree to which it serves students .from
at-risk populations. (pell Grant recipient status is
chosen instead of the risk factors because it is easier
to implement.)
2. Although debating differences in default rates among

the FFEL and Direct Loan programs has been rendered moot
by passage of the Health Care and Education Reconciliation
Act of 2010, which ends the FFEL program effective July 1,
2010, the method presented in this paper is still useful
3
for comparing the performance of state loan agencies in
servicing direct loan program loans. The earmark of
100,000 borrowers in each state to the state loan agencies
precludes the random assignment of borrowers to servicers,
preventing an apples-to-apples comparison of effectiveness
in default aversion and customer service quality.
Demographic differences among the states could be
responsible for some of the difference in effectiveness.
The method presented in this paper permits the adjustment
of servicer default rates according to a meaningful
common scale by reweighting them according to the overall
average distribution of borrowers.
Mark Kantrowitz
Publisher of FinAid.org and FastWeb.com
--------------------------------------------------
Mark Kantrowitz
Publisher of FinAid.org and FastWeb.com
Author, FastWeb College Gold
FinAid Page LLC

PO Box 2056
Cranberry Township, PA 16066-1056
Tel: 1-724-538-4500
Fax: 1-724-538-4502
Email: mkant@finaid.org, mkant@fastweb.com www.fastweb.com www.finaid.org www.collegegold.com .
NOTICE:
This message, and any attachments, contain(s) information that may be confidential or protected by privilege from disclosure
and is intended only for the individual or entity named above. No one else may disclose, copy, distribute or use the
contents of this message for any purpose.
Its unauthorized use, dissemination or duplication is strictly prohibited and may be unlawful. If you receive this message
in error or you otherwise are not an authorized recipient, please immediately delete the message and any attachments and
notify the sender.
•
Sent: Wednesday, April 07, 20102:02 PM
To: Shireman, Bob
Cc: . Lauren Asher
Subject: Invitation to meeting April 29-30 in Oakland
Bob,
A small group of organizations that'advocate for students, borrowers and taxpayers are meeting April 29-30 in Oakland, California to
discuss and brainstorm about ways to help bring relief to student loan borrowers who are in financial distress and/or were the victims of
fraudulent schools or lenders. We are hoping you can join us for all or part of the one and a half day meeting at the TICAS office in
Oakland. We have not yet finalized the agenda, but the topics include repayment issues, discharge of loans for victims of illegal
practices and FTC holder issues, and debt collection issues. The goal is brainstorming as well as educating ourselves on these issues.
Background reading will be sent around in advance with the agenda. The meeting will begin Thurs afternoon April 29 and all day Friday.
The following people and organizations will be attending or have been invited:
Deanne Loonin, National Consumer Law Center

Tim Ranzetta, Student Lending Analytics
Jaime Studley, Public Advocates
Margaret Reiter (invited), formerly Deputy CA AG
TICAS staff including Lauren and myself
We're purposely keeping this initial meeting small so we can keep it informal and cover as much ground as possible in a relatively short
period of time. We hope you can join us! Pauline
Pauline Abernathy
Vice President
1
-------- ---- ~~-----
From: Lauren Asher [LAsher@ticas.org]

Sent: Thursday, May 27, 2010 1:05 AM
To: Arsenault, Leigh; Smith, Zakiya; Shireman, Bob
Subject: FAFSA harder than SAT?
Students say filling out the FAFSA is more difficult than taking the SAT: see chart 8 from this new Student Poll survey at
h!!P://www.artsci.com/studentpoIl1v8n1Iindex.as~ . You probably already saw the 5/24 Chronicle article about the survey, which focuses on the heavy reliance on
sticker price when deciding where to apply, iow usage of available calculators to gauge actual costs, and high expectations for getting merit aid. Just flagging the
FAFSA stat as well given your interest in the issue.
Lauren
(Please note our new phone number and address!)

Lauren Asher
President
405 14th St., 11th Floor
Oakland, CA 94612
(510) 318-7900, x304
liasher@ticas.org
www.ticas.org
www.P!Qjectonstudentdebt.org
www.college-insight.org
1
.- .. -- -- ---- --

Sent: Tuesday, May 18, 2010 706 PM
To: Arsenault, Leigh; Smith, Zakiya; Dannenberg, Michael; Gomez, Gabriella; Shireman, Bob; Madzelan, Dan
Cc: Pauline Abernathy; Connie Myers
Subject: $5.4B in private student loans likely to default
Just fyi, I thought you might be interested in this likely conservative number for how much risky private student loan debt is out there. About $5.4
billion in outstanding private student loans - owed by an estimated 360,000-540,000 borrowers - are currently projected to default, according to a
new analysis of recent information from First Marblehead and Sallie Mae. For more about these high risk loans, most of which went to students at
for-profit colleges and/or were uncertified, see "The $5.4 Billion Private Student Loan Problem" at
h!1p:lIstudentlendinganalytics. ty~pad.com/student lending analytics/201 0/05/the-54-billion-problem_ html.
Lauren

Lauren Asher
President
40514th St., 11th Floor
Oakland, CA 94612 -
(510) 318-7900, x304
llasher@ticas.org
www.ticas.org
www.P!:Qjectonstudentdebt.org
1
Sent: Tuesday, May 11, 20102:55 PM
To: Shireman, Bob; Deanne Loonin; Margaret Reiter; Tim Ranzetta; jstudiey@publicadvocates.org; Michelle Rodriguez
Cc: Edie Irons; Pauline Abernathy
SUbject: Thanks!
Bob, Deanne, Margaret, Tim, Jamie and Michelle,
Thanks so much for participating in the April 29-30 group brainstorming session on distressed federal student loan borrowers. Each of you brought so much of
unique value to the discussion, and we really are grateful that you were able to take the time to join us in Oakland. As we discussed, the purpose of the discussion
was not to reach a consensus or set an agenda, but rather to increase all of our capacity to understand both consumer and taxpayer issues related to distressed
borrowers and identify our own research and/or 'policy priorities. Your combined expertise, energy, and ideas helped us all gain a more nuanced and shared
understanding of the challenges facing distressed borrowers, ways to help prevent default, servicing and collections functions within the federai student loan
system, and a range of issues that merit further exploration and analysis.
Edie is pulling together notes from the meeting that we plan to circulate next week. If you have anything you'd like her to include or draw on, please emaii her this
week at eirons@ticas.org, or fax hand-written notes to 510-318-7918. And thanks to Margaret for sending your notes along already!
While this is clearly a very busy time for us all, we'll be following up with you periodically over the next several months to fiesh out topics for additional research,
gather feedback on potential policy models, and otherwise continue this very important and productive conversation.
Thanks again!
Lauren
----------------------------------------------------
Lauren Asher
President
The institute for College Access & Success
405 14th St., 11 th Floor
Oakiand, CA 94612
(510) 318-7900, x304
jjasher@ticas.org
www.ticas.org
www.Q!:Qjectonstudentdebt.org
1
-- ------

Sent: Wednesday, May 05,201012:15 PM
To: Manheimer, Ann; Arsenault, Leigh; Gomez, Gabriella; Shireman, Bob; Kvaal, James R.; Plotkin, Hal; Kanter, Martha; Madzelan, Dan
Cc: Lauren Asher; Debbie Frankie Cochrane
Subject: CCA astoturfing opposition to defining gainful employment
The string below reveals that CCA has set up a web site and is urging its members to have students sign a petition to "reject the
Department of Education's definition of Gainful Employment." The fact that CCA is not even waiting to see what the Administration
proposes at a minimum raises questions about eCA's interest in any definition of gainful employment.
A student petition rejecting ED's [currently nonexistent] definition of gainful employment.
J!llp:Uwww.studentsforacademicchoices.org/index.cfm?!!!!ge=3
A search reveals a few schools that are directing students to the site. Example:
J!llp:Ucommunity.globeuniversity.edu/online!?p=1266
This appears to be in response to this notice by Students for Academic Choice. Questions are to be directed to Bruce Leftwich, Senior Vice President of
Legislation at CCA.
!illp:Ucommunity.globeuniversitv.edu/Elk-River/?p=84
Pauline Abernathy
Vice President
1
From: Pauline Abernathy [pabernathy@ticas.orgl
Sent: Tuesday, May 04,201012:45 PM
To: Manheirner, Ann; Gomez, Gabriella; Arsenault, Leigh; Kvaal, James R.; Shireman, Bob
Subject: Dear Colleagues related to gainful employment
FYI two Dear Colleagues from Rep Polis related to gainful employment and neg reg below.
.•__
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New College Board Study: For-Profit College Graduates Have

Highest Levels of Loan Debt
From: The Honorable Jared Polis
Sent By: fu>iros.Protopsaltis@mail.honse.gov
Date: 4/30/2010
New College Board Study Shows For-Profit College Graduates Have
Highest Levels of Loan Debt
53% ofbachelor's degree recipients from for-profit schools had a debt of$30,500 or more!
Dear Colleague,
Yesterday the College Board released a new study, "Who Borrows Most? Bachelor's Degree Recipients with High Levels a/Student Debt;" which
provides additional evidence of the alarming levels of student loan debt burden at for-profit colleges and underscores the need to protect
students, their families and taxpayers through meaningful policies and regulations. The study can be found at:
http://advocacy.collegeboard.org/sites/default/files/Trends-Who-Borrows-Most-Brief.mlf
According to the study, more than half (530/0) of bachelor's degree recipients who graduated from for-profit colleges had a
cumulative debt of $30,500 or more (excluding PLUS Loans, credit cards or home equity loans), compared to 24% among those from
1
private nonprofit colleges and 12% from 4-year public colleges. And while 38% of bachelor's degree recipients from public colleges and
28% from private nonprofit colleges had no debt, only 4% from for-profits were debtless.
Even more troubling is the fact that excessive debt in the for-profit sector seems to affect students regardless of family income or
status:
• For-profit colleges serve a higher proportion oflow-income students. But according to this study, among dependent bachelor's
degree recipients from for-profit colleges, students from families with incomes of $100,000 or more were equally likely (52%)
as students from families with incomes less than $30,000 to graduate with $30,500 or more in student debt!
• Also, while more bachelor's recipients at for-profit colleges are independent (88%) than dependent (12%), the study finds that
dependent and independent recipients from for-profit colleges had almost equal rates of high debt levels: 49% of dependent
students and 53% of independent students had $30,500 or more in cumulative debt.
These findings are consistent with the independent study recently commissioned by the for-profit sector's industry association - the Career
College Association - which found that, even after controlling for student demographic characteristics, for-profit college students are
twice as likely as other college students to default.
This Congress passed and President Obama signed into law historic legislation that made the single largest investment in college financial
aid ever by transforming the system to serve the needs of students, not banks or big corporations. As we work on education issues in the
111th Congress, we look forward to making further progress on protecting both students and taxpayers and we support the U.S. Department
of Education's ongoing process of revising and strengthening its "program integrity" regulations to curb federal student loan abuse and
safeguard taxpayer dollars.
•
If you have questions or need more information, please contactSpiros.Protopsaltis@mail.house.gov at 5-2161 (Polis' office),
Libby.Masiuk@mail.house.gov at 5-4276 (P. Murphy's office), or josep-h.Mais@mail.house.gov at 5-2435 (Grijalva's office).
Sincerely,
Jared Polis Patrick S. Murphy Raul M. Grijalva

Member of Congress Member of Congress Member of Congress
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"College Inc." Tonight on PBS: FRONTLINE Investigates For-Profit

Higher Education
Sent By: fuliros.Protopsaltis@mail.house.gov
Date: 5/412010
,Dear Colleague,
I would like to bring to your attention tonight's airing on PBS of a new FRONTLINE investigation of the for-profit higher education industry,
and specifically "the rise offor-profit universities and the tensions between their Wall Street backers and regulators," College, Inc. airs today,
Tuesday, May 4, 2010, at 9 P.M. ET on PBS (check local listings). The trailer for tonight's documentary can be found at
www.pbs.org/frontiine/collegeinc
According to PBS, "Higher education is a $400 billion industry fueled by taxpayer money, One of the fastest-growing--and most controversial--
sectors of the industry is the for-profit colleges and universities. Unlike traditional colleges that raise money from wealthy alumni and other donors,
many for-profit schools sell shares to investors on Wall Street. .. FRONTLINE follows the money to uncover how for-profit universities are
transforming the way we think about college in America." For 27 years, FRONTLINE has produced highly acclaimed documentaries and has served
as public television's flagship public affairs series, .
As we continue to work on improving higher education access and success in the 111 th Congress, I encourage you and your staffto view College
Inc" which promises to provide important information and insights through the high-quality investigative journalism of FRONTLINE that we are
used to,
Sincerely,
Jared Polis
Member of Congress
__
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Visit the e-Dear Colleague Service to manage your subscription to the available Issue and Party list(s),
3
--- -------- ------------- - ------
From: Edie Irons [Elrons@ticas.org]

To: Shireman, Bob
Cc: Lauren Asher
Subject: RE: Project on Student Debt
Hi Bob,
Belated congratulations on your new almost-official position! We're all proud of you and excited for what's to come, but also missing you.
I sent her to you and Mark Kantrowitz since we don't really have anyone on staff who knows much about this topic. It's a knowledge gap I didn't notice until just
now. Let me know if I shouldn't refer reporters to you on this or other topics, as I occasionally do. Also, Lauren is in Seattle today for a Gates meeting, and mostly
indisposed ...
Actually, I just spoke with her, and she seems to be done with her meeting. We could make a general comment about using federal loans first and being aware of
the costs of these programs, but that's about as far as we'd go. Let me know if you don't talk to her and I'll cal her back.
Thanks,
Edie
Edie Irons
Communications Director
2054 University Ave. Suite 500
Berkeley, CA 94704
510.883.7302
eirons@ticas_org
www.ticas.org
J:!!!QJLQ!Qiectonstudentdebt.org
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From: Shireman, Bob [mailto:Bob.5hireman@ed.gQY]

Sent: Wednesday, April 15, 2009 11: 12 AM
To: Edie Irons
Cc: Lauren Asher
Subject: FW: Project on Student Debt
1
"
-~-_.~ _--_.~--------_._--_.~.~-~-~-----_._._-_._-~----~-~_'~.~'_.~_" _ _-_._. __
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From: Beth Kowitt Imailto:beth kowitt@fortunemail.com]

Sent: Wednesday, April is, 2009 2:09 PM
To: Shireman, Bob
Subject: Project on Student Debt
Hi Mr. Shireman,
I am a reporter with Fortune Magazine and am working on a story on social/peer-to-peer lending for coliege. I calied the Project on Student Debt and they
said you were on leave right now. I don't know if you're able to speak with me about this in your new capacity, but if now could you put me in touch with
someone who can? Any direction you can give me would be greatly appreciated.
Thanks,
Beth Kowitt
Fortune Magazine
212-522-3318
2
- -------- --- -------- --- ----_._--------- ---------- ----------,,----------
From: Lauren Asher [Ijasher@ticas.org]

Sent: Monday, April 06, 2009 3:25 PM
To: Williams, Leslie; Shireman, Bob; Anderson, Gregory; Oakes, Jeannie
Subject: RE: DC Convening with Obama Higher Ed
Try Cecilia E. Rouse@cea.eolL9Ql!
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From: Williams, Leslie Imailto:Le.williams@fordfound.org]

To: Shireman, Bob; Lauren Asher; Anderson, Gregory; Oakes, Jeannie
Thanks Lauren and Bob!
Bob, do you have Cecilia's info?
Leslie
From: Sbireman, Bob [mailto:Bob.Shireman@ed.gov]
Sent: Sun 4/5/2009 12:41 AM
To: Lauren Asher; Anderson, Gregory; Williams, Leslie; Oakes, Jeannie
kantermartha@gmail.com
From: Lauren Asher [mailto:ljasher@ticas.org]
Sent: Sat 4/4/2009 II :28 PM
To: Anderson, Gregory; Williams, Leslie; Shireman, Bob; Oakes, Jeannie
Cc:
Kevin Byrne's phone number is (512) 329-0799, xl25
1
.~ --- ----- ------- ---- -- -- -- ----- -- --- - ----- ~ ~-------
Hilary Pennington's email is hilarv.pennington@gatesfoundation.org
Bob probably has a current email address and/or phone for Martha Kanter.
From: Anderson, Gregory [mailto:G.Anderson@fordfound.org]

Sent: Saturday, April 04, 2009 5: 18 PM
To: Williams, Leslie; Bob.Shireman@ed.gov; Lauren Asher; Oakes, Jeannie
Subject: Re: DC Convening with Obama Higher Ed
Hi Leslie,
Jeannie Oakes can help you with Hilary and you should ask her to call if need be.
Best,
Greg
From: Williams, Leslie

To: Anderson, Gregory; Bob.Shireman@ed.gov <Bob.shireman@ed.gov>; Lauren Asher <jjasher@ticas.org>; Oakes, Jeannie
Sent: Sat Apr 0420:15:322009
Subject: DC Convening with Obama Higher Ed
Hi Gr'eg, Jeannie, Bob and Lauren,
I've gotten a letter out to most convening invitees inquiring about their availability. However, I don't have contact information for all. Do any of you have e-mail addresses and
phone numbers for the following people:
Kevin Byrne (I have an e-mail but could use a phone number for follow-up.
Hilary Pennington
Cecilia Rouse
2
---------
Bob, I've contacted Zakiya Smitb regarding contact information for Carmel Martin and Martha Kanter. He has provided me with Ms. Martin's info but Ms. Kanter's nomination is
so recent that there isn't any info. Should I assume that you will be in touch with her?
Regards,
Leslie
3
--- - -----
From: Nassirian, Barmak [NassirianB@aacrao.org]

Sent: Monday, May 11, 2009 1:08 PM
To: Tom Butts; Swarthout, Luke (HELP Committee); Shireman, Bob
Subject: RE: WAPO: Sallie Mae's About-Face on Loan Subsidies
What a puff piece! It betrayed no consciousness whatever of how self-serving and one-sided the proposal is.
Bannak Nassirian
AACRAO
1 Dupont Circle, Suite 520
Washington, DC 20036
202/263-0290 Direct
202/ 872-8857 Fax
From: Tom Butts [mailto:thms.btts@gmail.com]
Sent: Sunday, May 10, 2009 9:09 PM
To: dlcg@umich.edu
Subject: WAPO: Sallie Mae's About-Face on Loan Subsidies
Sallie Mae's About-Face on Loan Subsidies

Lender's Proposal Similar to Obama's
By Amit R. Patey'
Washington Post Staff Writer
Monday, May 11, 2009
http://www.washingtonpost.com/wp-dyn/contentiarticie/2009/05/10/AR2009051001768.html?hpid=topnews
1
- -- - - - - - - - - -

Sent: Friday, May 08, 2009 11: 13 AM
To: Sullivan, Jerry
Subject: Citi: Learn about legislation that impacts you
I have lost count, but I think Citi has received only $320 billion in TARP money. I love their newfound concern about the national debt.
From: The Student Loan Corporation <student.loans@email.studentloan.com>

Date: Fri, May 8, 2009 at I: 18 AM
Subject: Citi: Learn about legislation that impacts you
To:
I f you're unable 10 see t(le 11l8'3sage below. click here,

/vLJ student.loans@ell)ail.studentloan.com to your address book to ensure deliw:'ly
.•.
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May 7,2009
Dear
Thank you for the opportunity to help you obtain the education of your choice. As a student loan
provider for the past 50 years, Citi has provided financial aid assistance to millions of students
and parents nationwide.
Given the challenging economy and continued increases in the cost of higher education, it is
critical that the U.S. student lending system serves the best interests of students and their
families. If you believe that competition and choice among student loan providers is valuable,
you have an opportunity to make your voice heard.
Why Get Involved?
1
.It ---------- -- ---- -------------------- _.--- -- - -.- - ----~-
The government budget outline proposes offering federal student loans solely through the
federal government's Direct Lending Program starting July of next year. While this proposal will
not impact a borrower's ability to obtain a federal student loan, it wili eiiminate your ability to
choose a student loan provider. It will also substantially increase the national debt since each
and every federally-insured student loan will be funded by the Federal Treasury through the
issuance of treasury securities. This proposal impacts you as a citizen - both as a taxpayer and
as a borrower.
Why Does Competition And Choice Matter?

Without private lender involvement through the Federal Family Education Loan Program,
students and their families will not enjoy the benefits that competition has made possible for
more than 40 years. This competition has provided not only a choice of lenders, but also
innovative products and services, such as:
•. a variety of borrower benefits that lower your cost of borrowing
• financial literacy programs that educate you on how to borrow responsibly
• web-based tools and resources to advise you about your financing options
• default prevention services to help you pay back your loans
Competition also has driven increased customer satisfaction as a result of the responsiveness,
personal attention and.on-campus support that student loan lenders have provided to borrowers
and schools nationwide.
Make Your Voice Heard

If you value the ability to shop for, evaluate and choose your student loan provider, make your
voice heard by contacting your Members of Congress and by signing one of the online petitions
that support borrower choice and competition in federal student lending.
Sincerely,
The Student Loan Corporation
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from ..email.studentloan.com.. claiming to be studentloan.com hr ~>eCUI'e "lccounl access or call -1-300-967 2400. i\llonday ~
Friday f(QID 8 <1 m. ·11 p.rli. Eastern Time_
This 8'lT1aill)",,~ beell sent to you -from Th'2 Stl.lct8nt L_'XHl CurpNcr[iun. If you no 10l1ger WiSfl to r8ceive c-rTleo,1 nl'"~ssages 1m!), The
Student Loan Corporation. you can click here ,0 chan(jf) your «-rnail options
Should yuu vi/ish to contact us in writing, pl'Jds8 rn;jl your cO;Tcspondenc('! to:
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From: nassirianb@aacrao.org
Sent: Thursday, May 07,20095:06 PM
To: Shireman, Bob
Subject: Re: Investigators Raid City College of San Francisco
That is happy news. Let's talk when you have a minute.
Sent from my Verizon Wireless BlackBerry
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From: "Shireman, Bob"

Date: Thu, 7 May 200915:46:19 -0500
To: 'Nassirian, Barmak'<NassirianB@aacrao.org>
Subject: RE: Investigators Raid City College of San Francisco
FYI, unrelated to this, Arne has a family vacation planned and will not be speaking at NASFAA.
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From: Nassirian, Barmak [mailto:NassirianB@aacrao.org]
Sent: Thursday, May 07, 2009 3:18 PM
To: thms.btts@gmail.com; Davenport, Dan; Craig Munier; Johnson, Roberta; Lauren Asher; Rich Williams; Steve Burd; Michael Dannenberg; Melissa Tooley;
Jason Delisle; Benjamin Miiler
Subject: Investigators Raid City College of San Francisco
I don't know whether NASFAA can get its money back from the search firm, but their due diligence clearly left something to be desired.
Raid seeks to prove City College misused funds

Lance Williams, Chronicle Staff Writer
Thursday, May 7, 2009
1.
----- ---- - - ----- -- --- - ---------- --- -----
District attorney's investigators raided City College of San Francisco on Wednesday, seeking evidence that college officials had illegally spent public
money on donations to education-related political campaigns.
A copy of a search warrant served on the college shows that investigators are scrutinizing the actions of former Chancellor Philip Day, who left the
college last year to work for an education lobbying firm in Washington, D.C.
Investigators searched Day's former office, now occupied by Chancellor Don Griffin. The offices of Peter Goldstein, vice chancellor of finance, and
Stephen Herman, dean of administrative services, also were searched, said an official who saw the searches under way.
Investigators were seeking documents concerning donations to the political campaigns of two city bond measures that benefited the college and two
state initiatives that sought increased funding for community colleges, the search warrant says.
The Chronicle disclosed in 2007 that college officials had diverted $10,000 in public money to political donations for a $246.3 million college bond
measure that San Francisco voters approved in 2005.
A county grand jury then began investigating Day and his aides on suspicion of violating state laws against misusing public funds and failing to make
accurate reports of political donations, college documents show.
An internal probe ordered last year by City College's trustees found a continuing pattern of political fundraising abuses at the school. Some
transactions appeared to violate state law, wrote lawyers for the firm of Renne, Sloan, Holtzman & Sakai, which conducted the investigation.
Day, now the head of the National Association of Student Financial Aid Administrators, could not be reached for comment Wednesday. In an
interview last year, he denied that he had ever misused college funds or failed to report political donations accurately.
"That did not happen," he said at the time. "That is not true."
Martha Lucey, City College's dean of public information, said, "Any comment should come from the D.A."
Erica Derryck, spokeswoman for District Attorney Kamala Harris, declined to comment.
Matthew Siroka, an attorney for Goldstein, said the raid was needlessly disruptive.
2
"The college has bent over backwards to cooperate" with prosecutors, Siroka said. "Most of what was seized today were (copies of) documents that
had already been turned over. "
The search warrant indicates that investigators are focusing on these transactions:
-- A $10,000 donation to the 2005 bond campaign, made by a motorcycle driving school that leases a parking lot at City College. The school's
president told The Chronicle that the $10,000 was a lease payment he owed to the college, but that Assistant Vice Chancellor James Blomquist told
him to make it a donation to the bond campaign instead.
Blomquist later acknowledged steering the payment to the bond campaign, saying he hadn't realized he was doing anything wrong.
-- A $20,000 donation to the 2005 bond campaign, made by a cafe owner who had just won a contract to operate a coffee bar at the college. The cafe
owner owed the money to the college, but it was given to the bond campaign, records show. Before the election, the donation was refunded and the
cafe owner paid the money to the college, Day said.
-- $30,000 in donations to the same bond campaign, made by two women with ties to the operator of vending trucks that sold food on campus. The
donations were made shortly after the vendor obtained a new five-year contract, records show. Day said the food vendor was simply a friend of the
college.
-- More than $28,000 in donations to two 2006 state education measures, made by the college's nonprofit foundation. Unlike the college, the
foundation was legally permitted to make political donations.
According to the report by the college's internal investigators, the $28,000 was owed to the college by PepsiCo on its contract to sell beverages on
campus.
Day, through his aide Herman, instructed PepsiCo to make the payments to the foundation, which then donated the money to the political campaigns,
the internal report said. At the time, Vice Chancellor Goldstein expressed discomfort with the PepsiCo transaction, apparently for legal reasons, the
report said.
-- An additional $10,000 in donations to the same state measures, also from the foundation. According to the internal investigation, Day used $7,000
from the college bookstore and $3,000 from the cafe owner who operated the coffee shop to finance this donation, but had it made in the foundation's
name.
At Day's direction, the foundation repaid the $10,000 to the college in 2007, after The Chronicle began reporting on political fundraising abuses at
the college, the internal report said.
E-mail LanceWilliamsatlmwilliams@sfchronicle.com.
3
--~~~~~~
http://sfgate.comlcgi-bin/article.cgi?f /c/a/2009/05/07/MNJQ17FTEQ.DTL
This article appeared on page A-I of the San Francisco Chronicle
Barmak Nassirian
AACRAO
202/263-0290 Direct
202/ 872-8857 Fax
4
,-,-,-- -------- - ---- - - --------------------------------------- --------------- -- -- --- -- -----

Sent: Thursday, May 07, 2009 3: 18 PM
To: thms.btts@gmail.com; Davenport, Dan; Craig Munier; Johnson, Roberta; Lauren Asher; Rich Williams; Steve Burd; Michael
Dannenberg; Melissa Tooley; Jason Delisle; Benjamin Miller
SUbject: Investigators Raid City College of San Francisco
I don't know whether NASFAA can get its money back from the search firm, but their due diligence clearly left something to be desired.
Raid seeks to prove City College misused funds

Lance Williams, Chronicle Staff Writer
Thursday, May 7, 2009
District attorney's investigators raided City College of San Francisco on Wednesday, seeking evidence that college officials had illegally spent public
money on donations to education-related political campaigns.
A copy of a search warrant served on the college shows that investigators are scrutinizing the actions of former Chancellor Philip Day, who left the
college .last year to work for an education lobbying firm in Washington, D.C.
Investigators searched Day's former office, now occupied by Chancellor Don Griffin. The offices of Peter Goldstein, vice chancellor of finance, and
Stephen Herman, dean of administrative services, also were searched, said an official who saw the searches under way.
Investigators were seeking documents concerning donations to the political campaigns of two city bond measures that benefited the college and two
state initiatives that sought increased funding for community colleges, the search warrant says.
1
-,,,, --- ------ --- - ---------- -- -- --- ------------------ ------- -------------- -'--'---.. --. '------.---
,
The Chronicle disclosed in 2007 that college officials had diverted $10,000 in public money to political donations for a $246.3 million college bond
measure that San Francisco voters approved in 2005.
A county grand jury then began investigating Day and his aides on suspicion of violating state laws against misusing public funds and failing to make
accurate reports of political donations, college documents show.
An internal probe ordered last year by City College's trustees found a continuing pattern of political fundraising abuses at the school. Some
transactions appeared to violate state law, wrote lawyers for the firm of Renne, Sloan, Holtzman & Sakai, which conducted the investigation.
Day, now the head of the National Association of Student Financial Aid Administrators, could not be reached for comment Wednesday. In an
interview last year, he denied that he had ever misused college funds or failed to report political donations accurately.
"That did not happen," he said at the time. "That is not true."
Martha Lucey, City College's dean of public information, said, "Any comment should come from the D.A."
Erica Derryck, spokeswoman for District Attorney Kamala Harris, declined to comment.
Matthew Siroka, an attorney for Goldstein, said the raid was needlessly disruptive.
"The college has bent over backwards to cooperate" with prosecutors, Siroka said. "Most of what was seized today were (copies of) documents that
had already been turned over."
The search warrant indicates that investigators are focusing on these transactions:
-- A $10,000 donation to the 2005 bond campaign, made by a motorcycle driving school that leases a parking lot at City College. The school's
president told The Chronicle that the $10,000 was a lease payment he owed to the college, but that Assistant Vice Chancellor James Blomquist told
him to make it a donation to the bond campaign instead.
Blomquist later acknowledged steering the payment to the bond campaign, saying he hadn't realized he was doing anything wrong.
-- A $20,000 donation to the 2005 bond campaign, made by a cafe owner who had just won a contract to operate a coffee bar at the college. The cafe
owner owed the money to the college, but it was given to the bond campaign, records show. Before the election, the donation was refunded and the
cafe owner paid the money to the college, Day said.
-- $30,000 in donations to the same bond campaign, made by two women with ties to the operator of vending trucks that sold food on campus. The
donations were made shortly after the vendor obtained a new five-year contract, records show. Day said the food vendor was simply a friend of the
college.
2
-- More than $28,000 in donations to two 2006 state education measures, made by the college's nonprofit foundation. Unlike the college, the
foundation was legally permitted to make political donations.
According to the report by the college's internal investigators, the $28,000 was owed to the college by PepsiCo on its contract to sell beverages on
campus.
Day, through his aide Herman, instructed PepsiCo to make the payments to the foundation, which then donated the money to the political campaigns,
the internal report said. At the time, Vice Chancellor Goldstein expressed discomfort with the PepsiCo transaction, apparently for legal reasons, the
report said.
-- An additional $10,000 in donations to the same state measures, also from the foundation. According to the internal investigation, Day used $7,000
from the college bookstore and $3,000 from the cafe owner who operated the coffee shop to finance this donation, but had it made in the foundation's
name.
At Day's direction, the foundation repaid the $10,000 to the college in 2007, after The Chronicle began reporting on political fundraising abuses at
the college, the internal report said.
E-mail LanceWilliamsatlmwilliams@sfchronicle.com .
http://sfgate.comlcgi-bin/article.cgi?f=/c/a/2009/05107/MNJQ17FTEQ.DTL
This article appeared on page A-I ofthe San Francisco Chronicle
Barmak N assirian
AACRAO
202/263-0290 Direct
2021 872-8857 Fax
3
- ------------------ -- ----- --- - ----, ----------------

Sent: Wednesday, May 06, 2009 12:06 PM
To: Shireman, Bob
SUbject: NASFAA etc.
Frank Holleman used to say that there were only two kinds of people in Secretary Riley's book: friends and really good friends. That mindset gave us another 15
years of friends like Sallie and GAs and NASFAA screwing students and taxpayers. I hope Secretary Duncan knows that the Administration has friends and
enemies in Washington, and helping your enemies is not a good strategy for success:
Get a Sneak Peak at the NASFAA 2009 Preliminary Conference Program

The 2009 NASFAA National Conference is just two months away! While there is still plenty of time to register, make sure you do so by June 12 to take
advantage of the early bird rates. You won't want to miss our National Conversation Initiative sessions, or Education Secretary Arne Duncan when he
delivers the opening address at the conference. We hope you join US in San Antonio this July!
Speaking of really good friends, Laura McClintock is here visiting.
Hope all's well,
barmak
Barmak Nassirian
AACRAO
202/263-0290 Direct
2021 872-8857 Fax
1
"

Sent: Friday, May 01, 2009 11: 14 AM
To: Shireman, Bob
Subject: Quick conversation
Bob,
I hope you know how delighted everyone is with your decision to come back.
I'd like to have a quick conversation with you about NASFAA, the financial aid crowd, and how we might help. This isn't urgent, so call me whenever you have a
few moments.
barmak
Barmak Nassirian
AACRAO
I Dupont Circle, Suite 520
202/263-0290 Direct
2021 262-4684 mobile
2021 872-8857 Fax
1
To: List - DGR Monday Group
Cc: Kelly Field; Doug Lederman
Subject: White Knight Lobbying by the Student Loan Industry
This is a depressing example of how the financial aid community is being mobilized to torpedo the most visionary federal student aid proposal of the past 40
years. Instead of attempting to help with the creation of an indexed Pell entitlement to serve low-income students, various groups are getting duped into serving
as surrogates for the student loan industry.
Barmak Nassirian
AACRAO
202/263-0290 Direct
202/ 872-8857 Fax
\
Subject: FW: [SasfaaL] [sasfaaL] Senate Amendment 792 -FFELP[Scanned] .
Hey gang,
Sorry to ask for help but in today's environment, I need as much support as I can get. Below is an email explaining an amendment that has been
brought by Senator Lamar Alexander in support of the program that I work in, FFELP- Federal Family Education Loan Program. FFELP is simply
where private organizations administer student loans to schools and students. Without FFELP there would only be one means for a student to get a
student loan and that would be directly from the US government. If the Amendment passes, well simply put- I stay employed! If you so choose,
please click the links below to get your Senator's phone number (you'll speak to a voicemail) and you will also find a 5 line script of what to say
exactly. Easy, I know but like I said I hate to ask for help but today I'm needing a little extra!
Thank you, Brandon
1
It· -- --------- --- ----- ---- ----- ---------- ------------------- ----- -- --.---.- --- ----- -----
-------------------------
Senator Lamar Alexander is offering Senate Amendment 792 which deals with the FFEL Program. For those who are interesed in maintaning the
current dual programs, the following information is provided for your review and action. This is TIME SENSATIVE and you must take action
today. Below is a review of the amendment and attached is a copy of Senate Amendment 792 and a suggested speak is you call your Senator. Please
act quickly.
Bill Spiers
Legislative Affairs Committee Chair
Senate Amendment 792:

Preserving Choices for Schools and Students
What the Amendment Would Do

* Adds language to the Deficit-Neutral Reserve Fund for Higher Education to reiterate support for choices for institutions of higher education and
their students in the student loan programs.
Background
* The Senate Budget Resolution includes language regarding access and affordability in higher education through a deficit-neutral reserve fund.
* The Senate Budget Resolution does not include reconciliation instructions for education.
* While there is no specific mention of student loans, the House has included reconciliation instructions that may ultimately limit the choice
institutions currently have.
* This amendment reiterates the Senate's support for the two loan programs that students and institutions have to choose from.
Why It's Important to Pass this Amendment
* The President's proposed budget for FYIO proposes a massive shift from the Federal Family Education Loan Program.
* Not included in the Senate's Budget Resolution - but could be enacted through the reconciliation instructions in the House Budget Resolution.
* CO!llpetition and markets to key to successes in the U.S. higher education system.
o Almost every aspect of higher education in this country can be viewed as a success - primarily due to competition and markets.
2
o This no less true when we are discussing student loans - particularly given the enormity of the program.
Click the link to view the attachment
Attachment l: Suggest Speak

hnP://www.sasfaa.org/ListLockINBi6rFHPXq72qDRP.doc
Attachment 2: SA 792
hnP://www.sasfaa.orglListLock/q1pwZGQ3ETcc4pnH.pM
• 3
Sent: Friday, March 13, 2009 12:02 PM
To: Lauren Asher; Rich Williams; Angela M. Peoples; Melissa Tooley; Deanne Loonin; Shireman, Bob
Subject: RE: Perkins Formula
I don't know whether this is politically feasible, but I always thought that a new federal credit program should do away with the untenable assumptions of the
current system and start from scratch. The new Perkins program-if configured to promote accountability, pricing discipline, and program integrity-eould become a
template for reforming the rest of Title IV. I think it would be worth exploring some of the possible criteria for participation in the New Perkins program along the
following lines:
1- Access to the program should be based on a formula that includes percentage of Pell grant recipients served and graduation rates. The distribution
would work like the fair-share component of current law and provide pro-rated funding to all eligible institutions on the basis of their relative need.
2- Institutions would be allowed to package whomsoever they choose, however, because these loans would be fUll-recourse loans that the institutions
would in effect co-sign for. This will serve as a cost-containment and reasonable-use device, and prevent schools from packaging students who
shouldn't be loaded up with more debt than they can manage. (There might be objections that institutions may divert funds away from needy students
to better credit risks. But because their eligibility is tied to their Pell population, they already have a strong incentive to keep those students, and may in
fact be induced to package more grant money for them and use the new program to package middle-income students.)
3- Institutions seeking to participate would have to provide financial guarantees to cover the contingent liabilities associated with their cumulative loan
volume. The Secretary would be allowed to regulate this, and would be required to ensure that participating institutions can satisfy their financial
obligations to the Department through posting of bonds, commitment of collateral, or funding of escrows to cover projected defaults.
I would stop right there. I think this is enough of a framework to change the current regulatory approach in ways that make it more substantively effective and more
desirable for good actors, who may well find the broad discretion these parameters offer them appealing and worth the exchange.
For what it's worth,
barmak
Barmak Nassirian
AACRAO
202/263-0290 Direct
202/872-8857 Fax
1
From: Shireman, Bob
Sent: Thursday, February 26, 2009 8:00 AM
To: nassi rian b@aacrao.or9
Cc: Stratman-Krusemark, Karen
Subject: 10:007
Barmak:
Nice job in the NYT today. I was going to try to call you today to go over the budget, but I'm not sure I'll have time. Can you do this call at 10:007
10:00 with StudenUConsumer Groups--1-800-369-1931, passcode is HIGHER ED.
-Bob
Robert Shireman
Consultant serving as a Senior Advisor to the Secretary
U.S. Department of Education
. 400 Maryland Ave., S.W.
Washington, D.C. 20202
(202) 260-0101
bob.sh irema n@ed.gQ)!
1
From: Shireman, Bob
To: 'Elrons@ticas.org'; Arsenault, Leigh
Subject: Re: Bob's plans for Thursday and Friday?
We might do Oakland for my Phoenix flight. Are you in the Marriott area? Whafs near?
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From: Edie Irons <Elrons@ticas.org>

To: Arsenault, Leigh
Cc: Shireman, Bob
Sent: Man Apr 26 16:26:252010
Subject: RE: Bob's plans for Thursday and Friday?
Great! Maybe we will start a little earlier on Friday morning to maximize his time. When you say he's departing at noon on Friday, is that his flight or when he
needs to head to SFO?
: think if he's flying to and from SFO staying in SF is fine. It's a pretty short BART ride from here to there (like maybe 15-20 mins).
We're so giad he can make it,
Edie
Edie Irons
We moved! New phone and address:
405 14th SI. 11 th floor
Oakland, CA 94612
New main T1CAS line: 510.318.7900
New direct line: 510.318-7902
eirons@ticas.org
www.ticas.org
h!!QJlQ.i:Qjectonstudentdebt.org
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1
----
From: Arsenault, Leigh [mailto:Leigh.Arsenault@ed.9QY]

To: Edie Irons
Cc: Shireman, Bob
Subject: RE: Bob's plans for Thursday and Friday?
Hi Edie,
Bob will be flying in and out of SFO and is arriving at 63Spm on Wednesday and departing at noon on Friday. He needs to be at an event in Phoenix on Friday
evening so will need to keep that departure time if possible. Also, right now he is staying at the Hilton San Francisco (he'll have a car to get back and forth) but
let me know if there is another hotel that you would recommend. Thanks, hope it is a productive meeting!
-leigh
Office ofthe Under Secretary

kJgh.arsenault@ed.gov
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From: Edie Irons [mailto:Elrons@ticas.org]
To: Arsenault, leigh
Cc: Shireman, Bob
Subject: Bob's plans for Thursday and Friday?
Hi leigh (and Bob),

We had invited Bob to a two-day brainstorming session at our Oakland office this Thursday and Friday. Sorry if you already RSVPd to Pauline, she is on a plane
and I'm just trying to get the lay of the land so that we can plan the details of the meeting. Will Bob be able to join us for all or part of the meeting? The general
plan right now is to start with lunch in our Oakland office on Thursday, work through the afternoon, and go out to dinner in downtown Oakland on Thursday
evening. Then on Friday we would meet in our office from 9-4pm. The other people coming are Deanne Loonin, Margaret Reiter (Former Deputy Attorney General
of CAl, Michelle Rodriguez (Public Advocates), and Tim Ranzetta (Student lending Analytics).
Please let us know his (your) plans, and we will follow up with more details and an agenda shortly.
Thanks,
Edie
Edie Irons
We moved! New phone and address:
405 14th SI. 11 th floor
Oakland, CA 94612
2
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From: Shireman, Bob
Sent: Friday, June 25,20104:45 PM
To: 'barmak@aacrao.org'
Subject: Re: Tonight
We will be there!
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From: Nassirian, Barmak <barmak@aacrao.org>

To: Shireman, Bob
Sent: Fri Jun 2S 10:03:21 2010
SUbject: Tonight
Bob,
Hope things are still on track for tonight. It's a pretty informal place, so casual is fine. Do bring qU$iers for parking: Bethesda meters have to be fed
through 10:00 pm.
I won't be at the 3:00 o'clock today, but can be reached at 202/262-4684 if you need me.
best,
barmak
1
~
From: Shireman, Bob

Sent: Tuesday, June 22, 20106:59 PM
To: 'barmak@aacrao.org'
Cc: ,Iucsikes@sbcglobal.net'
Subject: Re: Friday
Sounds great. All three kids (Kirby, Camden, McCoy) willi be there.
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From: Nassirian, Barmak <barmak@aacrao.org>

To: Shireman, Bob
Sent: Tue Jun 22 13:47:52 2010
Subject: Friday
Bob,
We made reservations for 7:00 pm at Tako Grill Qmp://www.takogrill.com/) 7756 Wisconsin Avenue (past the intersection of East-West Highway
and Old Georgetown Road) in Bethesda. I assumed that your children will join us, but if any of them has a better offer, we certainly don't want to
stop them from doing their own thing with their friends either. On our side, it'll be me, my wife Satomi and our two girls Ema and Mie.
My cell number, in case, is 202/262A684. I hope Friday still works, but do feel to let me know if things have changed: I want this to be fun and not a
hassle for you.
barmak
1
I
From: Shireman, Bob

To: N",ssirian, Barmak; Kvaal, James R.
Cc: Swarthout, Luke (HELP Committee); Anthony Marx
Subject: RE: RE: May 17
Monday is hopefully doable, late or later.

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From: Nassirian, Barmak Imailto:barmak@aacrao.org}
To: Kvaal, James R.
Cc: Swarthout, Luke (HELP Committee); Shireman, Bob; Anthony Marx
Subject: Re: RE: May 17
I'm flexible
Barmak Nassirian
AACRAO
I Dupont Circle, Suite 520
202-263-0290
On May 5, 2010 3:28 PM, "Kvaal, James R." <James R. Kvaal@who.eop.gov> wrote:
The Monday times are good. I have conflicts with the Tuesday times.
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From: Swarthout, Luke (HELP Committee) [mailto:Luke Swarthout@help.senate.gov]

Sent: Wednesday, May 05, 20103:19 PM
To: Kvaal, James R; 'Shireman, Bob'; 1Nassirian, Barmak'
Cc: 'Anthony Marx1
Subject: FW: May 17
1
------ --------- ------- --- -------
Bob, James and Barmak-meet my friend and onetime employer Tony Marx.
Below are some times T...
2
--------
From: Diane Schulman [diane.schulman@theindagogroup.com]

Sent: Tuesday, June 29,20107:57 AM
To: Shireman, Bob
Subject: CCA's Harris Miller Refuses To Take Eisman Challenge
THE CHRONICLE of Higher Education
June 28, 2010
Investor Who Criticizes For-Profit Colleges Will Help Indebted

Student
By Marc Parry
Senators skeptical offor-profit education found an ideal poster child for their showdown with the industry last week: a single mother named Yasmine
Issa who testified that attending a career college had left her unable to find a job in her field and saddled with debt.
Turns out Ms. Issa will gain more from the experience than a chance to warn others to avoid her fate.
Steven Eisman, a hedge-fund manager who delivered a scathing assessment of for-profit education at the same Senate hearing, announced on
Monday that he would pay off Ms. Issa's $17,300 debt.
Monday's news follows an unusual "challenge" that Mr. Eisman laid down after the Senate hearing. The hedge-fund manager had called up a
Chronicle reporter on Friday to say he would pay half of Ms. Issa's loans if the Career College Association, a trade group that represents institutions
like the one she attended, would cover the other half.
Harris N. Miller, president of the association, did not directly respond to the specifics of Mr. Eisman's challenge when asked for comment by The
Chronicle. Instead, he issued a 348-word statement describing how his group is "working with public policy leadership in Washington every day to
continue to find ways to improve student-lending policies." He also attacked Mr. Eisman's motives, saying he stands to gain by talking down for-
profit colleges at the Senate hearings.
1
-------- - -- --- ------ -- ---------- -------- --------------- --------
"While one has to have sympathy for any student or former student or parent having problems repaying his/her debts," Mr. Miller wrote in an e-mail,
"one also has to have sympathy for the 2.8 million students whose educations Mr. Eisman so blithely and blindly disparages for his own financial
benefit."
Mr. Eisman, told ofMr. Miller's reply, said on Monday that he would pay off Ms. Issa's whole debt ifhe had not heard anything else from the
association by the end of the week.
"Clearly CCA cares more about keeping the status quo than helping people harmed by the very bad actors they admit exist," Mr. Eisman said in an e-
mail.
The Career College Association reported revenues of $5.4-million in the fiscal year endin(S June 30, 2008, according to the most recent tax records
available. Mr. Miller was paid $325,000 during that period.
'Something So Good 000 Out of Something Bad'
Ms. Issa, 28, took out the federal student loans while studying to be an ultrasound technician at a Sanford-Brown Institute campus in White Plains,
N.Y., near her home in Yonkers. According to her written testimony, she learned the institute's ultrasound program was not accredited only after
completing her studies. Good Housekeeping magazine featured her story in a June article, "School of Hard Knocks." That brought Ms. Issa to the
attention of Sen. Tom Harkin's staff, she said, who asked if she would testify during the Health, Education, Labor, and Pensions Committee hearing
on for-profit colleges.
"I'm in awe," Ms. Issa said Monday in response to Mr. Eisman's offer. "I just never thought that something so good could come out of something bad
that I went through."
She added, "It's stressful having to think about paying rent and bills and things for my children, and having a huge loan to pay with interest building
up. So this is just definitely a load off my shoulders."
Ms. Issa said she remains determined to find a job in the ultrasound field.
In the Good Housekeeping article, Sanford-Brown's parent company, Career Education Corporation, defended the quality of the institutes' training
and declared that "hundreds and hundreds" of graduates had found ultrasound jobs.
Mr. Eisman, who made a fortune betting against subprime mortgages, has emerged recently as a vocal critic of for-profit colleges. In his prepared
testimony, he likened for-profit education to the real-estate market before the collapse, with easy credit driving prices ever higher and large defaults
looming.
Asked last week whether he would make a lot of money from the collapse offor-profit education companies, he replied: "My investors and I would
make money. But that would be dwarfed by the amount of money saved by the taxpayer."
2
------ ------ ------ ------------------------. - ... _------ ------
Diane Schulman
The Indago Group
41 East II th Street, II th Floor
New York, NY 10003
diane.schulman@theindagogroup.com
617.965.5113 Direct phone
3
- -----------------.-- ------ - -- -----~.- ------- --_.- ----------- ..-_._---,,--_._.. --_. ------ -----------
From: Susanin, Chris [csusanin@fppartners.com]

To: Shireman, Bob
Subject: RE: Slides
Bob,
Thanks for taking the time to review our slide deck on the for-profit space on Friday. I am sorry we couldn't meet with you in person. We hope you found the
conversation useful and insightful (Steve is a character). I hope the data came across in an objective, fact-based fashion. We really wanted to show that with an
appropriate level of business risk placed on the companies (appropriately) that they'd still have margins and returns that are best-in-c1ass (and well above the Dow
30 companies). If there is a better way to present some objective financial analysis and data that could be helpful and additive to your existing resources, we are
more than happy to help in an arms-length fashion.
I hope we have a chance to continue a healthy dialogue.
Thanks again!
Chris
Christopher M. Susanin
Portfolio Manager
FrontPoint Partners
FrontPoint Consumer & Industrials Fund
Two Greenwich Plaza
Greenwich, CT 06830
p: (917) 934-1790
f: (203) 622-5230
email: csusanin@fgpartners.com
' __
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From: Black, Andrew

To: 'bob.shireman@ed.gov'
Cc: Susanin, Chris
Subject: Slides
1
,i
From: Pauline Abernathy (pabernathy@ticas.org]

Sent: Monday, June 28,20101:20 PM
To: MichaeI.Barr@do.treas.gov; Eric.Stein@do.treas.gov; Peggy.Twohig@do.treas.gov; McGuire, MaryEllen C.; Gordon, Robert M.; Kvaal,
James; Kanter, Martha; Shireman, Bob; Gomez, Gabriella; Arsenault, Leigh; Hamilton, Justin; Levine, Brian S.;
Gene.Sperling@do.treas.gov; Madzelan, Dan
Cc: Lauren Asher; Edie Irons; Connie Myers
Subject: Statement from Project On Student Debt: Big Wins for Students in Final Financial Reform Bill
FYI--Below is the Project on Student Debt statement calling on Congress to pass the financial reform bill conference agreement. Thank
you for your and the Administration's leadership and support for a strong CFPB with authority over all private student loans, including
those issued by nonbanks. We are, of course, disappointed that the final bill does not include the House school certification provisions,
and we hope the CFPB will promptly use its authority to require schools to certify private student loans and inform students of any
untapped federal loan eligibility! Thank you! Pauline
STATEMENT OF PAULINE ABERNATHY Contact: Johanna Diaz

Vice President, The Institute for College Access & Success 202/371-1999
June 25, 2010
Big Wins for Students in Final Financial Reform Bill
"We congratulate House and Senate conferees for reaching agreement on historic financial reforms, including a much-needed Consumer Financial Protection
Bureau (CFPB) with authority over risky private student loans and other financial products.
"Private student loans have been woefully under-regulated, leaving students and families vulnerable to unscrupulous lenders and deceptive practices. These loans
typically have variable rates with no cap and lack the important deferment options, affordable repayment plans, loan forgiveness programs, and cancellation rights
in cases of death or severe disability that federal student loans provide. In addition, unlike credit card debt and other consumer loans, private student loans are
virtually impossible for borrowers to discharge in bankruptcy.
1
- -- ------ -------------
"The CFPB's rules will apply to all private student lenders, including both banks and other entities, such as career colleges that offer private student loans. These
are big wins for student borrowers and their families. The CFPB will also have full supervision and enforcement authority over private student lending by larger
banks and all nonbanks.
"The bill also establishes a Private Education Loan Ombudsman at the CFPB that will finally give students and their families somewhere to turn for help with
private student loans.
"With its broad mandate and authority to protect consumers, we hope the CFPB will act quickly to require that colleges certifY private loans and inform students
and parents of any untapped federal loan eligibility before they take out a private student loan. This will help protect consumers from aggressive marketing and
unnecessarily risky products, and has strong support from lenders, students and schools.
"We urge the full House and Senate to quickly pass this legislation and finally rein in the 'wild west' of student lending."
# # # #
An independent, nonprofit organization, the Institute for College Access & Success works to make higher education more available and affordable for people ofall
backgrounds. The Institut~'s Project on Student Debt works to increase public understanding ofrising student debt and the implications for ourfamilies, economy,
and society. For more information see www.pro;ectonstudentdebt.organdwww.ticas.org.
2
Sent: Thursday, June 24,201012:12 AM
To: Luke_Swarthout@help.senate.gov; Saudargas, Lexi (Durbin); moira_lenehan@brown.senate.gov; graham_steele@brown.senate.gov;
Silvern, Joy (Bennet); Appel, Brian (Bennet); McConnell, Brad (Durbin); Little, Bethany (HELP Committee)
Cc: Connie Myers
Subject: FW: Dodd defends self-certification
As documented below, yesterday Dodd specifically cited "CFPB oversight of private student lenders" as among the reasons why the
Senate rejected the House school certification provisions. Yet the Senate counter-offer rejected both CFPB oversight of Sallie
Mae's private student loans and school certification. There is a link to Dodd's full remarks on certification below.
Senate Rejects School Certification on Private Education Loans

Late yesterday afternoon, the Senate rejected a House-sponsored amendment to the financial regulatory reform bill currently being negotiated in a bicameral
conference committee that would have mandated school certification on all private student loans.
''The Senate cannot accept this provision," said Senate Banking Chairman Christopher Dodd (D-CT). Dodd pointed to other "strong protections" for private student
loan borrowers included in the financial reform bill such as new Consumer Financial Protection Bureau (CFPB) oversight of private education loans, a new private
student loan ombudsman to assist students who need help with their private loans, and a new mandated study on the private student loan industry.
"The Senate cannot agree to a mandatory certification," Dodd continued. "1 authored self-certification with Senator Shelby ... and it's far too early in our view to
make a judgment if we need something more"
Senator Dodd's remarks are available for viewing online (skip to 2:20:15 for his comments on self-certification).
Nearly every stakeholder involved in private education loans ID!QPorts full school certification, which makes the Senates rejection of the House supported provision
perplexing. NASFAA worked with students, consumer groups, lenders, and servicers to push for mandatory school certification.
Conferees will continue to meet this week in hopes of wrapping up negotiations by Thursday so it can be passed by Congress prior to the July 4 Congressional
recess and possibly signed by the President prior to his departure for the upcoming G-20 summit.
From: J:!!jp:l/www.nasfaa.orgLPublications/201 0/gsenatecertification06231 O.html
1
----- -------- -----------------

Sent: Tuesday, June 22,201011:51 AM
To: Pauline Abernathy; Eric.Stein@do.treas.gov; Peggy.Twohig@do.treas.gov; McGuire, MaryEllen C.; MichaeI.Barr@do.treas.gov; Kvaal,
James; Shireman, Bob; Arsenault, Leigh; Gomez, Gabriella; Madzelan, Dan
Cc: Lauren Asher; Connie Myers
SUbject: RE: Private student loan provisions in House offer in financial reform conference
FYI--It turns out the Senate private student loan ombudsman provisions, while not in the House offer, are included in the "base text" off
of which the conferees are negotiating. Also included in the base text are the House bill's study on private student loans and report on
compliance with the school certification provisions and the impact on student borrowing.
From: Pauline Abernathy

Sent: Monday, June 21, 2010 11:05 PM
To: Eric.stein@do.treas.gov; 'Peggy.Twohig@do.treas.gov'; 'McGuire, MaryEllen c.'; 'Michael.Barr@do.treas.gov'; 'Kvaal, James'; 'bob.shireman@ed.gov'; Arsenault, Leigh; 'Gomez,
Gabriella'
Subject: FW: Private student loan provisions in House offer in financial reform conference
FYI--As many of you know, the House financial reform bill conferees released their offer to Senate conferees today, and it gives the
Consumer Financial Protection Bureau full authority over all private student loans and requires school certification of private loans, as
required by the House-passed bill. The House and Senate conferees meet tomorrow at noon to discuss the House proposal. Below is
a summary of the private student loan provisions in House June 21 offer to conferees:
• School Certification-House provisions requiring private loans are certified by schools and students informed of any untapped
federal loan eligibility. However, the House offer eliminates the House bill's study on private loans and report on compliance and
the impact on student borrowing.
• Private loans from banks-House provisions giving the CFPB back-stop supervision and enforcement authority over banks and
credit unions with assets under $10 billion, including Sallie Mae Bank.
• Private loans from schools and other nonbanks-Mirrors the private loan provisions adopted on the House Floor by giving the CFPB
supervision and enforcement authority over entities that offer or provide "any private education loan, as defined in section 140 of the
Truth in Lending Act."
• Ombudsman-House provisions, which are not specific to student loans like the Senate bill which had a private student loan
ombudsman. The House ombudsman provisions are also more general regarding advising consumers about their rights, lenders
about how to comply with the law, and other federal agencies about consumer financial protection issues.
Below are links to the base bill, manager's amendment, House offer, and a summary of the House offer.
1
I --------
Base bill off of which the conferees are working:

hnp:/Ifinancialservices.house.gov/pdf/AY01 OF74 xml.pQf
Conference Manager's amendment which appears to broaden the exemption for prepaid plans on page 20:
hnp:/Ifinancialservices.house.gov/Key Issues/Financial Regulatory ReformfTITLEX OFFER CFPA MANAGERS.pQf
House offer to Senate conferees:

hnp:l/financialservices.house.gov/Key Issues/Financial Regulatory ReformfTITLEX OFFER CFPA.pQf
Summary of House offer:

hnp:/Ifinancialservices.house.gov/Key Issues/Financial Regulatory ReformfTITLEX OFFER CFPA SUMMARY.pQf
Pauline Abernathy
Vice President
TICAS: 510.318.7900 Direct: 510.318.7903
2
----------------- -- ----- - ------ -------- ------ ----- -------------.

Sent: Monday, June 21, 2010 11 :05 PM
To: Eric.Stein@do.treas.gov; Peggy.Twohig@do.treas.gov; McGuire, MaryEllen C.; MichaeI.Barr@do.treas.gov; Kvaal, James; Shireman,
Bob; Arsenault, Leigh; Gomez, Gabriella
required by the House-passed bill. The House and Senate conferees meet tomorrow at noon to discuss the House proposal. Below is
• Private loans from schools and other nonbanks-Mirrors the private loan provisions adopted on the House Floor by giving the CFPB
.ombudsman. The House ombudsman provisions are also more general regarding advising consumers about their rights, lenders
.!l!!P:/Ifinancialservices.house.gov/pdf/AY01 OF?4 xml.pQf
.!l!!P:/Ifinancialservices.house.gov/Key Issues/Financial Regulatory ReformlTlTLEX OFFER· CFPA MANAGERS.pQf

.!l!!P:/Ifinancialservices.house.gov/Key Issues/Financial Regulatory ReformlTlTLEX OFFER CFPA.pQf
1
II

h!!p:llfinancialservices.house.gov/Key Issues/Financial Regulatory ReformmTLEX OFFER CFPA SUMMARY.pgf
Pauline Abernathy
Vice President
www.ticas.org and www.proiectonstudentdebt.org
TICAS: 510.318.7900 Direct: 510.318.7903
2
Sent: Sunday, June 06, 20104:55 PM
To: Pauline Abernathy
Subject: NYT: Facing Cuts in Federal Aid, For-Profit Colleges Are in a Fight
FYI. Today's NYT has a good article on gainful employment.
June 4,2010
Facing Cuts in Federal Aid, For-Profit Colleges Are in a Fight
By TAMAR LEWIN
Any day now, the federal Department of Education will formally propose new regulations that would cut off federal aid to for-profit
colleges whose graduates cannot earn enough to repay their student loans.
The regulations, known as the "gainful employment" rules, are an effort to rein in the high debt loads students take on when they enroll
in for-profit colleges that offer certificates or degrees in fields like nursing or culinary arts. Students at for-profit colleges are much more
likely than others to default on their loans.
Under the regulations, a draft of which came out in February, for-profit colleges would not be eligible to receive federal student aid if
their graduates' debt load was too high to be repaid, over 10 years, with 8 percent of their starting salary.
The Career College Association, which represents 1,450 for-profit colleges, is lobbying fiercely against the regulations, which it argues
are wrong-headed, unnecessary and likely to restrict needy students' access to vocational training and higher education. With so many
community colleges overcrowded, the for-profit colleges say, their programs represent the nation's best hope for training much-needed
health care workers and technicians.
The association criticizes almost every element of the regulations: the 8 percent debt limit, the 1O-year repayment period and the
underlying idea that high debt loads lead to loan default.
"Shouldn't the Department of Education have to present some facts and figures showing that there's really a problem with students who
have debt-income ratios above 8 percent?" said Harris Miller, president of the association. 'They haven't shown any evidence. And our
own research shows that students with high debt-income ratios actually default less than students with low debt-income ratios."
1
It
Arne Duncan, the secretary of education, has avoided demonizing the for-profit schools. In a May speech, he said that despite a "few
bad apples," for-profit colleges playa vital role in helping the nation reach the Obama administration's goal of having the world's best-
educated work force by 2020.
Advocacy groups representing students and consumers are less diplomatic. "These programs overpromise, underdeliver and load
vulnerable students up with way too much debt," said Chris Lindstrom, higher education program director at the U.S. Public Interest
Research GroUl:!, part of a coalition of education, consumer, student and public interest groups supporting the regulations.
In 2007, coalition members said, students at for-profit colleges made up only 7 percent of those in higher education but 44 percent of
those defaulting on federal student loans. Adding new fuel to the fire was a recent presentation at a New York conference for investors
by Steven Eisman, a hedge-fund manager known for having anticipated the housing market crash.
Mr. Eisman, whose early awareness of structural problems in the housing market is described in Michael Lewis's bestseller "The Big
Short," said the for-profit education industry, like the subprime mortgage industry, has rested on the proliferation of loans to low-income
people who would not be able to repay them.
Without tighter government regulation, Mr. Eisman predicted, students at for-profit colleges will default on $275 billion of student loans
over the next decade.
"Until recently I thought that there would never again be an opportunity to be involved with an industry as socially destructive and
morally bankrupt as the subprime mortgage industry," said Mr. Eisman, of FrontPoint Partners, a unit of Morgan Stanley. "I was wrong.
The for-profit education industry has proven equal to the task."
In an interview last week, Mr. Eisman said the gainful employment regulations help change the for-profits' business model of
aggressively recruiting needy students eligible for maximum federal aid.
For-profit colleges typically get three-quarters of their revenues from federal grants and loans - and some, like Apollo Group, which
owns the University of Phoenix, nearly 90 percent, the legal limit. Federal aid for students at for-profit colleges has more than
quintupled, to $26.5 billion, since 2000.
"The University of Phoenix got about a billion dollars in Pell grants last year, and when you have any institution growing that rapidly, it's
only fiscally prudent to take a look at it," said Mark Kantrowitz of Finaid.org, a financial aid Web site.
Sara Jones, a spokeswoman for Apollo, said in a prepared statement that with 458,000 students, the University of Phoenix's status as
the largest recipient of federal financial aid makes sense. The statement also said that the university had a lower default rate than for-
profits generally, and that in the last year half its students had borrowed less than the maximum available.
2
------------ --------
Federal law has long said that federal student aid can go only to for-profit colleges that "prepare student for gainful employment in a
recognized occupation." But this is the government's first effort to define "gainful employment" in relation to graduates' debt-to-income
loads.
"With a record number of students attending programs that are subjectto this requirement, and a record amount of taxpayer money
being used to enable them to attend, it's more important than ever to make sure they're getting their money's worth," said Pauline
Abernathy, vice president of the Institute for College Access and Success, part of the coalition supporting the regulations.
A study conducted by Charles River Associates for the Career College Association estimated that 18 percent of for-profit colleges'
programs, serving a third of for-profits' students, would not satisfy the gainful employment regulations. But supporters of the regulations
said for-profit colleges tended to have very high operating margins and could still make healthy profits if they lowered their tuition to
avoid running afoul of the new rules.
The regulations' 8 percent standard is not absolute: Programs that fail it could retain eligibility for aid if their students achieved other
standards like high levels of repayment or employment.
For-profit colleges, which contribute generously to Democrats and Republicans alike, have substantial influence in Congress. On the
Career College Association's annual Hill Day in March, members met with aides in almost every Congressional office, telling them the
regulations would limit access to college for minority students with few other options.
After the draft regulations are issued, there will be a public comment period, and final rules will be issued by Nov. 1, to take effect in
July 2011.
J:!!!p:l!www.nytimes.com/2010/06/06/education/06gain.html?ref=education&pagewanted=print
Pauline Abernathy
Vice President
3
---- --- -------------- -.-.--.-.

Sent: Thursday, June 03, 20102:48 PM
To: jkvaal@gmail.com; Arsenault, Leigh; Manheimer, Ann; Shireman, Bob; Kanter, Martha; Hamilton, Justin; Smith, Zakiya; Gomez,
Gabriella
Subject: Tea Party concern about for-profit education
FYI. See link below to Tea Party concern about the use of taxpayer dollars:
Is Corinthian College the ACORN of Education?

h!!J?:llwww.teapartypatriotslive.coml2009/1 211 4/is-corinthian-college-the-acom-of-educationl
1
Sent: .Wednesday, June 02, 2010 12:13 PM
To: GainfulEmploymentGroup
Subject: Danny Davis quote in support of GE
FYI --Steve sent the article below around earlier bc of the Dept statement indicating it might delay proposing rules on some issues, but I wanted to
make sure everyone also saw Rep Danny Davis' quote (below) in support of defining GE. Career Education is based in his district so this is a
particularly courageous statement. Rep Davis is a senior member of the CBC, former member of the Ed and Labor Cmte (now on Ways and Means)
and is a leader on private student loan bankrtupcy issues.
"It concerns me greatly that students from for-profit institutions are more likely to default on their student loans," Rep. Danny Davis, D-
Chicago, says in a statement. "I support the Department of Education's efforts to define gainful employment so that we can better
distinguish the good actors from the bad."
DeVry, Career Education join push against new rules designed to limit student-loan defaults
By; Paul Merrion May 31, 2010
The threat of an Obama administration crackdown on federal tuition aid for students of for-profit schools is roiling publicly held education firms such
as Chicago's DeVry Inc. and Career Education Corp., mobilizing an all-out lobbying blitz against the proposal.
Described as another subprime debacle waiting to happen, regulators are aiming to cut off federal student loans and tuition grants for classes that
don't lead to jobs paying enough to avoid a default on that debt.
There are signs the administration's resolve may be eroding, however, as the industry pushes back hard, hiring lobbyists, upping campaign
contributions and commissioning research to discredit the idea.
"At a certain moment, you've got to understand that maybe you're at war with the department," says Toby Moffett, a former Democratic congressman
from Connecticut who is lobbying for Career Ed, based in Hoffman Estates. "By war, what I specifically mean is getting members of Congress who
are impacted by this to ask the department a lot of questions."
For-profit schools account for 7% of the nation's post-secondary students but 44% of the loan defaults, according to the Department of Education.
The administration's remedy could force widespread tuition cuts or curtail subjects offered by for-profit schools. But non-profit public and private
colleges and universities are exempt from showing that their classes lead to "gainful employment" to qualify for federal tuition aid.
It's become a front-and-center issue for U.S. Education Secretary Arne Duncan.
The former head of Chicago Public Schools met privately two weeks ago with more than a dozen riled-up Democratic and Republican House
members, including Rep. Judy Biggert, R-Hinsdale, a member of the House Education and Labor Committee.
1
"No specific commitments were made, but I think we made a solid case, and that the diversity of the members present - representing all ends of the
political spectrum - made a strong impression on the secretary," she says in a statement. "Our message was simple: We don't want these new rules
to limit student access to unique career opportunities delivered by strong vocational programs, like those in our area. I think the secretary understood
that."
RATING RISK
New York-based Morgan Stanley Research analyst Suzanne Stein estimates the rule would have a "moderate/high" impact on Career Ed due to its
relatively high tuition and student-loan default rates.
DeVry was rated only a "moderate" risk, given its emphasis on "higher-paying occupations (business, IT, medical/veterinary/nursing)," Ms. Stein
wrote, "but tuition is not inexpensive and we expect some programs won't qualify."
Spokesmen at both firms decline to talk about the potential impact of the new rules. Career Ed President and CEO Gary McCullough told analysts in
early May that he "personally spent a great deal of time in Washington over the (last) two months. I'm encouraged by the willingness and the interest
of members of Congress to understand the impact of the proposed rules on students."
But there's also support for the administration. "It concerns me greatly that students from for-profit institutions are more likely to default on
their student loans," Rep. Danny Davis, D-Chicago, says in a statement. "I support the Department of Education's efforts to define gainful
employment so that we can better distinguish the good actors from the bad."
So far this year, DeVry is on track to match the $320,000 it spent on lobbying last year, more than three times what it has spent annually in the past.
DeVry executives contributed more than $52,000 to federal candidates and party fundraising efforts in the 2007-08 election cycle and almost $39,000
since then, including $13,860 to President Barack Obama's campaign fund, according to the Washington, D.C.-based Center for Responsive Politics.
LOBBYING, CONTRIBUTING
Career Ed spent $90,000 on lobbying in the first quarter, compared with $270,000 in all oflast year. Execs contributed $12,555 in the last election
and $5,800 since then, including $1,500 to the political action committee of the Career College Assn., a Washington industry group that has
contributed $175,511 to federal candidates and other PACs since last year.
Combined, the PACs of DeVry and Career Ed contributed more than $31,000 since January 2009. DeVry's PAC contributed $5,700 in the last
election, and Career Ed launched its PAC in May 2009.
The Department of Education is still expected to issue a proposed regulation in the next few weeks, but some ofthe most controversial provisions
circulating for the past six months may be dropped for further study.
"We are deciding how to move forward with areas of disagreement," a department spokesman says in a statement. "We may go forward with some or
regulate others on a separate timeline."
The administration hasn't said that publicly before. "There have been quiet hints that they're considering that option," says Harris Miller, president
and CEO of the Career College Assn., which represents about half of the estimated 2,900 for-profit schools in the u.S. "That would be very
productive. "
©201O by Crain Communications Inc.
2
-,---,--- -------- ....,." ._------ -------------- ------
Pauline Abernathy
Vice President
3
Sent: Thursday, May 27, 20104:06 PM
To: Kvaal, James R.; McGuire, MaryEllen C.; Gordon, Robert M.; Shireman, Bob; Arsenault, Leigh; Gomez, Gabriella;
Cecilia_Rouse@who.eop.gov; Kanter, Martha; Yuan, Georgia; Manheimer, Ann
Subject: FW: Dear Colleague: NAACP, National Council of La Raza and 30+ Orgs Support Administration's Efforts to Protect Students and
Taxpayers
FYI - Below is a Dear Colleague from Reps. Polis and Grijalva to all House members sharing the letter to Secretary Duncan from more
than 30 organizations in support of strong and effective regulations on gainful employment and incentive compensation.
Pauline Abernathy
Vice President
We moved! TICAS' main number is now 510.318.7900. My direct line is 510.318.7903 .
• .• _ _ , _ _ . . ._ •• _ , • • _ . _ , • • • " _. ._ . _ _ __ __h __ ""' _ _' ' ' __. . . . . . . . _ _ ••• _ .. _ . _. . . . . ._ " .." _ . _ . . . ._ _ . • • _ , _ • • _ . ._ . . . ._ . . ._ _ • _ _ .... •. _ . _ . _ . " • • • . • " ' _ . _ _ • • . . . . . . ._ " ........
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From: e-Dear Colleague
To: E-DEARCOLL_ISSUES_A-F_0000@ls2.house.gov
Subject: CivilRighls, ConsumerAffairs, Education: Dear Colleague: NAACP, National council of La Raza and 30+ Orgs Support Administration's Efforts to Protect
Students and Taxpayers
NAACP, National Council of La Raza and 30+ Orgs Support ,

Administration's Efforts to Protect Students and Taxpayers
Sent By: §piros.Protopsaltis@mail.honse.gov
Date: 5/27/2010
1
NAACP, National Council of La Raza and 30+ Organizations Support Department of Education's Efforts to Protect
Students and Taxpayers
Dear Colleague,
We would like to bring to your attention a letter that was sent to the Secretary of Education Arne Duncan last week in support of the Department's
efforts to make its regulations more consistent with the program integrity provisions in Title IV of the Higher Education Act and to protect students
and taxpayers. This letter was signed by more than 30 education, student, consumer protection and civil rights groups, including the NAACP,
National Council of La Raza, American Association of Collegiate Registrars and Admissions Officers, American Association of University Women,
American Federation of Teachers, American Medical Student Association, Campus Progress Action, Center for Law and Social Policy, Institute for
College Access & Success and its Project on Student Debt, National Association for College Admission Counseling, National Association of
Consumer Bankruptcy Attorneys, National Consumer Law Center, Consumers League, U.S. PIRG, and the United States Student Association. The
letter can be found at ~ectonstudentdebt.orglfiles/pub/Neg reg coalition support letter to Duncan.W
This Congress passed and President Obama signed into law historic legislation that made the single largest investment in college financial aid ever by
transforming the system to serve the needs of students, not banks or big corporations. As we work on education issues in the III th Congress, we
look forward to making further progress on expanding college access and success, curbing federal student loan abuse, and safeguarding taxpayer
dollars. If you have questions or need more information, please contactfuliros.Protopsaltis@mail.house.gov at 5-2161 (Polis' office) or
Joseph.Mais@mail.house.gov at 5-2435 (Grijalva's office).
Sincerely,
Jared Polis Raul M. Grijalva

Member of Congress Member of Congress
May 20,2010
The Honorable Arne Duncan
Secretary of Education
400 Maryland Avenue, SW
Dear Secretary Duncan:
As organizations representing students, higher education, consumers and civil rights, we write to express our support for the Department of
Education's efforts to make its regulations more consistent with the program integrity provisions in Title IV of the Higher Education Act. In
particular, we urge you to propose regulations on incentive compensation and gainful employment that will more effectively protect students from
2
--------------- - -- ---- ----------- ------ --------------- --- ----- -----------
high-pressure and deceptive sales tactics for educational programs of little or no benefit to them, and will ensure that taxpayer dollars do not
subsidize such practices and programs.
To protect both students and taxpayers, federal law prohibits "any commission, bonus, or other incentive payment based directly or indirectly on
success in securing enrollments or financial aid," and requires vocational programs and nearly all programs at for-profit institutions to "prepare
students for gainful employment in a recognized occupation." Yet, examples of overly aggressive recruiting are plentiful. Some for-profit institutions
recently made headlines by targeting homeless shelters in their recruitment efforts. Another for-profit institution paid $78.5 million to settle a
whistleblower False Claim Act lawsuit and another $9.8 million to the Department of Education to resolve claims that it was paying improper
incentive compensation to its recruiters. Yet another large for-profit institution paid $6.5 million to settle a lawsuit brought by the California
Attorney General charging "a persistent pattern of unlawful conduct," including the inflation ofjob placement and starting salary information in
order to recruit students to enroll in costly vocational programs, and falsification of records provided to the government.
While most schools may not engage in such practices, federal data suggest these are not isolated incidents. Students at for-profit schools are the most
likely to borrow and borrow the most. According to the most recent federal data, one in five for-profit school students default on their federal loans.
A full 44% of all defaulters attended for-profit institutions, even though just 7% of all students attend for-profit schools. Low-income, first-
generation and minority students attend for-profit institutions at disproportionate rates, making them particularly vulnerable to illegal or unscrupulous
acts by these schools.
Incentive Compensation. In direct conflict with federal law prohibiting institutions of higher education from providing "any commission, bonus, or
other incentive payment based directly or indirectly on success in securing enrollments or financial aid," current regulations permit incentive
payments that are not "based solely" on the number of students recruited, admitted, enrolled or awarded financial aid. Some schools have
aggressively exploited this and other loopholes in the current regulations to do just what the statute is intended to prohibit. Consistent with the
Department's proposals during the negotiated rulemaking process, the proposed new regulations should conform to the law and prohibit any
employee or contractor compensation "based directly or indirectly" on successfully securing student enrollments or aid. To avoid creating additional
loopholes, it is important that the prohibition include compensation based directly or indirectly on applications or enrollment up to and including
completion, as well as payments for prospective student contact information.
Gainful Employment. Each year, students borrow and taxpayers spend billions of dollars to subsidize attendance at programs required to "prepare
students for gainful employment in a recognized occupation." Yet, the Department's current regulations include no official definition of "gainful
employment." We urge you to develop regulations that define gainful employment in a way that is measurable, enforceable, not overly burdensome
to schools, and is aligned with the following principles:
• Include all debt incurred at any affiliated school. All debt incurred at a school under the same control structure must be included in any
measure of gainful employment that considers debt. Otherwise, schools controlled by the same company could simply move students from
one schoo) or program to another. Excluding debt from unaffiliated schools also has the benefit of allowing low-cost schools to enroll and
graduate students with high debt from unaffiliated schools without fear of penalty.
• Include all private loans known to the school and its affiliates. Debt-related measures of gainful employment must include all private loans
that should be known to the school. Excluding private loans would create a perverse incentive for schools to promote risky private loans
3
iI ~ -~~~ ~ ~- ~ ~-- ~ ---~--
before students have exhausted their safer federal loan options. Private loans that should be known to the school must include all credit
provided by any school under the same control structure as well as any loans provided by lenders with which the school has a preferred lender
arrangement.
• Avoid loopholes for programs with both high student borrowing and low completion rates. A low completion rate is one of the ways
schools can fail to prepare students for gainful employment. Students who borrow but do not complete are often left carrying substantial debt
without the increased earning power that should come from a completed degree or certificate. The definition of gainful employment should
not create a loophole for schools to discourage completion by students they consider likely to have trouble repaying their loans.
• Use only data that are accurate and consistent across colleges and programs. Existing requirements for the calculation and reporting of
completion and placement rates are not sufficient for use in any success-based measure of gainful employment. Accrediting agency
requirements vary widely and allow for substantial variation in the calculation of rates, and some schools have been found to have falsified
and manipulated their placement data. It is therefore essential that the data and reporting standards are clear, consistent and independently
verified.
Again, we applaud your initiative in reviewing the Department's current program integrity regulations to ensure their consistency with federal law
and to protect both students and taxpayers. We support your efforts and stand ready to assist you in improving the Department's regulations.
Sincerely,
American Association of Collegiate Registrars and Admissions Officers

American Association of University Women
American Federation of Teachers
American Medical Student Association
California Community College Student Financial Aid Administrators Association
California Tomorrow
Campaign for College Affordability
Campus Progress Action
Center fOr Law and Social Policy
Community College League of California
Consumer Action
Consumer Federation of California
Crittenton Women's Union
Demos: A Network for Ideas & Action
Empire Justice Center
Florida State College at Jacksonville
Greater Boston Interfaith Organization
The Greenlining Institute
The Institute for College Access & Success and its Project on Student Debt
NAACP
4
National Association for College Admission Counseling
National Association of Consumer Bankruptcy Attorneys
National Center for Public Policy and Higher Education
National Consumer Law Center (on behalf of its low-income clients)
National Consumers League
National Council of La Raza
Neighborhood Economic Development Advocacy Project (NEDAP)
New York Community College Association of Presidents
Public Advocates Inc.
Public Higher Education Network of Massachusetts
Rainbow PUSH Coalition
Student Senate for California Community Colleges
U.S. PIRG
United States Student Association
•.',',0«-"".
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Visit the e-Dear Colleague Service to manage your subscription to the available Issue and Party list(s).
5
Sent: Saturday, May 22,201010:34 AM
To: Shireman, Bob
Subject: Fw: For-profits on Face tomorrow?
----- Original Message -----

To: 'leigh.arsenault@ed.gov' <leigh.arsenault@ed.gov>; 'rshireman@ticas.org' <rshireman@ticas.org>; 'James_R._Kvaal@who.eop.gov' <James R. Kvaal@who.eop.gov>
Cc: Lauren Asher
Sent: Sat May 22 07:31 :572010
Subject: For-profits on Face tomorrow?
Sestak and lamar alexander are both eca advocates. Does gibbs have tps on ge in case it comes up tomorrow?
-'Face the Nation': White House Press Secretary Robert Gibbs; Sen. Lamar Alexander (R-TN); U.S. Senate candidate Rep. Joe Sestak (D-PA)
1
~~- - ---~---
From: Robert Shireman [bobshireman@gmail.com]

Sent: Sunday, April 19, 2009 9:47 PM
To: Roger Nozaki; Rosa L. Armendariz; Pauline M. Abernathy; Richard Kazis; Annik Hirshen; russlynnedtrust
Cc: Lauren Asher; Kelly Solari
Subject: It's Official
Tomorrow it will be public that I am the Deputy Undersecretary (or maybe it's Deputy Under Secretary), with responsibility for financial aid policy
and operations as well as other higher education and related initiatives. I turn into a pumpkin at midnight tonight: no longer on the TICAS suspended
payroll, no longer a board member and officer on leave. It feels very strange to cut all official connection to the organization that I founded. But I
know that it is in great hands. Thank you all so much for your support of me and of the goals of the Institute.
While I have no further official connection to TICAS, I intend to make myself available as a volunteer in my personal time. Let me know how I can
be helpful.
Lucinda and the kids will be coming out for a couple of weeks in June, and then we may all drive across the country in August if I can keep enough
time available. We rented a house (Barbara Chow's house, the new education director at Hewlett). The address is:
4514 44th Street, N. W.

Washington, D.C. 20016
Thank you again, and again.
-Bob
1
-------- -- ------- ----- .-..... -- _._.
From: Shireman, Bob

To: 'Pauline.Abernathy@philagov'
SUbject: RE: Martha J. Kanter, Nominee for Under Secretary of Education
No, I've been aware and talking to Martha for a while.

----_. -- --,"--'-'- .. ~ --" .. _-_
._,,--,,_.~.~-- ~_ .. ,,~~ __ .._._..-- _,,---_.. ~~.~.~_. __..__ .~ __ .~."._.- _.~.~.~._~.--._~_ --.~ .. ~.~. __ .~ .. ~_ __.. ~--~ ,,~ _.~~._-~_ .. ~_ _ --.~ ~._._._~._.~.. _~.- ..
. ~ - " - ~ - - " " ' - - - - . - " - ~ . - ~ . - . " " . " ~
From: Pauline.Abernathy@phila.gill! Imailto:Pauline.Abernathy@phila.gQ)i}

To: Shireman, Bob
Subject: Fw: Martha J. Kanter, Nominee for Under Secretary of Education
Does this change your situation?
Pauline Abernathy
Senior Advisor to the Mayor
City of Philadelphia
City Hall, Room 225
215.686.2175
1
Sent: Friday, April 30,2010 12:33 AM .
To: Shireman, Bob
Subject: In case you missed this
.!illp://www.businessweek.comlnews/20 I 0-04-29/bristol-myers-cameron-dendreon-kellogg-u-s-eguity-movers.html
Also, Satomi and I would love to take you, Lucinda and the family out to dinner sometime in May/June if you guys can do it. There's a great
Japanese restaurant in Bethesda that is very family friendly.
Hope all's well,
barmak
1
l

To: Pauline Abernathy; Deanne Loonin; Luke Klipp; Henry Sommer; maureent@nacba.org; Steve Surd; Connie Myers; Lauren Asher
Subject: Sell-side prognostications about where the Department is going
FYI
here are comments paul ginocchio (Deutsche Bank) made this morning.
EDUCATION: POSITIVE UPDATE ON REGULATORY ENVIRONMENT. We spoke this morning to our key Washington DC contact. To start
with the conclusion: We think in the notice of proposed rulemaking (NPRM), expected to be filed in early June, that Gainful Employment (tying
tuition to starting salaries) will be modified to be less negative, the question remains how much will it be changed. We think it is significantly
watered down but will not go all the way to just a disclosure requirement, i.e. it will still have some teeth but much less than the last published draft
in January and that will be positive for the stocks. Update: There have been multiple conversations between Dept of Education officials and Career
College Association (CCA) and CEOs ofthe for-profits these past 2 weeks. Key points: 1) Letter signed by 18 Congressional members on 3/22
against Gainful Employment (GE) has been sent to Sec of Ed Arne Duncan, 2) CCA presented preliminary findings from its GE survey of members
to Dept of Ed, 3) Findings showed a broad negative effect on institutions especially minority-serving and were used to support CCA's proposed
modifications of GE. Our contact believes CCA is lobbying for disclosure vs regulation, 4) A final draft of the CCA survey is pending this week and
potentially will be publicly disseminated, 5) Gainful Employment will be an important bargaining chip in the upcoming reauthorization of the
Elementary and Secondary Education Act (ESEA); ESEA is a top priority for Sec Duncan and the Dept of Ed needs Congressional support in those
upcoming discussions, 6) Our contact believes the GE proposal in the upcoming Notice of Propose Rulemaking will be modified from the last
version from NegReg (based on our previous points and datapoints from two other private meetings he has intelligence from). Whether or not the
NPRM looks different from the last previous draft remains controversial- other contacts do not expect the Dept of Ed to budge. Points 1 to 3 are old
news and for reference only.
1
>_ •. ~._ ~ ••• __.__ ._._."_._•• _ ... • ." __ ... __ .. __ "._,_.e« __ ~ •. •• __ ~ .~,_, •• __ •. _.~" .~,_.__ .. _. . _.. __ .. _.~ __ .. .~ __ ~ _ ~ k·~,, ... ~ ~ .~ .. __. _ . ~ , ,__. . . .__ ~·~ __ · _ ~ · · ~_ _•__ ~ ·~ .. ~ · _ N __
~.~ >~ ~_~_~.~_ •• " _• • ~ _ . ~ ~_ .. _ ~ . _ _. _•• _ _ "". ., __ ~
From: Brown, Michael [mailto:Mich;!eI.A.Brown@morganstanley.com]

Sent: Tuesday, June 01, 2010 10:01 AM
To: Martin, Phil; aaron.klein@do.treas.gQ)!; John.Bellows@do.treas.gQY
Cc: Chavers, Kevin
Subject: Today's Call
Gentlemen-
I just wanted to check in to see if you have specific quesitons or topics that you would like covered on today's call.
Best-
Michael Brown, Managing Director

Morgan Stanley I Global Capital Markets
1585 Broadway I Floor 04
New York, NY 10036
Phone: +1 212761·2110
Fax: +1 212507·5086
Michael.A.Brown@morganstanley.com
_.">""._. <.•W.'''~'''''~~ __".''__ '~V '.>~. __.",.•".... "_._~ "·__ ~.,n .•,..,x_·_",,,.. _'·U"M_"_"__"_VA' ~"'~_~_~_~"'~'~" __""' ~""·'~"'~"<'~'«""_"~_~_" __
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'~ ~~_" ••
NOTICE: If received in error, please destroy, and notify sender. Sender does not intend to waive confidentiality or privilege. Use of this email is prohibited when received in error. We may monitor and store emails to
the extent permitted by applicable law.
,,, ,·."••'.,·,,,..,.•" "0· _~._, •• < ••.__ _ _~ _ .. _.~,,~,,~•. ~, .• _ ~ . _.._.,"_." •.'""._ ~_ ~· • . . , . · " , " __ , _ ,,_.c ,,~ ~_ m'.." __ ~,,_~'_·"'".A .">" __ '"._~~ ..
,,."'.~"'~"'",.~,, ""' ,,_~,"" ,,,._.,~ ,.,, ._.'"_'"·_".·_._.. '""".~._,,~._.u __,,·.. ~~~~,; ,,"~" ..
~_.·,~"'" .w'"'._ ·.".".-<_,,·.·._ ,__ .·."~.·._, ·._,_~ ...•_.'" ,.""•• ~._.'""~~_.""'~,_" .. ,_'"~_.
NOTICE: If received in error, please destroy, and notify sender. Sender does not intend to waive confidentiality or privilege. Use ofthis email is prohibited when received in error. We may monitor and store emails to
the extent permitted by applicable law.
2
-- --- - - - - ---- -----
"The broad support" for the idea of requiring financial aid offices to certify private loans is "an indication of the reality of how much the
market has changed, and that it's time for policy to catch up to the market," Abernathy said.
The willingness of lenders to sign on to the certification proposal does not mean that they'll be backing significant reductions in private loan
interest rates or embracing other ideas that hurt their bottom lines; the companies are still in the loan business for a reason, and their self-
interest will only encourage them to go so far.
But whether lenders support the certification idea because they think it's wise or because they hope that adopting a "best practice" favored
by consumer advocates will help reduce defaults and thereby forestall further (and potentially more painful) federal legislation, the level of
cooperation is welcome to Justin Draeger, the newly selected president of the financial aid administrators' group.
"I think there's an opportunity going forward to forge new alliances and partnerships to protect student aid funding and find common
ground for student protections like school certification," Draeger said via e-mail. "I hope that this will be the first of many instances where
NASFAA can drive consensus and help diverse stakeholders in the higher education community coalesce around concepts that work for and
protect students."
- Doug Lederman
© Copyright 2010 Inside Higher Ed
Pauline Abernathy
Vice President
3
------- -------- ------------

Cc: Lauren Asher; Debbie Frankie Cochrane
SUbject: Sharp Decline in Graduation Rates at For-Profit Four-Year Colleges
FYI - New blog posting posting at .!ll1P:/Iviews.ticas.org/201 0/04/sharp decline in graduation ra.html.
Sharp Decline in Graduation Rates at For-Profit Four-Year Colleges
A recently released report from the National Center for Education Statistics (NCES) presents the most up-to-date data from the U.S.
Department of Education on student financial aid, graduation rates, enrollment, and finances at postsecondary institutions.
We at the Project on Student Debt will continue to analyze these data in detail in the coming months, but one fact from the NCES report
. jumped out at me - graduation rates for first-time full-time students at for-profit four-year schools fell by 35% while the graduation rates
at other four-year schools stayed level.1 Only 22% of bachelor's or equivalent degree-seekers who entered for-profit four-year schools
in 2002 obtained their degree within 6 years (150% of normal time), compared to 34% of bachelor's degree seekers entering for-profit
four-year schools in 2000. The for-profit school graduation rate was already dramatically lower than the public and private non-profit
graduation rates, but now it is less than half the rate at either of the other types of four-year colleges. See the table below for detailed
figures:
CCC Gralill
1. U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education Data System (IPEDS),
Graduation Rates component, Spring 2009. Tables 6 and 7 in "Enrollment in Postsecondary Institutions, Fall 2008; Graduation Rates,
2002 and 2005 Cohorts; and Financial Statistics, Fiscal Year 2008." Note that these graduation rates do not include transfers-out.
Diane Cheng
Research Associate
Pauline Abernathy
Vice President
1
-, -----------_. ------ --------------_ ... -- - - - - - - - - ---- - ------------------- ----- - ----- -- ---.,,-- - ------ ----

2
From: Shireman, Bob
To: Martin, Carmel; Gomez, Gabriella
Cc: Kanter, Martha
Subject: FW: Sell-side prognostications about where the Department is going
Interesting: "Gainful Employment will be an important bargaining chip in the upcoming reauthorization of the Elementary and
Secondary Education Act (ESEA)"

To: Pauline Abernathy; Deanne Loonin; Luke Klipp; Henry Sommer; maureent@nacba.org; Steve Burd; Connie Myers; Lauren Asher
Subject: Sell-side prognostications about where the Department is going
FYI
here are comments paul ginocchio (Deutsche Bank) made this morning.
EDUCATION: POSITIVE UPDATE ON REGULATORY ENVIRONMENT. We spoke this morning to our key Washington DC contact. To start with
the conclusion: We think in the notice of proposed rulemaking (NPRM), expected to be filed in early June, that Gainful
Employment (tying tuition to starting salaries) will be modified to be less negative, the question remains how much will it
be changed. We think it is significantly watered down but will not go all the way to just a disclosure requirement, i.e. it
will still have some teeth but much less than the last published draft in January and that will be positive for the stocks.
Update: There have been multiple conversations between Dept of Education officials and Career College Association (CCA) and
CEOs of the for-profits these past 2 weeks. Key points: 1) Letter signed by 18 Congressional members on 3/22 against Gainful
Employment (GE) has been sent to Sec of Ed Arne Duncan, 2) CCA presented preliminary findings from its GE survey of members
to Dept of Ed, 3) Findings showed a broad negative effect on institutions especially minority-serving and were used to
support CCA's proposed modifications of GE. Our contact believes CCA is lobbying for disclosure vs regulation, 4) A final
draft of the CCA survey is pending this week and potentially will be publicly disseminated, S) Gainful Employment will be an
important bargaining chip in the upcoming reauthorization of the Elementary and Secondary Education Act (ESEA); ESEA is a
top priority for Sec Duncan and the Dept of Ed needs Congressional support in those upcoming discussions, 6) Our contact
believes the GE proposal in the upcoming Notice of Propose Rulemaking will be .modified from the last version from NegReg
(based on our previous points and datapoints from two other private meetings he has intelligence from). Whether or not the
NPRM looks different from the last previous draft remains controversial- other contacts do not expect the Dept of Ed to
budge, Points 1 to 3 are old news and for reference only.
1
I. ---------
From: Shireman, Bob

Sent: Thursday, June 10, 2010 11 :34 AM
To: 'Mark.Kantrowitz@Monster.com'
Cc: Kvaal, James
Subject: Re: fwd: Morgan Stanley on NPRM publication date and contents
Mark:
Thanks for all of your helpful data and suggestions. I'm copying James since he could benefit from being on your speed-dial like I have been.
-Bob
"" _.w._,,'," ~ .'. w_••• < __ '"

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"·_w".,~<,,._.~~.·"
From: Kantrowitz, Mark <Mark.Kantrowitz@Monster.com>

To: Shireman, Bob
Sent: Thu Jun 10 10:30:362010
Subject: fwd: Morgan Stanley on NPRM publication date and contents
If the Department wanted increased opportunities for public comment, it could publish interim final regulations to get a second public comment period. There's enough time before
November I to do this. Though historically the Department hasn't done this Gust once, and that interim final regulations turned into the final regulations without modification). I
think it would be beneficial to do this only if the form of the final rule will differ significantly from the forms that have been discussed publicly in negreg. While there have been a
lot of discussions behind closed doors, and the public policy advocates issued a joint letter, an interim final regulations would give them an additional opportunity to critique the
proposed final rule.
Mark
From: Suzanne Stein

Sent: Wed Jun 09 16:57:532010
Subject: Business & Education Services: NPRM Expected Next Week, But Details Could be Lacking
MORGAN STANLEY RESEARCH
Link to complete report available below.
BUSINESS & EDUCATION SERVICES: NPRM EXPECTED NEXT WEEK, BUT DETAILS COULD BE LACKING - June 09, 2010 GMT (5 pgs/48 kb)
Suzanne Stein +1 (1)2127610011 Morgan Stanley & Co. Incorporated

Vance Edelson +1 (1)2127610078
1
Cristina Colon +1 (1)2127614453
Impact on our views: We expect the negotiated rulemaking (negreg) overhang to extend beyond the release of the Notice of Proposed Rulemaking (NPRM), which we now expect
next Wednesday. Our sources tell us the Department of Education (ED) will take more time to evaluate gainful employment (GE), and details on this issue will be released in a
separate document. OUf view is that without clarity on GE, education stocks will continue to discount an outsized amount of risk. On the positive side, the extra consideration
given to GE implies there may eventually be substantial changes to the proposal. However, the publishing delay limits the time available for public comments and further
negotiations, and we have no assurances that the later GE-specific NPRM would have the level of detail the Street is anticipating. On a relative basis, we think consensus
overestimates the risk to DV, APOL and EDMC, while underestimating the risk to ESI, CECa and STRA.
What's new: The Department of Education (ED) may publish the Noti"e of Proposed Rulemaking (NPRM) by the middle of next week, but may do little to clarify uncertainties
about the anticipated ruling on gainful employment (GE). Our sources tell us that, in a departure from the normal negotiated rulemaking (negreg) process, ED plans to release the
NPRM in two parts. The first part, expected sometime next week, would cover 13 negreg issues in depth but omit details on GE, which would be released at a later (as yet
unknown) date.
What's next: We expect the first part of the NPRM by middle of next week, and a public comment period (likely 30 days) to follow that. A second NPRM dedicated to the GE
issue should be published not long after. To the best of our knowledge, ED still aims to meet the November deadline for the final NPRM.
Industry View: In-Line
INDUSTRY VIEW: IN-LINE
Read the complete report <1mp://linkback.morganstanley.com:80/web/sendlink/webaImfBMServlet?file="16hpd8hd-3nrk-gOOO-98ge-b52gebaca3b3&useF86suyn InOyf-

483& gda ~1370725049 bb33Ib919b4b5ef9ccbc877033686d5a>
The full report also contains analyst certification and other important disclosures relating to the companies mentioned in this email.
END OF RESEARCH ABSTRACT
Disclosure Section
The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley & Co. Incorporated, and/or Morgan Stanley C.T.V.M. S.A. As used in this disclosure
section, "Morgan Stanley" includes Morgan Stanley & Co. Incorporated, Morgan Stanley C.T.V.M. S.A. and their affiliates as necessary.
For important disclosures, stock price charts and equity rating histories regarding companies that are the subject ofthis report, please see the Morgan Stanley Research Disclosure
Website at www.morganstanley.comlresearchdisclosures. or contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research
Management), New York, NY, 10036 USA.
Analyst Certification
The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and
will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report: Suzanne Stein.
Unless otherwise stated, the individuals listed on the cover page of this report are research analysts.
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Morgan Stanley Research has been published in accordance with our conflict management policy, which is available at
2
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company: AECOM Technology Corp., Apollo Group, Capella Education, Career Education Corp, Cintas Corporation, DeVry, DigitalGlobe Inc., Education Management Corp.,
Expedia Inc., H&R Block, IHS Inc., InnerWorkings, Iron Mountain, ITT Educational Services, KI2 Inc., KBR, Inc, Manpower, MasTec, Inc., MSCI Inc., Orbitz Worldwide, Inc,
priceline.com, Republic Services Inc., Robert Haifinternational, Rosetta Stone Inc, RSC Holdings, Strayer Education, URS Corporation, Verisk Analytics, Inc., Waste
Management, Inc ..
Within the last 12 months, Morgan Stanley has either provided or is providing non-investment banking, securities-related services to and/or in the past has entered into an
agreement to provide services or has a client relationship with the following company: Apollo Group, DigitalGlobe Inc., H&R Block, Manpower, MSCI Inc., priceline.com, Robert
Half International, URS Corporation, Waste Management, Inc..
An employee, director or consultant of Morgan Stanley is a director of DigitalGlobe Inc., MSCI Inc..
Morgan Stanley & Co. Incorporated makes a market in the securities of AECOM Technology Corp., American Public Education, Inc, Apollo Group, Capella Education, Career
Education Corp, Cintas Corporation, Corinthian Colleges, CoStar Group Inc., DeVry, Education Management Corp., Expedia Inc., Granite Construction, H&R Block, IHS Inc.,
InnerWorkings, Iron Mountain, ITT Educational Services, Jackson Hewitt, K12 Inc., KBR, Inc, Manpower, MasTec, Inc., Orbitz Worldwide, Inc, priceline.com, Republic Services
Inc., Robert Haifinternational, RSC Holdings, Strayer Education, The Advisory Board Company, The Corporate Executive Board, URS Corporation, Verisk Analytics, Inc.,
Waste Management, Inc ..
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ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, Not-Rated and Underweight are not the equivalent of buy, hold and sell. Investors should carefully
3
- -- ---- ----------------- --------- - - ---- ---'--- -,,~ --------
read the definitions of all ratings used in Morgan Stanley Research. In addition, since Morgan Stanley Research contains more complete information concerning the analyst's
views, investors should carefully read Morgan Stanley Research, in its entirety, and not infer the contents from the rating alone. In any case, ratings (or research) should not be
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(as of May 31, 2010)
For disclosure purposes only (in accordance with NASD and NYSE requirements), we include the category headings of Buy, Hold, and Sell alongside our ratings of Overweight,
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recommendations, respectively.
Coverage Universe
Investment Banking Clients (IBC)
Stock Rating Category

Count
% of Total
Count
% of Total !BC
% of Rating Category
Overweight/Buy
1079
42%
358
42%
33%
Equal-weight/Hold
1111
44%
397
47%
36%
Not-Rated/Hold
13
1%
3
0%
23%
Underweight/Sell
4
~~-- ------
349
14%
95
11%
27%
Total
2,552
853
Data include common stock and ADRs currently assigned ratings. An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's
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8
------------ ---------- ----- --------- ------ - -----
From: Shireman, Bob

Sent: Friday, May 14, 2010 6:11 PM
To: Manheimer, Ann
Subject: RE: FYI rumor is Rep Andrews will be dropping a gainful employment bill
No. I wonder what it will say.
,_".",.",,",,,,~~,,_.,,,,, ..,.,__,.",, __ __
N<O'.,~,.,"·_""w"_",·_,>_"._~~"_~- «._N_",,,,·~"~,"~_'H·"·_._,",,,,~,,=.~._,,,,·.·~ .,,"·.·,~.,,,,_<.'_OOOF~·_~'.""W_~_.~_."<_~~",.",
""v~_.m>".~,,"~m.,,·.·.,"r_,_., .. "~_,,.~,_,m .. __
- _ " ' ~ , " ' _ V ' _ ' ' ' ' ' ~ ' ' ' , ~ ~ _ " ~ ' ~ ' m ~ , , , ~ _ w ~ ~ _ , , . , , , ~ ~,-'~''_'_~.,,,_,,~,,">"~,.,.,,>~
~ ,,,".w,,,,,·,~~~_~~~.N_'"~"m,, ".~· .~ ~ •. ~ __~~_."~.'>
From: Manheimer, Ann

To: Shireman, Bob
Subject: FW: FYI rumor is Rep Andrews will be dropping a gainful employment bill
Did you hear this?

_ _ .• ~ _ , " _ ~ _ ~ _ . ~ _ , _ ~ . _ . ,
_ _ • _ _ ~A._. . . __ , . . " ._.~~_._," • ~·~ . . _ _ e"_·'_·~_·_~·_~_~ ·_.. ·~ ."... .._.. ~. , .. .~ . .__ __ '"~ ~ ~.~ . .. ~ .__ ~._. __ ~~ "" " ._., ~_
From: Pauline Abernathy [mailto:pabernathy@ticas.org}

To: Gomez, Gabriella; Arsenault, Leigh; Manheimer, Ann
Cc: Lauren Asher; Debbie Frankie Cochrane .
Subject: FYI rumor is Rep Andrews will be dropping a gainful employment bill
Pauline Abernathy
Vice President
1
---------------- ---- ,-_._~-
From: Shireman, Bob

Sent: Tuesday, April 20, 2010 3:55 PM
To: Ritsch, Massie
Subject: FW: CCA outreach to Mayors against gainful employment
If we wanted to send something to Mayors, how would we do that?

....._-_._----_._--------_._-_.._-_._..
,_.~_._---~._-_._-_ .... ...._-_..
_----~._-----------_._"._ _~-" __.,.. ..
'-~,._. -_._-,,~--" _._~+.~.~~----_._--- ----------_.._.._-_.•._._-- ,~~+-~-~
From: Pauline Abernathy {mailto:pabernathy@ticas.org}

Sent: Tuesday, April 20, 2010 3:4S PM
To: Manheimer, Ann; Arsenault, Leigh; Gomez, Gabriella; Kvaal, James R.; Shireman, Bob
Cc: Debbie Frankie Cochrane
Subject: CCA outreach to Mayors against gainful employment
FYI-- I just got the email below from a former colleague in the Philadelphia Mayor's office. As you'll see, EDMC has hired a firm to get
local electeds and others to send letters to Senators Casey and Specter asking them to oppose the gainful employment regulation
and to urge ED to let "Congress handle this issue instead." Mayor Nutter will not be signing this letter but it would be worth the
Administration reaching out to the conference of mayors and other state and local elected associations on this issue.
Text of email sent to mayor's office:
We are working as local consultant for EDMC, the parent company of the Art Institute of Philadelphia The US Department of Education has proposed a rule that
would make entire programs ineligible for federal Title IV aid (like Pell grants) if they fail to meet a certain debt-to-income ratio for students upon graduation. It's a
bit wonky, but what it boils down to is concern that programs like those offered at the Art Institute of Philadelphia could be impacted if this rule goes through and
could limit access for students, and adults switching or starting careers to obtain degrees in such career tracks like graphic and fashion design, culinary arts,
filmmaking and photography and more.
We're seeking to build support from individuals and organizations that can attest to the importance of these programs for career training and education in the
Philadelphia region and the importance of these careers to our local economy. We're asking for a show of support in the form of written letters to our Pennsylvania
Senators, Arlen Specter and Robert Casey about this issue, expressing support for AI Philadelphia and its programs, explaining how important they are for those
seeking to start careers in the aforementioned arenas, and asking Senators Casey and Specter to contact the Dept of Ed to oppose this rule and have Congress
handle this issue instead.
Pauline Abernathy
Vice President
510.883.7303 www.ticas.org
1
----- - ------ ----
From: Shireman, Bob

To: Arsenault, Leigh
Subject: FW: Invitation to meeting April 29-30 in Oakland
I think this works well preceded by NASPSAS and followed by the Arizona trip (moved to Sunday instead of Monday?)

To: Shireman, Bob
Cc: Lauren Asher
Subject: Invitation to meeting April 29-30 in Oakland
Bob,
A small group of organizations that advocate for students, borrowers and taxpayers are meeting April 29-30 in Oakland,
California to discuss and brainstorm about ways to help bring relief to student loan borrowers who are in financial distress
and/or were the victims of fraudulent schools or lenders. We are hoping you can join us for all or part of the one and a
half day meeting at the TICAS office in Oakland. We have not yet finalized the agenda, but the topics include repayment
issues, discharge of loans for victims of illegal practices and FTC holder issues, and debt collection issues. The goal is
brainstorming as well as educating ourselves on these issues. Background reading will be sent around in advance with the
agenda. The meeting will begin Thurs afternoon April 29 and all day Friday. The following people and organizations will be
attending or have been invited:
Oeanne Loonin, National Consumer Law Center Tim Ranzetta, Student Lending Analytics Jaime Studley, Public Advocates Margaret
Reiter (invited), formerly Deputy CA AG TICAS staff including Lauren and myself We're purposely keeping this initial meeting
small so we can keep it informal and cover as much ground as possible in a relatively short period of time. We hope you can
join us! Pauline
Pauline Abernathy
Vice President
The Institute for College Access & Success www.ticas.org<file://www.ticas.org> and
www.projectonstudentdebt.org<file://www.projectonstudentdebt.org>
1
- --- - - - - - - -- - - -- - - - - - ------------------ -- ----- ----------------------'-------------------
From: Shireman, Bob

Sent: Tuesday, May 25,20108:11 AM
To: Martin, Phil
Subject: FW: Height Analytics -- For-Profit Ed: Gainful Employment Means Higher Wages & Lower Tuition
Attachments: Gainful Employment Analysis-Round 3xlsx
--~~. __._-_
... _.~-~._~~-_.~-----~~~.~~._~.~~--_._,,---- .. _-----------_ .. ---------~~._-_._~--_.~-_ .. _,._~,. __.--_. __ ._.,-~,--_ ..
~---_._-"----------------_._._---~-,
----------------------'--------
From: Nassirian, Barmak [mailto:barmak@aacrao.org]
Sent: Friday, February OS, 2010 11:44 AM
TO: Pauline Abernathy
Cc: Deanne Loonin; Swarthout, Luke (HELP Committee); Shireman, Bob; Burd@newamerica.net; James_R._Kvaal@who.eop.gov; Lauren Asher; Luke Klipp;
nassirianb@aacrao.org; Dannenberg, Michael; Arsenault, Leigh
Subject: Re: Height Anaiytics -- For-Profit Ed: Gainful Employment Means Higher Wages & Lower Tuition
From Credit Suisse. Very interesting analysis oflikely impact on specific companies.
On Wed, Feb 3, 2010 at 10:36 AM, Pauline Abernathy <pabernathy@ticas.org>wrote:

To help with scheduling, please indicate which of the five specified
dates and times you can make atMp://www.doodle.com/vvefr6qm3mgx4ukn.
It is quick, painless and does not require registration. Thanks
From: Deanne Loonin [maiito:dloonin@nclc.org1
Sent: Wednesday, February 03, 2010 10:22 AM
To: Pauline Abernathy; Swarthout, Luke (HELP Committee);
Bob.Shireman@ed.gov; Burd@newamerica.net; James R. Kvaal@who.eop.gov;
Lauren Asher; Luke Klipp; nassirianb@aacrao.org
Cc: MichaeI.Dannenberg@ed.gov; Leigh.Arsenauit@ed.gov
Subject: RE: Height Analytics -- For-Profit Ed: Gainful Employment Means
Higher Wages & Lower Tuition
I'm seeing clients most of the day on Fri., but if that's the only day
that works, I can do 1-2 ET, but not 2-3. I'm also free all day Monday
if that works better for others as it does for me.
1
------- ------ - ---,,- ----------- --'-- " ... _-~--,-------------------------_ .. _-_.----,,~,,- ---."._~--
-~-----------
From: Pauline Abernathy [mailto:pabernathy@ticas.org]
Sent: Wednesday, February 03,2010 10: 12 AM
To: Swarthout, Luke (HELP Committee); Bob.Shireman@ed.gov; Deanne
Loonin; Burd@newamerica.net; James R. Kvaal@who.eop.gov; Lauren Asher;
Luke Klipp; nassirianb@aacrao.org
Cc: MichaeI.Dannenberg@ed.gov; Leigh.Arsenault@ed.gov
Can folks do this call at I pm this Friday? Second choice 2 pm? Ifwe
get a quorum I can send around a conference call number.
From: Swarthout, Luke (HELP Committee)
[mailto:Luke Swarthout@help.senate.gov]
Sent: Wednesday, February 03, 2010 7:58 AM
To: 'Bob.shireman@ed.gov'; Pauline Abernathy; 'dloonin@ncic.org';
'Burd@newamerica.net'; 'James R. Kvaal@who.eop.gov'; Lauren Asher; Luke
Klipp; 'nassirianb@aacrao.org'
Cc: MichaeI.Dannenberg@ed.gov'; 'Leigh.Arsenault@ed.gov'
Subject: Re: Height Analytics -- For-Profit Ed: Gainful Employment Means
I would like to call in as well.

From: Shireman, Bob <Bob.Shireman@ed.gov>
To: Pauline Abernathy <pabernathy@ticas.org>; Deanne Loonin
<dloonin@ncic.org>; burd@newamerica.net <burd@newamerica.net>;
James R. Kvaal@who.eop.gov <James R. Kvaal@who.eop.gov>; Lauren Asher
<LAsher@ticas.org>; Luke Klipp <Iklipp@ticas.org>; Swarthout, Luke (HELP
Committee); nassirianb@aacrao.org <nassirianb@aacrao.org>
Cc: Dannenberg, Michael <MichaeI.Dannenberg@ed.gov>; Arsenault, Leigh
<Leigh.Arsenault@ed.gov>
Sent: Wed Feb 0307:06:092010
2
·...-.-- ,-----.- ~---- -------'-----------~------------_.- --_..
IfI'm available when you have your call I'd like to listen in.
Dannenberg has now joined us too and might be available.

Sent: Tuesday, February 02, 2010 2:50 PM
To: Deanne Loonin; Shireman, Bob; burd@newamerica.net;
James R. Kvaal@who.eop.gov; Lauren Asher; Luke Klipp;
luke swarthout@help.senate.gov; nassirianb@aacrao.org
Luke, James and Bob: do you want to be part of a for-profit call, or

should we schedule a neg reg follow-up conference call without you?
From: Deanne Loonin [mailto:dIoonin@nclc.org]

Sent: Tuesday, February 02, 2010 2:43 PM
To: Pauline Abernathy; bob.shireman@ed.gov; burd@newamerica.net;
James R. Kvaal@who.eop.gov; Lauren Asher; Luke Klipp;
luke swarthout@help.senate.gov; nassirianb@aacrao.org •

Thanks Pauline for circulating. Can we set up a strategy session

(follow-up from neg. reg.) at some point relatively soon? The responses
so far I have seen from the industry, while not surprising, show how
hard they will be fighting this.
From: Pauline Abernathy [mailto:pabernathy@ticas.org]

Sent: Tuesday, February 02, 201011:18 AM
To: bob.shireman@ed.gov; burd@newamerica.net; Deanne Loonin;
James R. Kvaal@who.eop.gov; LAsher@ticas.org; Iklipp@ticas.org;
luke swarthout@help.senate.gov; nassirianb@aacrao.org
Subject: FW: Height Analytics -- For-Profit Ed: Gainful Employment Means
3
FYI
From: Jarrel Price [mailtojprice@heightanalytics.com]

Sent: Tuesday, February 02, 2010 10:53 AM
To: Jarrel Price
Subject: FW: Height Analytics -- For-Profit Ed: Gainful Employment Means
All,
Please see yesterday's report examining the NegReg gainful employment

rule. We are working on a more detailed impact analysis, but as the
note suggests data is limited.
Please let me know if you have any questions/comments.
Best,
Jarrel
From: Jarrel Price

Sent: Monday, February 01, 20108:32 AM
To: Users
Subject: Height Analytics -- For-Profit Ed: Gainful Employment Means
For-Profit Ed: Gainful Employment Means Higher Wages & Lower Tuition
Height Analytics, LLC

Washington, D. C.
February 1,2010
The Negotiated Rulemaking (NegReg) process was filed with contentious

issues (negotiators failed to reach consensus on 5 out of 14 topics),
but the Department of Education's (ED) gainful employment (GE) rule was
finally accepted to be the greatest potential threat to the for-profit
education sector. ED may tweak the GE rule (which could significantly
4
------------------------ ----~,_.- " .....".- ..-----------,,--------_. ",,,,,. -.---,,-------_.------ .~ .. __ __
. ... _-_._.... --"._---
alter exposure), but it's unlikely that ED will scrap the

debt-to-earnings cap in its final rule. Uncertainty about the final
rule, the data ED will use to evaluate compliance, and which companies
are most exposed will prolong the regulatory overhang from this NegReg
process. Below we examine exposure, potential changes to the rule, a
quick look at incentive compensation and a timeline of next steps.
Who is Most Exposed to Gainful Employment? There is a disconnect between

Wall Street and ED's expected impact from the GE rule. Based on what we
know right now, longer duration high-cost programs appear most
vulnerable to the debt-to-earnings limit (negative - ESI, APOL, DV,
STRA, BPI). However, ED outlined an approach for which there is no data
(it will start being collected when the rule becomes effective). As
such, impact analyses could be varied and create further uncertainty in
the space.
Will Gainful Employment Impact "Outliers" or a Significant Number of

Programs? ED's data suggests that exposure is.limited (i.e. only 120 or
6.7% of its 1,800 program sample are above the threshold) and
certificate programs, specifically culinary schools, are most vulnerable
(negative - CECO, EDMC). This discrepancy leads to the question .. will
ED change its approach if/when ED reviews data that shows its GE rule
impacting degree programs and more than just the "outliers"?
Could ED Completely Scrap the Gainful Employment Rule? Completely

dropping GE from the final rule is unlikely. Even though ED developed
its gainful employment rule based on analysis of a very limited sample,
senior ED officials appear comfortable with their GE formula. If
further data analysis shows the magnitude of violations growing beyond
just "outlier" certificate programs, ED said it would only build their
resolve go forward with the rule and fix the problem.
What Changes Might ED Make to the GE Rule? ED will analyze data over the
next several months in conjunction with other government agencies to
determine if any modifications are needed. ED has implied, however, that
any changes would likely be offset to keep the scope of the GE rule the
same. For example, ED said that if it changes the formula from
total-debt to debt-from-the-most-recent-institution-attended, it might
5
,
__________.IL _ ._--_.._ - _ . _ - - -
reduce the 8% limit so that the targeted number of institutions remains

the same. We will monitor the inter-agency review process over the next
several months to determine if ED will accept any surprisingly positive
changes.
How Obtainable Are the "Alternatives" in the GE Rule? It will require

further analysis to determine how many programs might be able to meet
the two alternatives measures outlined in the GE rule. After exceeding
the 8% debt-to-earnings ratio, a program can maintain Title IV
eligibility if it proves the actual earnings of its graduates keep it
below the 8% threshold or if graduates show >90% loan repayment. It
remains unclear how many programs can keep their "true" default rates
(excluding forbearances or deferments) low enough to meet this loan
repayment threshold, but promoting Income Based Repayment (IBR) could
help keep graduates out of default.
What About Congress? Intervention under a Democratic Congress is

unlikely.
Will Incentive Compensation Constrain Business Models? Companies must

now show that compensation is not "indirectly or indirectly" based on
securing enrollments of financial aid (instead of "solely" based on
these metrics). However, ED will allow merit-based pay (in certain
circumstances) and payments to 3rd-party lead aggregators, so long as
compensation is based on retention/completion (i.e. not applications or
enrollments).
, .
For a PDF version of this 3-page report, including a list of previously
published research on this topic, please refer to the attached file.
RISKS
. The legislative and regulatory agendas are subject to change at the

discretion ofieadership. Unprecedented economic conditions could
instigate unanticipated and/or sweeping shifts in policy. Predicting the
future is a hazardous endeavor and economic / market forecasting is an
imprecise science. Actual outcomes may differ substantially from our
forecasts. The predictions and opinions expressed herein are subject to
6
~- ~ - ~- --~.. ~ ~ ~'" .---~-- ---------_.
change at any time.
ANALYST CERTIFICATION
I, Jarrel Price, certify that (i) the recommendations and opinions

expressed in this research report accurately reflect the research·
analyst's personal views about any and all of the subject securities or
issuers discussed herein and (ii) no part of the research analyst's
compensation was, is, or will be, directly or indirectly, related to the
specific recommendations or views expressed by the research analyst in
the research report.
•
I, Andrew Parmentier, certify that (i) the recommendations and opinions

expressed in this research report accurately reflect the research
analyst's personal views about any and all ofthe subject securities or
issuers discussed herein and (ii) no part of the research analyst's
compensation was, is, or_will be, directly or indirectly, related to the
specific recommendations or views expressed by the research analyst in
the research report.
DISCLAIMER
This report is intended for the private use of Height Analytics' clients
and prospective clients. Reproduction or editing by any means, in whole
or in part, or any other unauthorized use, disclosure or redistribution
of the contents without the express written permission of Height
Analytics is strictly prohibited. The information contained in this
report has been obtained from sources which Height Analytics believes to
be reliable; however, Height Analytics does not guarantee the accuracy,
completeness or timeliness of any information or analysis contained in
the report. Opinions in this report constitute the personal judgment
of the analysts and are subject to change without notice. The
information in the report is not an offer to purchase or sell any
security.
Users assume the entire cost and risk of any investment decisions they
choose to make. Height Analytics shall not be liable for any loss or
damages resulting from the use of the information contained in the
7
--------------
report, or for errors of transmission of information, or for any third

party claims of any nature. Nothing herein shall constitute a waiver or
limitation of any person's rights under relevant federal or state
securities laws.
8
--~--- ~ ~-- ------- .. __
----~-_ .~. ...
_ _._._----_._---~- -~~~~~-~-~~-----_._-~-~. __ .~._-_ .. _~-----~------ --- -----------_._ ... ~ .. _.. _----- --~._-----

Sent: Tuesday, June 22, 2010 10:38 PM
To: Pauline Abernathy; Eric.Stein@do.treas.gov; Peggy.Twohig@do.treas.gov; McGuire, MaryEllen C.; MichaeI.Barr@do.treas.gov; Kvaal,
James; Shireman, Bob; Arsenault, Leigh; Gomez, Gabriella; Madzelan, Dan
Subject: . Private student loan provisions in Senate counter-offer in financial reform conference
The Senate's counter offer rejects the House offer on two of the three private student loans issues in the coalition letters:
1. Does not accept the House school certification provisions (strongly supported by lenders, schools and students)
2. Does not accept the House back-up enforcement authority for banks under $10 billion, such as Sallie Mae Bank
3. Accepts the House offer on CFPB supervision of all nonbanks that provide or offer private education loans as defined by TILA
Has the Obama Administration weighed in with conferees on the importance of the first and second issue?
~ 1:1
CFPB Coalition Lender School
Sign-on Letter ... ;tudent SchooICe..

To: Pauline Abernathy; 'Eric.Stein@do.treas.gov'; 'Peggy.Twohig@do.treas.gov'; 'McGuire, MaryEllen C.'; 'Michael.Barr@do.treas.gov'; 'Kvaal, James'; 'bob.shireman@ed.gov'; 'Arsenault,
Leigh'; 'Gomez, Gabriella'; 'Madzelan, Dan'
Subject: RE: Private student loan provisions in House offer in financial reform conference
FYI--It turns out the Senate private student loan ombudsman provisions, while not in the House offer, are included in the "base text" off
of which the conferees are negotiating. Also included in the base text are the House bill's study on private student loans and report on
compliance with the school certification provisions and the impact on student borrowing.

Sent: Monday, June 21, 2010 11:05 PM
To: Eric.Stein@do.treas.gov; 'Peggy.Twohig@do.treas,gov'; 'McGuire, MaryEllen C.'; 'MichaeI.Barr@do.treas.gov'; 'Kvaal, James'; 'bob.shireman@ed.gov'; Arsenault, Leigh; 'Gomez,
Gabriella'
1
------------- ------------- -------_._.~._~----.---------
-~~~-~-----~~~~---~~~~~-~~--~-~ ~ ~ .. .. ~--~
~~~ ~ ~~ .~ ~ ~.~.~ ~.~.~ ..
~~ ~.~ ~---~~~------~------~~-~--~ ~ .... _---------
required by the House-passed bill. The House and Senate conferees meet tomorrow at noon to discuss the House proposal. Below is·
• Private loans from schools and other non banks-Mirrors the private loan provisions adopted on the House Floor by giving the CFPB
ombudsman. The House ombudsman provisions are also more general regarding advising consumers about their rights, lenders
Jillp:/lfinancialservices.house.gov/pdf/AY01 OF74 xml.pQf
.!:!!!p:/lfinancialservices.house.gov/Key Issues/Financial Regulatory ReformlTlTLEX OFFER CFPA MANAGERS.pQf
I
.!:!!!p:llfinancialservices.house.gov/Key Issues/Financial Regulatory ReformlTlTLEX OFFER CFPA.pQf

.!:!!!p:/lfinancialservices.house.gov/Key Issues/Financial Regulatory ReformlTlTLEX OFFER CFPA SUMMARY.pQf
Pauline Abernathy
Vice President
TICAS: 510.318.7900 Direct: 510.318.7903
2
May 3,2010
United States Senate

Dear Senator:
As advocates for students, young people, consumers, higher education and civil rights,
we strongly urge you to ensure that the Restoring American Financial Stability Act
(S. 3217) gives the Consumer Financial Protection Bureau (CFPB) full authority over all
private student loans. We are deeply concerned that the bill as currently drafted may not
even give the CFPB enforcement authority over the largest private student lender, Sallie
Mae, or over predatory loans made by large for-profit colleges attended
disproportionately by low-income and minority students.
Private student loans are one of the riskiest ways to pay for college, yet a significant
number of students have private student loans as well as, or instead of, safer federal
student loans. Private student loans typically have uncapped, variable rates that are
highest for those who can least afford them. They lack the fixed rates, consumer
protections and flexible repayment options of federal student loans, and are extremely
difficult to discharge in bankruptcy.
Unfortunately, S. 3217 does not currently ensure meaningful oversight of the largest
private student lender or the riskiest products. We therefore urge you to amend S. 3217
to ensure that the CFPB has full authority over all private student loans, including that:
• The CFPB has full enforcement authority over the largest private student
lenders. As S. 3217 is now drafted, the CFPB may not have supervision or
enforcement authority over Sallie Mae, the largest private student lender, because it
is financing private loans through the Sallie Mae Bank, which has total assets under
$10 billion. Sallie Mae made nearly $5 billion in private loans in 2008-09.
• The CFPB has full enforcement authority over predatory loans by schools and'
other nonbanks. As S. 3217 is currently drafted, the CFPB would not have full
authority over nonbank entities unless they were determined to be "larger" in the
market. Lenders who might fall through the cracks include schools that make private
loans directly to their students, such as Corinthian Colleges, which has told investors
that it expects nearly 60% of these loans to default. The company still profits
because the federal grant and loan dollars associated with these borrowers far
outweigh the planned write-ofts.
• Private loans must be certified and students informed of any remaining federal
loan eligibility. The House-passed financial reform bill requires lenders to confirm
with the borrower's school that the borrower is in fact a student, is eligible to borrow
the requested amount, and has been notified of any untapped federal loan eligibility.
This "school certification" gives colleges the crucial opportunity to counsel students
before they take out an unnecessarily costly and risky private loan. Sallie Mae
reports that school certification reduces the amount borrowed nearly 30% of the time,
and research has found that school-certified loans have significantly lower default
rates than uncertified loans.
Thank you for your consideration of our views. Should you or your staff have any
questions, please contact Pauline Abernathy with the Institute for College Access &
Success at pabernathy@ticas.orgor(510) 318-7903..
Signed,
American Association of Community Colleges
American Association of State Colleges and Universities
•
Americans for Financial Reform
The College Board
College Parents of America
Consumer Action
Consumer Federation of America
Consumer Watchdog
Consumers Union
.The Education Trust
Hispanic Association of Colleges & Universities
NAACP
National Association for Equal Opportunity in Higher Education
National Association of Consumer Advocates
National Association of Social Workers
National Black Law Students Association
National Consumer Law Center (on behalf of its low income clients)
National Council of La Raza'
National Education Association
NYPIRG
Rock the Vote
Roosevelt Institute Campus Network
The Sargent Shriver National Center on Poverty Law
Thurgood Marshall College Fund
U.S. PIRG
UNCF
Young Invincibles
Please note: This letter was updated on May 11 to include organizations that asked to sign the letter after it
was submitted to senators on May 3, 2010.
• A large number of organizations are working together to advance Americans for Financial Reform's common interest in an accountable,
transparent and secure financial system, and to accomplish our shared policy goals. Because the organizations involved and the issues
addressed are diverse, not every organization works on or has a policy position on every specific issue.
----- ------------------- -----_._--_._... ~".-- ...-- -- ------- ..... _--_.. __ __
._. .... __. -
From 1987 through 2000, the amount of total Title IV dollars given to for-profit
schools fluctuated between $2 billion and $4 billion dollars...
Total Federal disbursements of Title IV Stafford Loans and Pell Grants, 1987 - 2009
Dollars in billions
Total Total For profit For profit Total For profit share For profit share
Year Pell Grants Stafford Loans Pell Grants Stafford Loans For profit Pel! Grants Stafford Loans
1987 $3.5 $7.3 $0.9 $1.8 $2.7 25% 25%
1988 $3.8 $8.0 $1.0 $2.1 $3.1 27% 27%
1989 $4.5 $8.2 $1.1 $2.3 $3.4 24% 28%
1990 $4.8 $8.3 $1.1 $1.9 $3.0 23% 23%
1991 $4.9 $8.8 $1.1 $1.5 $2.6 22% 17%
1992 $5.8 $9.5 $1.2 $1.3 $2.5 21% 14%
1993 $6.2 $9.9 $1.1 $1.0 $2.1 18% 10%
1994 $5.7 $14.1 $0.9 $1.4 $2.3 15% 10%
1995 $5.5 $19.9 $0.7 $2.0 $2.7 13% 10%
1996 $5.5 $22.8 $0.7 $1.9 $2.6 13% 8%
1997 $5.8 $25.1 $0.7 $2.2 $2.9 12% 9%
1998 $6.3 $26.3 $0.8 $2.3 $3.0 12% 9%
1999 $7.2 $27.2 $0.9 $2.6 $3.5 13% 10%
2000 $7.2 $28.4 /$O~ $3.0 /$3.9'. 13% 10%
2001 $8.0 $29.5 I $1.1 \ $3.4 /$4.5 \ 14% 12%
2002 $32.1 $1.4 $4.1 $5.6 14% . 13%
$10.0
2003 $11.6 $36.5 $1.8 $5.2 $7.0 15% 14%
2004 $12.7 $41.6 $2.1 $6.6 $8.7 16% 16%
2005 $13.1 $45.7 $2.3 $7.9 $10.3 18% 17"k
2006 $12.7 $48.0 $2.4 $8.8 $11.2 19% 18%
2007 $12.8 $49.4 $2.5 $9.5 $12.0 19% 19%
2008
2009
$14.7
$18.2
$56.8
$70.9
~3.1
$4.4
$12.4
$17.0
$15.5
$21.4
21%
24%
22%
24%
Ip, under $4 billion in 2000 to over

billion to $4 billion $21 billion in 2009
...but with the leniency shown to the industry under the Bush Administration, the
dollars that flowed to the industry eXI?loded to over $21 billion, a 450% increase
1
SoUIW: College Boam
--,,------- __ __._----"
. .. "._~~-----
-~~~~--'-~~--~-
At the current pace of growth, For-profit schools will claim 20% of enrollments,
represent 40% of schools and draw over 40% of all Title IV aid in 10 years
For-profit share of enrollment, schools, Pell grants and Loans, 2009 - 2020
For-profits % share of:

Total Total Pell Stafford Total Total Title IV disbursements I~ billions)
Year Enrollment Schools Grants Loans Title IV Non-profits For-profits
2007 7% 23% 19% 19% 19% $50.2 $12.0
2008 8% 24% 21% 22% 22% $56.0 $15.5
2009 8% 25% 24% 24% 24% $67.6 ( $21.4J-
2010 9% 26% 25% 25% 25% $71.9 $24.3
2011 10% 27% 26% 27% 27% $76.5 $27.7
2012 10% 29% 27% 28% 28% $81.2 $31.5
2013 11% 30% 28% 30% 29% $86.2 $35.8
2014 12% 31% 30% 31% 31% $91.4 $40.8
2015 13% 32% 31% 33% 32% $96.9 $46.4
2016 14% 34% 32% 35% 34% $102.5 $52.8
2017 16% 35% 33% 36% 36% $108.4 $60.1
2018 17% 37% 35% 38% 38% $114.4 $68.5
2019 18% "10 OL 1% 40% $120.6 $77.9
2020 20% 40% 38% 43% 42% ::> $126.9 ( $88.8
fu!.v Assumptions for Projections Based on current financials of For-profit

• Total post-secondary enrollment grows at 1.5% per year
institutions, less than 30% of the
incremental $67 billion in Title IV dollars
• For~profit enrollment grows at 10% per year (10-yr avg is 14.4%
annually) will go towards educating students...
• Total post-secondary institutions grow at 1.5% per year; For-profit
institutions grow at 6% per year (both long-term avg since 1990) ....nearly $50 billion will go to companV
• Avg grant and loan amounts per student grows at 5-yr historical avg profits and non-faculty and executive
growth rates, by institution type compensation
2
Sou"",: College Boald. us Dept of Education. industry estimates
------ -----,--------- ~...... . _ - - - - - - - - - - - - - _ .. __._--_. . _._-- --_ _ - - - -
Using the same data and looking at the average Pell and Stafford Loan disbursements
on a per-student basis highlights many other warning signs
Traditional vs. For-profit disbursements of Title IV Stafford Loans and Pell Grants, 1987 - 2009
For-profits % share of: Average Pell Grant + Loans

Total Total Pall Stafford Total Per Student
Year Enrollment Schools Grants Loans Title IV All schools Non-profit For- rofit
1987 . 1% 10% 25% 25% 25% $842 $643 $13,969
1988 2% 10% 27% 27% 27% $899 $670 $14,262
1989 2% 10% 24% 28% 27% $933 $697 $14,640
1990 2% 10% 23% 23% 23% $ $740 $14,179
1991 2% 10% 22% 17% 19% $954 $788 $11,133
1992 2% 9% 21% 14% 16% $1,053 5 $10,831
1993 2% 9% 18% 10% 13% $1,120 $989 $9,263
1994 2% 9% 15% 10% 12% $1,385 $1,246 723 We are back to late-80's
1995 2% 9%- 13% 10% 11% $1,780 $1,616 $11,3 levels of lending to For-profit
1996 2% 9% 13% 8% 9% $1,967 $1,827 $8,402 students, a key leading
1997 2% 15% 12% 9% 9% $2,131· $1,974 $8,910 indicator for expected loan
1998 3% 16% 12% 9% 9% $2,249 $2,093 $8,317 defaults... back then, fraud
1999 3% '17% 13% 10% 10% $2,329 $2,154 $8,15 was commonplace and
2000 3% 18% 13% 10% 11% $2,323 $2,130 $ , 81 regulation was minimal.
2001 3% 19% '14% 12% 12% $2,351 $2,139 $8,533
2002 4% 19% 14% 13% 13% $2,531 $2,27 $9,349
2003 4% 19% 15% 14% 14% $2,848 ,543 $9,786
2004 5% 20% 16% 16% 16% $3,146 $2,783 $9,909
2005 6% 21% 18% 17% 17% $3,3 $2,947 $10,153
2006 6% 22% 19% 18% 18% ,420 $2,968 $10,498
2007 7% 23% 19% 19% 19% $3,407 $2,944 $10,074
2008 8% 24% 21% 22% 22% $3,740 $3,173 $10,541
2009 8% 25% 24% 24% 24% $4,525 $3,744 C$13,247
We must take note that because For-profit students receive 3·5x as much Title IV aid as
traditional students and are growing enrollment at 3x the pace of traditional schools,
these early warning signs will only grow in the coming years...
Sou"",: College Boatd

3
----
If history is any guide, we will return to late-80's Cohort Default rates in 1-2 years,
the worst period of recorded default rates in the history of the DOE
Average Total Loans + Grants per For-profit student vs. DOE Official CDRs, 1987 - 2009
I liIiIiIIliiiJ Avg Loans + Grants • Official CDR I

$16,000 I I 24%
$15,000
20%
$14,000
1: $13,000 16%
...
CI>
cr:
c()
~:.
a.
$12,000 -co
<!: 12% :11
ll:
CI>
E $11,000
o
w
-
I-
g
~ $10,000 8%
$9,000
4%
$8,000
$7,000 0%
i>- fb'<> fbO:> g," g,'" g,'" g,":> pJ< g,<' g,'" Ri- g,'<> g,0:> \:)" \:)'" \:)", \:)":> >:f \:)<, \:)'" \:)'\ \:)'<> \:)0:> &
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ '];~
4
Soun;e: College Board, US Dept of Education
------------------------------------------------------------------- ----~-----------------

Sent: Thursday, March 04, 2010 12:03 AM
To: Smith, Zakiya; Arsenault, Leigh; Shireman, Bob; James Kvaal
Cc: Pauline Abernathy
SUbject: new data from fafsa/irs data transfer pilot
Attachments: 24lRSDataRetrievalProcessinFAFSAontheWebV1.pdf
I was excited to get the first numbers from the FAFSAlIRS pilot on a conference call yesterday with FSA staff and about a dozen other outside people on the
FAFSA design team. But, as you've no doubt seen already, the data indicate that among those offered the option to pre-populate the 09-10 FAFSA with their 1040
data, half try it, but only 28% transfer data successfUlly (see actual numbers below). The staff identified why they think this is happening, but the solutions depend
on the IRS taking certain actions. They also said the Spanish translation is not yet underway and they are running behind making the data transfer available in
July for the 2010-11 school year because of IRS issues as well. Since I, and perhaps others on the call, regularly field questions from the Hill and the press about
the status of the pilot, it would be best if we could tell them what the Administration is doing to address these issues. I've included James on this email because it
sounds like it may require WH involvement to resolve some of the issues in a timely way.
FYI, here are more details from the call:
- 343,637 = total FAFSA applicants since 1/28/10

- 247,403 offered the IRS Data Retrieval tool
- 129,897 accepted the offer
- 69,934 actually transferred data.
According to FSA, there two main reasons for the steep drop-off between accepting the offer and successfully transferring the data:
- Address Authentication Glitch: This is a simple usability issue that could easily be corrected by the IRS, and it sounds like there's some openness to doing so,
although how soon is unclear. Here's the problem: applicants have to provide the IRS with their address exactly as it appears on their tax returns, but the format
for entering address information is unclear. As you can see in the mockup on page 11 in the attached PDF, there are two lines for entering "P.O. Box and/or Street
Address", and people naturally start with the first line. However, the first line is apparently only for P.O. Box numbers, so if you put your street address there, it
doesn't match IRS records.
- Filing Status Confusion: According to FSA, the other main problem also involves authentication on the iRS side. It seems that a lot of people (no number given)
are uncertain about their tax filing status and get it wrong. The relevant question is on the same page as the P.O. Box problem. Applicants can try again, but there
are no prompts about either the option to retry or how to figure out your filing status. FSA indicated that IRS doesn't want anything on the IRS or ED side that might
compromise the integrity of the IRS authentication process and is wary about any kind of prompts.
It's great that FSA is tracking and sharing this information. Just let me know if there's anything more on context and next steps, or if we can be of assistance in any
way.
Lauren
1
. __._._ ..._.. ~~~~~~~- _ __
..... .~-----
Lauren Asher
President
2054 University Ave., Suite 500
Berkeley, CA 94704
510-559-9509, x304
nasher@ticas.org
www.ticas.org
www.~ectonstudentdebt.org
www.economicdiversity.org
2
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Session # 24
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Michele Brown, Director of Applicant

Products and Customer Service
Marilyn LeBlanc, Director of

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Agenda
• What is the IRS Data Retrieval Tool?

• How will it work?
• Who can use it?
• When can they use it?
• What's new for 2009-10?
• What's new for 2010-11 ?
• Verification.? .
• Ideas for the future?
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Schools to Receive Your Results :HeIP',il COill2i:tus'.':: FAQSC' uve,l:~fh~;;5:H ,..,,:?;\;r;:: i:/.? .- .: ."?,:'{i_;~, ". m';;:'; ." ,',:.;~:.;, :?".:.:':;?i.,-';,',: ~; i :~~{;~':;:;~:' '-"j;%'l :1;:·?:LZ:..Si; '.:.:~.
Enterthe Federal School Codes for any school(s) you are considering attending in 2009-2010.
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I NEED HELP? _ VIEWFAFSA SUMMARY

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,Who can use the IRS Data Retrieval

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• Initial and renewal FAFSA on the Web
applicants and parents
• Applicants and parents -
- With a valid SSN and FSA PIN
- Who have completed a 2008 tax return
- With no change in marital status since
12/31/08
19
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When will the IRS Data Retrieval Tool

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• 2009-10 FOTW: January 24, 2010
• 2010-11 FOTW: Summer 2010
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What's new for 2009-2010?

IRS Data Retrieval
• In FOTW, COTW, FAA Access Corrections -

- New indicator - "Transferred from the IRS" -
will display next to each field populated with
IRS data
- Indicator removed from -
• All parent income fields populated with IRS data
whenever any of those parent fields are changed
• All student income fields populated with IRS data
whenever any of those student fields are changed
• No changes to electronic SAR, paper SAR or .
SAR Acknowledgement
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"Transferred from IRS" Indicator
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COTWIFAA ACCESS
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What's new for'2009-2010?

Comment Codes
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- Student Inquiry section of FAA Access
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Access
Only For Use by Financial Aid Olfice (skip to next page to begin your review 01 the data included in your SAR)
This information will be used by your Financial Ald Administrator to determine your eligibility for student ald.
SAR C Flag, Y Dependency status~ D Rejects Met: ABCDEFG

Application Sourc,a: 4A Dependency Override: Y Application Receipt Date: DIfDII2DID
Transaction Source~ 4A Professional Judgment: Y Transaction Rece'lpt Date: D\fDl/2DID
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Special Circumstances: I S Flag Student 1)1 Parenr. 01
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SECONDARY EFe, ODDDO OODDO DDOOD ODDDD DDDDD DDDDD DDDOD ODDDD ODDDD ODOOD DODOD 00000
PC:
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Auto Zero EFC Flag: Y SNIT flag: Y Pall Eligible flag: Y

MATCH FLAGS,
SSN Match Flag: 4 Selective Service Registration Flag: V Selective Service Match:
DHS Match Flag: DHS Verificatlon #: 999999999999999 SSA Citizenship Codle: C
DHS Sec. Conf. Flag: VA Match Flag: FSSN Match Flag: 4-
NSLDS Match Flag: 2 NSLDS Results Flag: t MSSN Match Flag: 4
NSLDS Transaction Number: 0i
COMMENTS:
R5ENOOOOO 1 999 PAGE 2 Of 10 IIUIIII.IIIIIIIIIIIIII~I

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• Revised ISIR layout posted to IFAP on 10/28/09

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Contact Information
• Michele Brown
michele.brown@ed.gov
202-377-3203
• Marilyn LeBlanc
marilyn.leblanc@ed.gov
202-377-3205
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33
1-
____L__________________________ _ - - - - - - - - - ---- ---- --- - - - - - - --- ------- ---------_. - ----------------------------------------- ._._----------------
From: Marlin, Phil

To: Shireman, Bob
Subject: FW: Today's Call
Attachments: HEFTS_2P9_060110.pdf
FYI- talking to morgan Stanley today to learn more, they sent across these bullets with their own proposal. (includes financing DL through different mechanism,
treasury doesn't support/like the idea, just wanted to make sure you had it.)
Will let you know if we learn anything good on the call.

_~ ~.~_.~~_~~~. .__ _ ~ •._ , , , _ ,.. • _ _ ,_~ ~, "~~ ._. ._,_,_, " __ ~ _ , ·_ _ · ~~· · _ _ ~ · ~ e _.._ •.. ~ _ ~ _ , ... _ ~ _, ~_~ ~, _ _. _ _ , _
From: Brown, Michael Imailto:MichaeI.A.Brown@morganstanley.com}

To: Martin, Phil; aaron.klein@do.treas.gQ'{; John.Bellows@do.treas.gQ'{
Cc: Graham, William; Wilson, James
Subject: RE: Today's Call
Gentlemen-
Please see the attached 1-page summary of the strategy that we would like to discuss on today's call.
Michael Brown, Managing Director

Morgan Stanley I Global Capital Markets
1585 Broadway I Floor 04
New York, NY 10036
Phone: +1212761-2110
Fax: +1212507-5086
MichaeJ.A.Brown@morganstanley.com
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From: Martin, Phil Imailto:Phil.Martin@ed.gQ'{}

To: Brown, Michael (GCM); ili!r.QD.klein@do.treas.gQ'{; John.Bellows@do.treas.gQ'{
Cc: Chavers, Kevin (FID); Graham, William; Wilson, James
Subject: RE: Today's Call
Looping William Graham and James Wilson who will be on the call for ED.
1
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PROPRIETARY AND CONFIDENTIAL
Higher Education Funding Strategy

The Higher Education Funding Strategy has a Three-pronged Approach
The Higher Education Funding • The Higher Edncation Funding Strategy is a three-pronged approach to ultimately creating a self-funding student
Strategy has a three-pronged lending platform
approach
• Clean up of existing market Clean-up
inefficiencies
• Addressing dysfunction in the current Student Loan Auction Rate Securities ("SLARS") market alleviates
- Frees up capital for student
significant stress in the overall market and produces efficiency gains, benefitting taxpayers and students
lending
• Stabilization of the market - Government benefits from the restructuring arbitrage existing on risk it already owns
through short-term asset-backed
Stabilize
conduit (Straight-A)
- Revenue generator for the • Stabilization ofthe market incorporates an efficient bridge funding strategy which utilizes the existing Straight-A
government and popUlar with ABCP Funding Conduit
CP market investors - More efficient than the bridging that issuers are currently attempting to accomplish
- Bridge to term securitization of
student loan collateral - Sets the stage for off-balance sheet, longer-term financing
• Repricing of the student loan ABS Reprice
market through issuance of new
• New issuance of student loan-backed term securities will receive a lower cost of funds than any existing term
student loan-backed securities
ABS
- Lower cost of funds for Student
Loan ABS - Ultimately drives down the overall cost to student borrowers
- Attracts larger and broader • Regular, programmatic issuance draws large new pools of investor capital into the student loan ABS market
amounts of investment capital
for Student Loan ABS
- Precursor to off-balance sheet
financing for the Direct Lending
Student Loan Program
Morgan Stanley 1
-_ ~._ _-_.. _-~ .
.
PROPRIETARY AND CONFIDENTIAL
Important Information and Qualifications
We have prepared this document solely fOf infonnational purposes. You should not definitively rely upon it or use it to fonn the defmitive basis for any decision, contract,
commitment or action whatsoever, with respect to any proposed transaction or otherwise. You and yOUf directors, officers, employees, agents and affiliates musthold this document and any
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whole or in part at any time except with our prior written consent. If you are not the intended recipient of this document, please delete and destroy all copies immediately.
We have prepared this document and the analyses contained in it based, in part, on certain assumptions and information obtained by us from the recipient, its directors, officers,
employees, agents, affiliates andlor from other sources. Our use of such assumptions and infonnation does not imply that we have independently verified or necessarily agree with any of such
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our affiliates, or our or their respective officers, employees or agents, make any representation or warranty, express or implied, in relation to the accuracy or completeness of the infonnation
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ofany kind from the commencement of discussions, the U.S. federal and state income tax treatment and tax structure of the proposed transaction and all materials of any kind (including
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This document is provided by Morgan Stanley & Co. Incorporated andlor certain of its affiliates, which may include Morgan Stanley Realty Incorporated, Morgan Stanley Senior
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governing law permits otherwise, you must contact an authorized Morgan Stanley entity in your jurisdiction regarding this document or any of the information contained herein.
© Morgan Stanley andlor certain of its affiliates, All rights reserved,
Morgan Stanley 2
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Sent: Thursday, April 15, 20106:00 PM
To: Kvaal, James R.; MichaeI.Barr@do.treas.gov; Eric.Stein@do.treas.gov; Peggy~Twohig@do.treas.gov;Shireman, Bob; Gomez,
Gabriella; Arsenault, Leigh
Cc: Lauren Asher
Subject: DURBIN, COHEN AND OTHERS INTRODUCE LEGISLATION TO RESTORE FAIRNESS IN STUDENT LENDING
Attachments: image003.jpg
FYI. Bills were introduced in the House and Senate today to treat private student loans like other consumer debt in bankruptcy. The
House Judiciary Subcmte on Commercial and Admin Law has scheduled a hearing on the Cohen-Davis bill for next Thursday at 11am.
Pauline
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From: Mulka, Christina (Durbin)

To: Mulka, Christina (Durbin)
Sent: Thu Apr 15 16:57:32 2010
Subject: DURBIN, COHEN AND OTHERS INTRODUCE LEGISLATION TO RESTORE FAIRNESS IN STUDENT LENDING
I .."'1 U Nt T EOS TA T ES SEN A T()R*I L LIN Q I S

.I I' .. ~
!, Il
t \
DlCI< DURBIN ,-
I
- . . -
I
,
For Immediate Release
Christina Mulka (Durbin) 202.228.5643
Christina rnulka@durbin.senate.gov
Matt Thornton (Whitehouse) 202.228.6293
Matt thornton@whitehouse.senate.gov
Jess Mcintosh (Frau1(en) 202.224.1868
Jess rncintosh@franken.senate.gov
Michael Pagan (Cohen) 202.226.7916
MichaeI.pagan@rnai1.house.gov
Ira Cohen (Davis) 773.533.7520
ira.cohen@rnail.house.gov
1
-------~ .... , .. - ---------------------- ---------.. - ---- ----------------------..." -_....---
DURBIN, COHEN AND OTHERS INTRODUCE LEGISLATION TO RESTORE FAIRNESS IN

STUDENT LENDING
Bill will make private student loans dischargeable in bankruptcy

[WASHINGTON, D.C.] - U.S. Senators Dick Durbin (D-IL), Sheldon Whitehouse (D-RI) and Al Franken (D-MN) today joined U.S.
Representatives Steve Cohen (D-TN) and Danny Davis (D-IL) to introduce legislation in both the Senate and the House that will restore fairness in
student lending by treating privately issued student loans in bankruptcy the same as other types of private debt.
Before changes were made to the bankruptcy code in 2005, only government issued or guaranteed student loans were protected during bankruptcy.
This protection has been in place since 1978 and was intended to safeguard federal investments in higher education. Today's bill would restore the
bankruptcy law, as it pertains to private student loans, to the language that was in place before 2005, so that privately issued student loans will once
again be dischargeable in bankruptcy.
"The high interest rates on private student loans have made them incredibly profitable for loan companies and saddled students with crushing
debt," said Durbin. "Two weeks ago, Congress ended a $6 billion subsidy to banks and companies, ·like Sallie Mae, which reaped the benefit oj
student loans while taxpayers assumed all the risk. Today's bill takes an additional step toward restoring fairness in student lending, by placing
student loan companies in the same position as virtually all other private lenders." Durbin first introduced this legislation in June 2007.
"People who seek higher education to better their futures should not be dissuaded from doing so by the threat offinancial ruin," said Cohen.
"The bankruptcy system should work as a safety net that allows people to get the education they want with the assurance that, should their
finances come under strain by layoffs, accidents, or other unforeseen life events, they will be protected. My bill takes a modest but important step
in achieving this goal." Congressman Cohen held a hearing on the dischargeability of student loan debt in bankruptcy in September 2009. He is a
longtime advocate of making a higher education more affordable and accessible, most notably through the establishment of the Tennessee Lottery.
For the past decade, private student loans have been the fastest growing and most profitable part of the student loan industry. According to the
College Board, roughly 15% of total student borrowing is in private student loans. Ten years ago, only 5% of total education loan volume was in
private loans. The interest rates and fees on private loans can be as onerous as credit cards. There are reports of private loans with interest rates of at
least 15% and higher rates are not unheard of. This can place a tremendous burden on student borrowers with private loans and unlike federal student
loans, there is no government-imposed loan limit on private loans and no public regulation over the terms and cost of these loans.
"By repealing special treatmentfor private lenders, we will hold big banks accountable, protect young people from abusive lending practices, and
make college more affordable, " said Whitehouse.
"In this economy, we want to be encouraging people to invest in their education and their future," said Franken. "That's why it is more
important than ever for people to be able to get afresh start afterfinancial problems related to private student loans."
2
L ------ - ---_.-- ----------------------- ----------,' - "_'" ----- ---------- ----- ------ --------- -- ---------.- ------------------------ -.--_." ._._-------------------------,,~.
"The 2005 bankruptcy restrictions penalize borrowers for pursuing higher education, provide no incentive to private lenders to lend responsibly,
and likely a./fect African American borrowers more negatively than other borrowers, " said Davis. "I am proud to join with my colleagues to
ensure that our statutes do not unintentionally burden particular groups ofpeople. Private education debt is no different than other consumer
debt; it involves private profit and deserves no privileged treatment. I will work actively with Senator Durbin and Congressman Cohen to protect
student borrowers. "
Private loans involve only private profit and do not have the protections that government borrowers enjoy, including caps on interest rates, flexible
repayment options, and limited cancellation rights. There are very few types of debts that the bankruptcy law subjects to a different standard,
allowing for discharge in only the most extreme circumstances. For example, the bankruptcy code makes it especially difficult for people to escape
child support responsibilities, overdue taxes, and criminal fines. Privately issued student loans should not be on that list.
Today's legislation is supported by the Institute for College Access and Success (TICAS) and the National Consumer Law Center.
-30-
3
---,---- --- --------------- ................ _._- _.._----- -_ -"--. ~---

Sent: Sunday, June 06, 2010 10:43 PM
To: IUke_swarthout@help.senate.gov; Little, Bethany (HELP Committee); Juliano, Robin (HELP Committee); jkvaal@gmail.com; Shireman,
Bob
Cc: Connie Myers; Lauren Asher; Debbie Frankie Cochrane
Subject: Federal Title IV revenues vs taxes paid
FYI--After hearing CCA refer to its members as taxpaying and unsubsidized, we created the attached spreadsheet with the actual
numbers from their members' reports to the SEC.
LIJ
ForProfit
venues and Taxes
Pauline Abernathy
Vice President
1
------------- ------- ---- - --,---" ...".- ------ ------------------------- .. ,_._-'-------------, --_... --_ .. _---------------_._..
, -~._._--------
From: Shireman, Bob

Sent: Monday, June 07, 2010 9:14 AM
To: Marlin, Phil
SUbject: FW: Federal Title IV revenues vs taxes paid
From: Pauline Abernathy [mailto:pabernathy@ticas.org}

Sent: Sunday, June 06, 2010 10:43 PM
To: luke swarttjout@help.senate.gQY:; Little, Bethany (HELP Committee); Juliano, Robin (HELP Committee); jkvaal@gmail.com; Shireman, Bob
Cc: Connie Myers; Lauren Asher; Debbie Frankie Cochrane
Subject: Federal Title IV revenues vs taxes paid
FYI--After hearing CCA refer to its members as taxpaying and unsubsidized, we created the attached spreadsheet with the actual
numbers from their members' reports to the SEC.
•
iiJ
ForProfit
'venues and Taxes
Pauline Abernathy
Vice President
1
~~- ---- -~~ .. ~~-
For-Profit Colleges Receive Vast Majority of their Revenues from Federal Programs
Pay Small Share in Taxes
Est. FY09 Ofo of total FY09 Federal Title

revenues from revenues from Total FY09 Ofo of total FY09 IV funds in
federal Title IV federal Title IV federal and revenues paid in excess of
Total FY09 programs* programs state taxes taxes taxes paid
revenues (column BxD) (90/10 ratio) paid (column E/B) (column C-E)
Apollo Group (Univ. of Phoenix) $4.0 B $3.4 B 86% $446 M 11.2% $3.0 B
Corinthian Colleges $1.3 B $1.2 B 89% $46 M 3.5% $1.1 B
DeVry $1.5 B $1.1 B >75%** $72 M 4.9% .$1.0 B

ITT Educational Services $1.3 B $0.9 B 70% $191 M 14.5% $0.7 B
Total FY09 revenues, 90/10 percentages, and taxes paid are from company 10-K and 10-Q reports to the SEC.
* Estimated Title IV revenues based on 90/10 ratio times total revenues. Title IV revenues do not include any financial aid from the U:S.
Department of Veterans Affairs, Department of Defense or Department of Labor.
** DeVry's lO-Q gives the 90/10 ratio for each of its holdings but does not give a ratio for the overall company. 75% is the estimated
overall 90/10 ratio based on the weighted average across all DeVry holdings, including DeVry University, Chamberlain College of Nursing,
western Career College, and Apollo College, except for Ross University for which enrollment data were not available. DeVry reports that
Ross University has an 80% 90/10 ratio, the highest of any of its holdings, so inclUding Ross would increase the overall percentage for
DeVry.
,
..it _ - - - " " ,
From: Lauren Asher [LAsher@ticas,orgl

Sent: Wednesday, April 28, 20106:01 PM
To: dloonin@nclc,org; Shireman, Bob; Jamienne S, Studley; Michelle Rodriguez; margaretreiter123@gmail.com; Tim Ranzetta
Cc: Pauline Abernathy; Edie Irons; Luke Klipp
Subject: Agenda and backgrounders for 4/29-30 meeting
Attachments: April 29 30 meeting agenda,doc; default relief options Feb 16,docx; IBR and ICR Feb 12,docx; FTC Holder Rule nclc letter.pdf;
defauitmemomarch2010finai nclc,doc
We're all really looking forward to seeing you all here at noon tomorrow, in our new Oakland office, for the brainstorming meeting on relief for distressed borrowers!
Attached are five documents, which I hope you'll have a chance to review before we meel:
- Meeting Agenda (which we'll go over first thing and revise if needed)
- Ways to Help Borrowers Get out of Default and Back into Repayment (2-page TICAS/NCLC memo, dated 2/16110)
- IBR and ICR (1-page TICAS/NCLC memo on differences in relief currently provided through these repayment programs, dated 2/12110)
- FTC Holder Rule (3-page NCLC letter explaining FTC Holder Rule and recommending improvements)
- Recommendations to Improve Relief for Federal Loan Borrowers in Default (longer backgrounder from Deanne on current problems and potential fixes)
And here again are the basics on where we are and how to find us:
Location:
405 14th SI:, 11th floor
Oakland, CA 94612
510-318-7900
(and here's the full Google Maps link: h!!P:/Ima~00gle,com/maps?g=405+14th+SI:+oakland,+ca&oe=utf-8&rls=org,mozilla:en-US:official&client=firefox

a&um=1 &ie=UTF-8&hq=&hnear=405+ 14th+SI:+Oakland,+CA+94612&gl=us&ei=y6iYS-
!,g,KozAsQPlqaWeBg&sa=X&oi=geocode result&ct=title&resnum=1&ved=OCAcQ8gEwAA)
Public Transportation: Take BART to 12'h SI: Oakland City Center station, Exit station towards the front of the train if coming from SF, from the back of the train if
1h
coming from Richmond (look for signs to 14th St), That should put you on 14 and Broadway, Franklin is one block over from Broadway (away from City Hall), A
great transit planning tool, with maps, is here: h!!p:/itriPQlanner.transiI:511 ,0rq/mtc/XSLT TRIP REQUEST2?lanill@ge=en&itdLPxx homeQSge=secondStep
1h
Driving/Parking: If you're driving, by all means map it from wherever you're coming from, Edie advises taking the 14 51: exit off 980, There are is an affordable lot
right across the street at 1305 Franklin SI: called "Downtown Merchants Parking," You can enter from Franklin or Webster, and it takes up the whole block
1h 1h
between 14 and 13 The lot may close before we are done with dinner on Thursday, but you'd be able to move your car to the street and park for free before
dinner. There are other lots close by that may be open longer.

Lauren Asher
1
-------------- -- -------------- ~-----.~.~._-- '"----~~-- -'---------- ,-_..._._---- --.-----',,-- -----_._--------
President
405 14th SI., 11th Floor
Oakland, CA 94612
(510) 318-7900, x304
nasher@ticas~org
www~ticas.orq
www.lliQjectonstudentdebl.org
www.colleqe-insighl.orq
2
----------- ,-_.-- ------ - --,----_._._...... -~-_.---- _
------.,,_.. .. _.- --------- -_..._-_.

U.S. PIRG
Young Invincibles
------------------------------------------------------------------------
Lauren Asher
President
40514th St., 11th Floor
Oakland, CA 94612
(510) 318-7900, x304
Dasher@ticas.org
www.ticas.org
www. ~ectonstudentdebt.org
3
Protecting and Improving the Best Thing
The FTC Has Ever Done: The Holder Rule
Submitted by Jonathan Sheldon, Carolyn Carter, and Deanne Loonin, National Consumer Law-Center
7 Winthrop Square, Boston MA 02110, www.consumerlaw.org; 617-542-9595
jshe1don@nclc.org; ccarter@nclc.org; dloonin@nclc.org
The Holder Rule Is the FTC's Most Effective Tool against Fraud
. The TRRConcerning Preservation of Consumers' Claims and Defenses ("Holder" Rule), 16
CFR 433, is the most effective action the FTC has ever taken to prevent and remedy consumer
fraud. The Rule requires all types of sellers of goods or services to include a clause in their
credit contracts that makes any assignee or holder of the credit contract responsible for claims
the consumer might have against the seller, up to a cap.
Before the FTC adopted the Holder Rule in 1975, sellers and creditors exploited commercial law
to create a perfect system to profit from fraud. A fraudulent seller would sell faulty goods or
services to a consumer on credit, and then assign the credit contract to a creditor (or arrange a
purchase money loan from a creditor). The assigned contract would waive the consumer's right
to raise assignor-related defenses against the assignee.
As a result, the consumer was legally bound to pay the creditor the full price of the goods plus all
the finance charges even though the goods were defective or never delivered or the transaction
was procured by fraud. With profits from fraudulent sales assured, creditors had no incentive to
police the sellers whose transactions they financed. Moreover, it was usually impractical or
impossible for the consumer to bring an affirmative action to recover from the seller.
The FTC Holder Rule dramatically changed these relationships. Now, in all types of
transactions, consumers can raise seller-related claims against the holder. The consumer has a
practical means of obtaining redress, by simply stopping payment on the portion of the debt
representing fraud. The creditor in turn has an incentive to police its sellers to avoid losing
money on its loans. In the case of a loss, the creditor is in a much better position than the
consumer to recoup this loss from the seller.
There are tens of billions of significant consumer transactions every year in the United States and
no federal, state or local agency or private litigation can hope to compensate all victims of
consumer fraud. The FTC Rule instead enlists creditors and the consumers themselves to help
police sellers.
Two Examples of What Happens without Holder Rule Protections

• Throughout the 1980s, the Holder Notice was not included in guaranteed student loans and
•
the Department of Education argued that students could not raise school-related fraud as a
defense on their student loans. The result was fraud on a scale hard to comprehend as over a I
thousand scam vocational schools eventually closed and millions of the most vulnerable I
students were ripped off, with no remedy. Students now can raise school-related defenses on
their government backed loans. Not surprisingly, the area of greatest vocational school abuse
today involves loans outside the federal program where the Holder Notice is often (illegally)
absent from the loan documents.
• The most telling example of what happens when holders are insulated from origination fraud
involves an area where the Rule does not currently apply. Mortgage loan brokers and loan
originators earlier this decade were given the green light for fraud on a scale never before
seen in this country because the parties financing the mortgage loans claimed immunity from
liability for the origination fraud and had no incentive to police it.
Ten Ways the FTC Can Protect and Improve the Holder Rule
Because of the Rule's importance, the FTC should give high priority to ensuring the Rule is
. properly understood and enforced. We urge the FTC to take the following steps to clarify and
improve the Rule:
1. Issue a Commission Opinion stating that the Rule allows a consumer to recover payments
made in a fraudulent transaction regardless of whether the consumer has the right to rescind
the transaction. Many courts require, as a precondition to an affirmative recovery, that the
consumer could have legally rescinded the transaction, relying on language taken out of context
from the Rule's Statement of Basis and Purpose. The FTC Staff in 1999 issued two letters
indicating this approach was contrary to the Rule's intent, contradicts the Notice's clear
language, and misinterprets the Statement of Basis and Purpose. But numerous courts continue
to ignore these staff interpretations.
•
2. Revise the 1976 Staff Guidelines, which mistakenly say that the Holder Rule does not apply
to transactions over $25,000, exempting many car sales today.
3. Revise the Rule itself, or issue a Commission Opinion stating that the Rule covers leases.
Ambiguously, the Rule applies to a "sale or lease," but only to "consumer credit contracts"
which are defined to exclude leases. Unlike the 1970's, automobile leases now are a major
concern, but courts find the Rule does not apply to them.
·4. Revise the Rule to provide that lenders share responsibility for complying with the Rule.
Courts often rule the consumer has no remedy against the lender where the Holder Notice is
improperly omitted from the loan documents, since only the seller, not the lender is responsible
for inserting the Notice in the loan documents. That is, lenders (particularly national banks
making loans for students to go to scam vocational schools) argue for special immunity from
valid claims because their notes are illegally drafted. The FTC should amend the Rule to require
that lenders share the responsibility with sellers to comply with the Rule's Notice requirements.
Once the FTC acts, the banking agencies should be urged to adopt parallel requirements for
lenders outside the scope ofthe FTC Rule.
5. Revise the Rule to provide that it is unfair or deceptive for creditors to misrepresent
consumer rights under the Rule or to include contract terms contradicting the Holder Notice.
Creditors frequently mislead consumers by claiming no responsibility for seller-related abuses.
Creditors also try to circumvent the Rule by inserting in credit agreements either a direct or
indirect waiver of the consumer's rights under the Notice. Once the FTC prohibits these
2
practices, we will urge the banking agencies to adopt parallel requirements for lenders outside
the scope of the FTC Rule.
6. Bring enforcement actions against sellers who fail to arrange for the Notice to be inserted
in the note. We continue to see a disturbing pattern of sellers in certain industries violating the
Rule by failing to insert or arrange for the insertion of the Holder Notice in credit agreements. A
prominent example is private student loans to attend proprietary vocational schools.
7. Issue a Commission Opinion stating that the Rule operates independently ofstate law rules
about holder liability. The Eighth Circuit has misread the Statement of Basis and Purpose to
require use of state law to determine when seller-related claims can be brought against the
holder, as opposed to what claims are available against the seller (and thus available against the
holder). The Eighth Circuit ruled the Holder Rule did not apply because state law did not allow
consumers to raise seller-related claims against assignees. Of course, the Holder Rule was
enacted to overcome just such state laws.
,
8. Issue a Commission Opinion stating that the Truth in Lending Act's limit on assignee
liability only affects liability for TIL violations, not liability under the Holder Rule for state
law claims. Several courts have wrongly held to the contrary.
9. Issue a Commission opinion interpreting the Rule to allow a consumer to recover attorney
fees from a holder, in addition to recovering the amount paid under the contract. Under the
Rule, the consumer's maximum recovery from a creditor is the amount paid under the contract.
The Rule is unclear and courts are divided whether attorney fees, when recoverable under state
or federal law, are part of the amount capped. Where the lender engages in a scorched earth
litigation defense, the consumer's litigation expenses should not be part of the capped amount
10. Expand the Rule to allow consumers to raise against holders claims and defenses that
they could raise against the loan originator or arranger (and not just against the seller).
Holders' insulation from loan origination fraud is the major cause of the subprime mortgage
crisis and also limits consumers' ability to raise loan fraud as a defense to loan repayment. The
current crisis teaches us that the holder-in-due course doctrine must be further narrowed to meet
the realities of the modern marketplace. Holders are already liable for all claims that the
consumer could raise against the originator of HOEPA loans. We urge the FTC to expand the
Holder Rule to apply this principle to all mortgage loans, or at least to a broader segment of the
mortgage market, such as "higher priced mortgage loans," as now defined by Regulation Z.
Once the FTC acts, we will urge the banking agencies to adopt parallel requirements for lenders
outside the scope of the FTC Rule.
3
President Obama's IBR proposal and ICR
February 12,2010
The President's proposal to provide loan forgiveness after 20 years rather than 25 years
needs to apply to both Income-Based Repayment (lBR) and Income Contingent
Repayment (lCR). Otherwise borrowers in ICR would be forced to switch to IBR in order
to benefit from the change, and some borrowers in ICR may not qualify for IBR.
Even with the President's proposal, ICR will still have some advantages over IBR unless
additional changes are made. Under current law, some people are eligible for ICR but not
IBR, and ICR is more generous for some borrowers. While the President's proposal would
make IBR more generous, ICR would still offer some important advantages over IBR,
particularly for borrowers in extreme financial hardship. Therefore, to avoid reducing access
to meaningful relief, the following changes would need to be in place before eliminating ICR:
I. Allow borrowers coming out of default through consolidation to select IBR right
away. Currently, the Department requires these borrowers to enroll in ICR first, then later
switch to IBR. Borrowers coming out of default through consolidation should be able to
select IBR immediately. To operationalize this, borrowers may need to be granted
forbearance or permitted to make interest-only payments while their initial IBR payment
amount is being determined. It is not clear whether this could be done administratively.
2. Allow borrowers to re-enter IBR as they currently can ICR. Low-income borrowers
move frequently and often do not receive paperwork needed to remain in programs, such
as IBR's annual authorization to release IRS records. Borrowers who exit IBR because
they did not submit the necessary annual paperwork need to be able to re-enter within a
reasonable period oftime based on their previous eligibility, and their previous IBR
payments need to count towards forgiveness. This is very important since IBR and ICR
are often the only realistic options borrowers have to stay out of default.
3. Allow borrowers exiting IBR to choose their repayment plan as they currently can
when exiting ICR. Borrowers exiting ICR can choose any repayment plan. However,
under current regulations, IBR borrowers can face severely limited options. As a result,
some people exiting IBR will face monthly payments far in excess of what they would
have paid under a standard 10-year plan, directly contradicting the statute.! The current
IBR regulations would need to be changed to avoid this outcome and to be consistent with
both current law and ICR policy.
4. Allow those currently in ICR to remain in ICR. If ICR is eliminated, current borrowers
should not be forced to switch plans. Switching plans only creates another hurdle for
borrowers.
I See TICAS June 22, 2009 negotiated rulemaking comments at !mP:iiticas.orglQub view.IDm?idx=484.
Ways to Help Borrowers Get out of Default and Back into Repayment
February 16, 2010
At a time of high unemployment and rising student loan defaults, it is particularly important
to ensure that borrowers who have defaulted on federal student loans have a way to get back
into repayment. Below are some common-sense, low- or no-cost policy changes that would
immediately and significantly help borrowers in default get back into repayment and onto
more secure financial footing.
• Make the credit reporting consistent for rehabilitation and consolidation.

Currently, the default notation is removed from the credit report if borrowers exit
default through rehabilitation, but not if they exit through consolidation. Both are
legitimate options for exiting default, and they should be treated the same. Borrowers
should not have to go through the more onerous rehabilitation process in order to
remove this negative notation on their credit report.
• Define "reasonable and affordable." Rehabilitation is not always an option for

borrowers in default because it requires reaching agreement with the loan holder or
collection agency on a "reasonable and affordable" repayment amount, and agencies
frequently demand inflated or unreasonable amounts. Defining "reasonable and
affordable" as no more than what the borrower would pay in lBR and no less than $5
would make rehabilitation a real option for all borrowers in default. This change is
even more important if consolidation is not always an option and/or the credit
reporting problem described above is not fixed.
• Allow borrowers to select IBR right away. Currently, the Department requires
borrowers coming out of default through consolidation to enroll in ICR first and then
switch to lBR, which is burdensome for both borrowers and the Department. These
borrowers should be able to select lBR immediately. To operationalize this,
borrowers may need to be granted forbearance or permitted to make interest-only
payments initially while their lBR payment is being determined, as they currently can
while temporarily in ICR. It is not clear whether this could be done administratively.
• Eliminate the 45% "excess consolidation proceeds" standard. To prevent guaranty

agencies from pressuring borrowers into consolidation, this rule establishes a financial
disincentive for agencies to consolidate more than 45% of their defaulted loans.
However, times have changed and the policy now harms borrowers by discouraging
agencies from counseling borrowers about consolidation. Instead, borrowers are being
pressured to choose rehabilitation, even though they could get similar and faster relief
through consolidation. Lenders and guaranty agencies would support this change, and
it may have little or no budgetary cost. For more information see HEA 20 U.S.C.
§ 1078(c)(6)(C).
• Purchase rehabilitated FFEL loans that others won't. The HEOA technical
corrections act (P.1.111-039) gave the Department the authority to purchase
rehabilitated FFEL loans if others won't. However, the Department has not exercised
this authority, leaving thousands of otherwise rehabilitated borrowers stuck in default
through no fault of their own.
Ensure there is always a route out of default:
• Get rid of the "one time only" rule for loan rehabilitation. The HEOA limited
rehabilitation to one time only, reportedly solely to make it consistent with the Perkins
loan program. However, this leaves people who default more than once with no
options if they find themselves in extreme financial straights a second time.
• Allow Direct consolidation loans to be reconsolidated to exit default. Currently,

borrowers who default on a FFEL consolidation loan can get out of default through
consolidation or rehabilitation. However, borrowers who default on a Direct
consolidation loan do not have this choice: they have to go through the more onerous
rehabilitation process. Direct loan borrowers should be allowed to reconsolidate
Direct consolidation loans so they have the same options as FFEL borrowers.
• Exercise the Department of Education's authority when no other option is

available. The Department has the authority to put defaulted borrowers in ICR.
When there is no other way for a borrower to exit default, the Department should
exercise this authority so there is always a way out. It is unclear if the Department has
ever exercised this authority. For more information, see HEA 20 U.S.C. §1087e(d)(5).
2
Recommendations to Improve Relief for Federal Student Loan Borrowers in Default
Deanne Loonin, NCLC's Student Loan Borrower Assistance Project
March 2010
The recommendations below follow the format from my 2006 paper, No Way Out (see
h!1p:llwww.studentloanborrowerassistance.orgiblogslWJ2=
content/www.studentloanborrowerassistance.org/uploads/FileIREPORTDec07 .lliLf). The fIrst set
of recommendations in bold come directly from the 2006 paper. These are followed by new
ideas and updates. We should also consider expanding these categories.
I. POSSIBLE SOLUTIONS TO HELP PREVENT DEFAULTS
The adverse consequences of student loan debt are particularly acute after a borrower
defaults. However, the system is not set up to focus real resources and energy into default
prevention.
1. Evaluate what works and develop effective counseling programs.
March 2010-New Ideas and Updates
I did not include the 2006 specifIc recommendations here, but you can fInd them in the
2006 No Way Out paper. There is not much to update here. I was working with the Foundation
for Credit Education for a number of years to try to train credit and housing counselors to assist
student loan borrowers. Unfortunately, the project did not work out very well. We found that
counselors frequently cross the line and provide legal advice without the supervision of lawyers,
are not trained or inclined to look up the law or check for updates, tend to have a mentality of
negotiating with creditors (since this is what they do with credit card debtors) instead of going
through all of the options available under the HEA. There is still potential here, but I believe the
l
counselors must be closely connected with legal services.
2. Fix the Perverse Incentive Structure.
The problem is that the student loan system is not set up to focus real resources and
energy into prevention. Even more to the point, the financial incentive system rewards
default collections rather than default prevention.
For lenders, delinquent loans often have less value than loans in default because the
government guarantees close to full payment when default claims are filed. A 2002 GAO
1See http://www.studentloanborrowerassistance.org/blogs/wp-
contentlwww.studentloanborrowerassistance.org/uploadslFile/REPORTDec07.pd£
I
report described the problem in greater detail. The traditional payments for guaranty
agencies, according to the GAO, make it more financially beneficial for an agency to allow
2
borrowers to default and then to try to collect rather than prevent default.
Recommendations (2006):
Congress should require a comprehensive analysis of the current voluntary flexible

3
agreements and other default avoidance programs. Congress should also continue to
promote and expand the VFA program and other innovative strategies that help prevent
default. Quantifying the cost savings of preventing default is essential.
3. Communicate with Borrowers Early and Often.
Studies of characteristics of student defaulters consistently show that lack of

information about options is a strong predictor of default. Yet, in discussions of this issue,
many schools and agencies report that the only way they communicate with borrowers is
through the often ineffective standardized presentations. Instead, schools and agencies
should develop innovative programs that target at-risk borrowers and deliver information
in a timely and engaging way.
It is important to develop a range of delivery options. Schools should also consider

who is most effective in delivering the message. For example, contacts from loan servicers
may be much more threatening than communications from a neutral, non-profit counseling
agency.
March 20lO-New Ideas and Updates
Eliminating perverse incentives still seems like the key to reform as far as prevention
efforts. There is not much to update here, although it is worth finding out more from NASLA
and NCHELP about their ideas for reform. I assume this is also where the Department's new
servicing contracts are important. To what extent do these new contracts address perverse
incentives? In addition, what is the status of the voluntary flexible agreements? Has the Direct
Loan default aversion program been successful in working with schools?
II. POSSIBLE FIXES TO PRE,DEFAULT REPAYMENT PROGRAMS:
Recommendations from 2006:
1. Extend the ICR to FFEL loans or develop a similar formula for FFEL repayment.
2 U.S. General Acconnting Office, "Federal Student Loans: Flexible Agreements with Gnaranty Agencies Warrant
Careful Evalnation", GAO-02-254 (Jannary 2002).
3 The GAO found in 2002 that the Department had not figured ont a way to measure performance ofthe VFAs. See
generally U.S. General Acconnting Office, "Federal Student Loans: Flexible Agreements with Gnaranty Agencies
Warrant Careful Evalnation", GAO-02-254 (Jannary 2002).
2
2. Establish a maximum time limit for repayment of student loans.
3. Until #2 is adopted, Congress should ensure that borrowers have the flexibility to
repay over an extended period of time. While it is generally preferable to pay in the
least amount of time possible in order to limit the amount of interest charged, many
borrowers simply cannot afford to repay through these shorter-term plans.
Congress should extend the repayment period for pre-default flexible repayment
plans.
4. Require both FFEL and Direct lenders to offer alternative payment plans to
accommodate a borrower's "exceptional circumstances." For example, after the
hurricane disasters in the South in 2005, the Department of Education and Congress
reached out to affected borrowers, offering various flexible repayment, deferment,
and other options.
Much has changed for the better in this area. ICR is no longer the only income-
based option. IBR is also available. We should also consider #4 (alternative repayment
plans) to help borrowers who for various reasons cannot use IBR or ICR or do not qualify
for IBR. (e.g. PLUS parent borrowers?). We also have much to do to improve and
expand IBR on a policy and administrative level. Ensuring that forgiven amounts are not
taxable income is also critical.
III. POSSIBLE FIXES TO REHABILITATION AND CONSOLIDATION AS PATHS

OUT OF DEFAULT (2006):
1. Increase oversight and enforcement.
Oversight and enforcement are needed to ensure that borrowers are not required to
pay more than what is reasonable and affordable during the rehabilitation period
and during the transition when the loan is sold. The regulations already provide
this right, but are often not enforced. One efficient solution would be to allow
borrowers to repay using the ICR formula during the rehabilitation period.
Further, borrowers have few remedies if a lender or collector violates the HEA and
refuses to rehabilitate a loan or demands high monthly payments beyond what is
affordable.
2. Collection efforts should automatically cease while the borrower is repaying

through a rehabilitation agreement.
3. Only reasonable and actually incurred collection fees should be charged, as

discussed in greater detail below. Tn addition, the collection fee charge should be a
one-time fee that is not capitalized.
3
Unfortunately, not much has changed here and in fact the situation is worse due to the
problems with selling rehabilitated loans. We have a number of additional ideas to improve
rehabilitation and consolidation as ways out of default. We are also working with NCHELP (and
other guaranty agencies) to develop a "best practices" document. While not comprehensive, it is
hopefully an important first step. A draft is attached, I have also attached the memos TICAS
and NCLC wrote in February 2010 regarding President Obama's IBR proposal and regarding
ways to help borrower get out of default.
This is a tremendously important area crying out for reform and enforcement. Below are
the. main reasons I hear (excuses) why collectors pressure borrowers to pay higher amounts
through rehabilitation. Each excuse, I believe, is either no longer relevant now that IBR is
available or was never a valid excuse. Some of the problems, particularly regarding sale of
loans, should be less relevant post-SAFRA, but this is not a panacea. The Department's
administration of the rehabilitation program has been just as problematic as the industry in my
expenence.
The main tension here is the real pressure collectors get from the Department to collect as
much as possible; including incentives to collect more than what is required in the regulations. It
is very troubling that the Department continues to set commissions for collectors that perpetuate
perverse incentives (or in some cases incentivize collectors to violate the HEA). I will be
following up with examples, including possible legal violations to the OGC. Some of the
incentive issues include DOE allowing PCAs not to discuss particular options with borrowers,
such as consolidation.
EXCUSES:
I. Borrowers must pay more in order to payoff their loans within a reasonable period
of time. (What does this mean in the era ofIBR? Why should borrowers coming out
. of default be treated differently?)
2. Higher payments are required to find buyers (no evidence of this, especially since
most buyers are not currently placing restrictions on purchases)
3. Borrowers with higher payments are less likely to default (evidence?)
4. Higher payments demonstrate borrower commitment (is rehabilitation intended to set
a higher bar than e.g. consolidation?)
5. Borrowers with higher payments are better able to handle post-rehabilitation payment
(This is a key excuse, no validity. Dwight Vigna recently used this as an excuse at
my presentation in Nashville, mainly because of "operational" problems getting
borrowers into IBR after rehabilitation)
6. Borrower is hiding something (So why not do your job and get documentation?)
The unspoken reasons are that SAP is lower on the newer loans. The Department's
compensation policies are behind most of these problems. The collectors follow the
financial incentives.
4
In addition to the problems cited in the memos, there is a huge problem currently because
borrowers cannot select IBR when choosing consolidation as a way out of default. Another key
issue is the automatic collection fees (up to 18.5%) that are charged coming out of default.
This is particularly important as it contributes to the problem of ballooning loan balances.
IV. POSSIBLE FIXES TO COMPROMISES AND WRITE-OFFS (2006);
We recommend at a minimum that:
1. The Department should clarify and update its staudards for compromise and
write-off. The existing guidelines were developed for guaranty agencies in
1993.
2. The Department should build additional flexibility into the system. It is often
preferable for both borrowers and taxpayers to accept a lump sum and close
the books on a particular loan rather than stretch out collection for an
extended period. This is particularly. true in cases where the costs of
pursuing collection are likely to be greater over time than the amounts
collected.
3. Publicly disclose information about compromise and write-off options.
March 2010 New Ideas and Updates
Unfortunately, there have been no changes here that I know of. As far as I know, the
Department still uses the 1993 guidelines for guaranty agencies. This should be a high priority
area, especially since balances grow so quickly when interest accrues and collection fees are
added. There is some discretion already allowed in the regulations. This is another key issue.
Because of compounding interest and collection fees, many borrowers who sincerely want to
resolve their accounts face balances that are much greater than their original loan balances. Even
those offering substantial lump sums are often turned away.
V. POSTPONING REPAYMENT (2006):
A. Deferments
1. Restructnre the economic hardship deferment by:
a) Eliminating the three year limit on economic hardship assistance since those
most in need of the benefit are often in long-term hardship situations;
b) Making interest subsidies available to borrowers with "unsubsidized" loans;
c) Encouraging borrowers to make payments to reduce principal even when they

receive interest subsidies;
5
d) Including some consideration of family size in determining economic hardship,
and
e) Establishing procedures for borrowers to apply online for economic hardship.4
2. Time limits should also be extended for the unemployment deferment and other
hardship-related deferments. The extended limits should apply to each period of
hardship instead of cumulatively.
3. Restore the temporary total disability deferment.
4. Provide timely information about deferments.
S. Simplify the application process for all deferments.
There have been some improvements in this area. For example, the Department and loan
holders encourage borrowers to make interest-only payments during deferment periods.
In addition, the test for economic hardship deferment does now consider actual family
size. The other issues should still be considered, including increasing the time limits for
deferments, making interest subsidies available to borrowers with "unsubsidized loans",
and restoring the temporary disability deferment. A number of military deferments have
also been added or improved since 2006. There is still a need to simply these deferments.
B. POSSIBLE FIXES TO FORBEARANCES (2006):
It is generally appropriate to retain the time limits on forbearances since interest

accrues during the forbearance period and any interest costs not paid during this period
are capitalized (added to the loan principal). The recommendations below first address
ways to make the forbearance program less costly for borrowers. The second set of
recommendations highlight the need to make information abont forbearance more readily
available.
1. Using the existing categories of forbearance eligibility, establish options for

borrowers coming out of forbearance to restructure their loan terms. This
program could be modeled on existing programs in the housing area such as the
special forbearance program for homeowners with HUn, V.A., and Rural
s
Housing Service (RHS) loans. Among other options, these programs allow
homeowners to reduce or suspend payments for a dermed period of time so long
as the arrearage does not exceed the equivalent of twelve monthly mortgage
payments. At the end of the forbearance period, the homeowner must typically
4 These recommendations are derived from The Project on Stndent Debt, "White Paper: Addressing Stndent Loan
Repayment Burdens" (February 9, 2006), available at:
http://projectonstndentdebt.orgifiles/pubfWHITE]APER]INAL]DF.pdf.
5 See generally National Consumer Law Center, Foreclosures §2.7 (2005).
6
begin paying at least the full amount of the monthly mortgage payment. Similar
programs should be established for student loan borrowers.
2. Prohibit or limit the capitalizing of interest accrued during the forbearance
period. There is precedent for setting a limit on capitalization in the Direct Loan
ICR program. In this case, unpaid interest is capitalized until the outstanding
principal amount is ten percent greater than the original principal amount. At
that point, interest continues to accrue but is not capitalized. 6
3. Provide timely information about forbearances using counseling and other
communication methods discussed above. This information should explain in
detail the costs of forbearance as well as other non-forbearance related options
to help borrowers in fmancial distress.
A key issue is to clarifY that forbearances can be available to borrowers post-default.

Many loan holders continue to claim that forbearances are not available in these
circumstances. They will, however, cease collection in some cases, so this may be
more of a matter of semantics. The recommendations described above have not been
granted. Another area to consider is expanding administrative forbearances and/or
automatically offering such forbearances in cases where collection does not
automatically cease while a borrower is waiting for a decision on a deferment,
consolidation or cancellation application.
VI. POSSIBLE FIXES TO IMPROVE CANCELLATIONS (2006):
1. Develop a cancellation that affords relief to all borrowers who attended schools that
violated key HEA regulations. This will ensure appropriate relief for victims of
fraud instead of the current piecemeal process.
2. If borrowers have secured judgments against a school based on violations of the

HEA and have been unable to collect from the school or from any other source, they
should be entitled to relief to payoff all student loans owed or to directly cancel
these loans.
3. With respect to the existing programs:
a. Closed School: Expand and clarify the extenuating circumstances that allow
borrowers to obtain closed school discharges even if they do not meet the 90 day
standard.
b. False Certification Cancellations: The Department should specify that

borrowers that submit a sworn statement establishing their eligibility for a false
certification discharge and any available corroborating evidence are
presumptively eligible for the discharge. Once presumptive eligibility is
634 C.F.R. §685.209(c)(5).
7
established, the burden would shift to the Department to disprove the
borrower's eligibility.
c. Disability Cancellations: Tie the disability standard to the standard used by

the Social Security Administration or V.A. Initiate a public rulemaking process
with respect to the evaluation and processing of disability cancellation
applications.
4. Respond promptly to cancellation applications. Denials must be sufficiently detailed

so that the borrower can determine whether she has grounds for appeal. (
5. Provide public information about cancellation application and approval rates.
6. Notify borrowers of cancellation rights at various points in the repayment and

collection process.
The first and second recommendations to develop broader relief for borrowers
harmed by proprietary school buses should be a very high priority. To date, the
Administration's efforts have not expanded relief for borrowers who are harmed by
proprietary schools. At a minimum, the false· certification regulations should be
broadened to conform to the statutory authority. The statute at 20 U.S.C. 1087(c)
provides for discharge in cases where the student was falsely certified by the eligible.
institution. This has been arbitrarily narrowed to smaller categories, mainly apply only to
borrowers who must qualify for assistance through the "ability to benefit" rules. The
other recommendations regarding false certification and closed school are still on the
table. There is the additional factor that the ATB category now includes borrowers that
receive 6 credit hours, an area of potential abuse.
With respect to disability, some improvements have been made in the regulations,
including the connection to V.A. and the change in the definition of permanent and total
disability. However, the V.A. standard applies only to veterans with service-connected
conditions. In addition, there are still numerous problems with the Department's
administration of the program. Many of these were highlighted by the Higgins court? I
have been working informally with FSA for years to improve the process. Some small
improvements have occurred, but much more needs to be done.
VII. POSSIBLE FIXES TO BANKRUPTCY:
.1. At a minimum, Congress should act immediately to eliminate the non-

dischargeability provision for private student loans. If the rationale is shaky for
discharging government loans, it is hard to fathom any reason to allow private
student loans to be treated differently from other types of unsecured credit. In fact, •
i•
7 Higgins v. Spellings, 663 F. Supp. 2d 788 (W.D. Mo. 2009).
8
exempting these loans from discharge is likely to cause even more harm for
borrowers since there are no interest rate limits or limits on fees charged for private
student loans or limits on the amount of credit that can be extended.
2. Congress should also extend greater relief to student loan borrowers by once again
allowing these borrowers to discharge federal student loans in bankruptcy.
Alternatively, Congress should retain the undue hardship standard and restore the
seven year provision. In this way, borrowers could prove undue hardship at any
time in order to discharge their loans. However, all Qorrowers, regardless of
hardship, would be allowed to discharge student loans seven years after those loans
first became due. As was the case before, the seven year period should not include
any applicable suspension ofthe repayment period.
Unfortunately, Congress has not made any progress on this issue. A few bills have been
introduced, but have not moved. Alternative ideas to discuss include limited relief for
private loan borrowers who are harmed by proprietary school abuses or qualifY for the
school-related federal discharges.
VIII. POSSIBLE FIXES TO EXPAND COLLECTION RELIEF (2006):
A. Collection Agencies
1. . The Department should limit the files it sends to collection agencies. At a minimum,
borrowers that are already subject to extreme collection programs such as offset
and have no other assets should not be pursued by collection agencies and should
not be charged collection fees.
2. The Department and its agents must develop a system to· ensure that when
borrowers ask a collection agency to return their files to the Department or
guaranty agency, the agencies are required to do so immediately. If a borrower
informs a collector that he believes he has a defense to the debt, that the amount is
wrong, .or that he wants to request a hardship reduction, the file should be
.immediately sent back to the agency.
3. The Department must immediately develop a rigorous, public training program for
collection agencies that includes information about all student loan rights as well as
fair debt collection rights. An independent legal observer should be appointed to
evaluate these programs and conduct follow up with collectors.
4. As part of the training process described above, the Department should develop a
handbook for collectors that outlines in detail the main borrower rights and
responsibilities. This handbook should include specific information about returning
fJ.J.es to the loan holders when requested by borrowers. The handbook should be
reviewed by independent consultants,. updated regularly, and be publicly available.
!.
•
9
5. As recommended in the IG report, the Department must improve all aspects of
enforcement and oversight of private collection agencies. In addition, Congress
should establish a set of mandatory penalties, including elimination from the
government's program, for offenders.
6. The Department and its agents should make publicly available its process for
handling complaints against collection agencies and any disciplinary actions taken
against those agencies.
7. All collection letters must include information about exemptions and other rights.
8. **The Department should only charge fees that are bona fide and reasonable and
actually incurred in collecting against individuals. The amount of fees to be charged
must be clearly written in the promissory note. In no event should fees be
capitalized.
9. Reasonable collection fees should only be charged when actual costs are incurred
and in no case for government offsets or wage garnishments.
10. To better understand the true costs of collection, Congress should commission a
study of all collection costs incurred in pursuing student loan debtors, including fees
paid to collection agencies and paperwork costs. Special attention should be paid to
collection efforts against borrowers with little or no assets or income, including
those living solely on Social Security payments. The results of this study should be
used in developing exemptions from collection.
For more on this· topic, see my blog for New America:

h!1p://higheredwatch.newamerica.netlblogposts/2010/get rid of the collection agencies
-25940. We urge the Department to get rid of the private collection agency contracts. In·
this piece, we also discuss interim solutions. Many of these are derived from the 2006
report:
h!1p://higheredwatch.newamerica.netlblogposts/201O/guest post getting rid of collectio
n agencies part 2-26188. This is critical and is not going to go away because of
SAFRA. We have just as many problems with DOE collection agencies as we do
with FFEL agencies.
B. Restore a reasonable statute oflimitation for student loan collections.
The Higher Education Act Amendments of 1991 eliminated the statute of limitations
within which suits could be filed, judgments enforced, or offset, garnishment or other
8
actions initiated to collect federal student loans. This places student borrowers in
.unenviable, rarified company with murderers, traitors and only a few violators of civil
8 20 U.S.C. § 1091a.
10
laws. Even rapists are not in this category since there is a statute of limitation for rape
prosecutions, at least in federal law and in most state laws.
The legislative history for this unprecedented retroactive elimination of the statute
of limitations is sparse, but it appears to have been derived at least in part from the
unsubstantiated premise that student loan defaulter's ability to repay increases over time. 9
Further, because student loans are made without credit worthiness considerations, some in
Congress argued that the benefit for the borrower far outweighs any burden resulting from
the government's right to collect forever. Savings in the student loan program were also
mentioned.
There has been no progress on this issue. In fact, instead of clarifying that the ten year
limit should apply to Social Security offsets of student loans, Congress went the other direction
and eliminated the ten year limit for all federal debts.
The clock should begin to tick at the time the borrower defaults. General common law
rules regarding reinstating and tolling of the time limit should also apply. At a minimum, a ten
year statute of limitations should be adopted. This would coincide with the ten year limit on
other federal debt collections through the benefits offset program. 10
C. POSSIBLE FIXES TO IMPROVE EXEMPTIONS (2006):
Congress has steadily increased the government's collection powers over the past
decade. The government can now collect student loans through tax refund offsets,
administrative wage garnishment, and offset of federal payments. All of these collection
efforts have no time limit. The Department can also litigate to collect student loans, but
law suits are rarely used given the government's tremendous extra-judicial powers.
There are limited safeguards built into the various collection' methods.
Unfortunately, in some cases, these safeguards are simply insufficient to protect the most
vulnerable borrowers. In other cases, the safeguards are not being enforced.
Recommendations:
1. Eliminate offset of Social Security and other federal payments to collect federal ,
debts. This program undermines the social interest in preserving the health and i-
well-being of elder and individuals with disabilities.
2. Until #1 is adopted, Congress should at a minimum do the following:
9 137 Congo Reg. S7291-02, 1991 WL 95486 (June 6, 1991).

10 31 U.S.C. §3716.
11
a. Increase the amount of Social Security benefits exempted from offset to equal
at least 150% of poverty and provide for annual cost of living increases.
b. Clarify that the ten year limit applies to student loan collections.
c. Exempt the most vulnerable Social Security recipients from the offset
program, including those over an advanced age such as 75 or those who are
severely disabled.
3. Exempt the EITC from the tax refund offset program.
4. Clarify that the 15% limit on administrative wage garnishment is a maximum

regardless ofthe number ofloans being collected.
5. Establish consistent standards for hardship defenses for all of the collection
programs. Publicize these standards in collection notices, hearing notices, and on
the Department's web site. These notices should not only set out the criteria to
establish hardship and the available relief, but also include detailed instructions on
how to apply for this relief.
Unfortunately, there are no improvements or updates in this area other than that instead
of clarifying that the ten year limit applies to student loan collections, Congress removed
the ten year limit for anyone with a federal government debt. There has been an
unprecedented evisceration of the safety net for student loan borrowers.
IX. POSSIBLE FIXES TO IMPROVE INFORMATION AND OUTREACH:
In addition to improving the substance of the student loan safety net, it is essential
to alert borrowers about it and ensure that there are neutral, objective counselors available
to help with follow-up. In addition to strengthening effective existing programs, Congress
should fund a pilot project that sets up a neutral, non-profit entity to provide assistance to
borrowers in trouble. Private funders could also offer assistance.
Counselors should be under the supervision of a lawyer or other professional who is

knowledgeable about student loan law and keeps up with new developments. This is
because, as discussed above, even well-intentioned counselors may give erroneous advice
about the often complex student loan programs. The pilot project is a first step toward
building a strong network of student loan counselors.
It may be possible to give funding to already existing borrower assistance,

counseling or legal services agencies. However, these agencies must be truly non-profit and
should not receive high levels of funding from creditors or collectors. In addition, the
difference between agencies that act as mediators and agencies that act as borrower
12
advocates must be clearly delineated. These are different types of services that overlap and
complement each other, but also come into conflict at times.
A critical first step in building an adequate borrower assistance network is to

evaluate the existing federal, state and guaranty agency ombudsman programs and other
borrower assistance services to assess which programs are effective and why.
There have been some improvements, mainly with respect to additional disclosures.
However, there is little or no evidence that disclosures make much difference in borrower
decision making. Similarly, entrance and exit counseling have not been proven to be effective.
The conflict of interest and perverse incentives make it nearly impossible for loan holders to be
reliable counselors regarding the range of borrower choices.
X. POSSIBLE FIXES TO IMPROVE PRIVATE ENFORCEMENT OF BORROWER

RIGHTS:
Even borrowers who are aware of their rights are often unable to enforce them.
The main barrier to private enforcement is that courts have consistently held that there
is no private right of enforcement under the Higher Education Act (IlEA). Fair debt
laws are an imperfect substitute for direct enforcement of borrower rights. Among
other recommendations, we call on Congress to create an explicit private right of action
to enforce the Higher Education Act. Borrowers must also have the right to appeal an
adverse decision regardless of whether the decision is made by a guaranty agency,
lender, or government agency.
A. Private Actions
1. Congress should specify that borrowers and other parties with standing have a
private right of action to enforce the HEA.
2. The Department and other relevant state and federal agencies, including the
Federal Trade Commission (FTC), must ensure that lenders and schools that are
required to do so are complying with the FTC Holder Rule. Enforcement and
oversight is especially important in the private student loan context.
3. Ensure that borrowers in all of the loan programs have the same rights as Direct
Loan borrowers to assert defenses against repayment based on school abuses.
Congress has yet to even consider a private right of action for borrowers. The
FTC holder issue is most relevant for private loans (see attached memo).
13
...
.
B. POSSIBLE FIXES TO IMPROVE APPELLATE RIGHTS:
1. Congress should require all student loan collectors to report not only on dollars
collected, but also on how they are complying with the notice and hearing
provisions of the Debt Collection Improvement Act (DCIA).
2. All agencies must develop and enforce regulations that meet constitutional and
statutory due process standards. At a minimum, collection notices should inform
consumers that they might have defenses to payment of the debt, that they have a
right to set up reasonable and affordable payment plans, and that they may
request a hearing.
3. All collection notices and the Department's web site and other information sent
to borrowers should include a toll-free phone number that borrowers can use to
f'md out about their rights. This program could be developed in coordination
with the existing Student Loan Ombudsman office. In addition to the
government program, we advocate developing a pilot project that sets up a
neutral, non-profit entity to provide assistance to borrowers in trouble.
4. Each agency must establish fair hearing procedures that are truly fair. Fair
hearing includes the opportunity for consumers to choose from a list of neutral
arbiters, easy access to records and reports related to their case and the
opportunity to present testimony by phone if the closest agency forum is
inconvenient. Agencies must require hearing officers to tape proceedings and to
make transcripts available when requested by borrowers. These minimal due
process standards have been routine for many years at most government
•
agencIes.
5. The Department must not delegate inherently governmental functions, such as

conducting fair hearings, to third party debt collectors. Private debt collectors
are not trained to understand and stay current on the latest agency rules and
regulations. They are trained to collect money. If a borrower informs a collector
that he believes he has a defense to the debt, that the amount is wrong, or that he
wants to request a hardship waiver, the file should be immediately sent back to
the agency.
6. Amend the law so that it is clear that borrowers are able to appeal adverse
actions taken by guaranty agencies and other entities as well as actions taken by
the Department.
March 2010 Update
None of these issues has been addressed or resolved.
14
FEBRUARY MEMOS
President Obama's IBR proposal and ICR
February 12, 2010
The President's proposal to provide loan forgiveness after 20 years rather than 25 years
needs to apply to both Income-Based Repayment (lBR) and Income Contingent Repayment
(lCR). Otherwise borrowers in lCR would be forced to switch to IBR in order to benefit from
the change, and some borrowers in ICR may not qualify for IBR.
Even with the President's proposal, ICR will still have some advantages over IBR unless
additional changes are made. Under current law, some people are eligible for ICR but not
IBR, and ICR is more generous for some borrowers. While the President's proposal would make
IBR more generous, ICR would still offer some important advantages over IBR, particularly for
borrowers in extreme financial hardship. Therefore, to avoid reducing access to meaningful
relief, the following changes would need to be in place before eliminating ICR:
I. Allow borrowers coming out of default through consolidation to select IBR right away.
Currently, the Department requires these borrowers to emoll in ICR first, then later switch to
IBR. Borrowers coming out of default through consolidation should be able to select IBR
immediately. To operationalize this, borrowers may need to be granted forbearance or
permitted to make interest-only payments while their initial IBR payment amount is being
determined. It is not clear whether this could be done administratively.
2. Allow borrowers to re-enter IBR as they currently can ICR. Low-income borrowers
move frequently and often do not receive paperwork needed to remain in programs, such as
IBR's annual authorization to release IRS records. Borrowers who exit IBR because they did
not submit the necessary annual paperwork need to be able to re-enter within a reasonable
period of time based on their previous eligibility, and their previous IBR payments need to
count towards forgiveness. This is very important since IBR and ICR are often the only
realistic options borrowers have to stay out of default.
3. Allow borrowers exiting IBR to choose their repayment plan as they currently can
when exiting ICR. Borrowers exiting ICR can choose any repayment plan. However, under
current regulations, IBR borrowers can face severely limited options. As a result, some
people exiting IBR will face monthly payments far in excess of what they would have paid
under a standard 10-year plan, directly contradicting the statute. I I The current IBR
regulations would need to be changed to avoid this outcome and to be consistent with both
current law and ICR policy.
11 See TlCAS June 22,2009 negotiated ruiemaking comments at Jillp://ticas.orglpub view.plm?idx=484.
15
4. Allow those currently in ICR to remain in ICR. If ICR is eliminated, current borrowers
should not be forced to switch plans. Switching plans only creates another hurdle for
borrowers.
,.
!-
16
Meeting Agenda
A. Review agenda and revise if needed
B. Defining the problems we want to solve: inadequate options and relief for
distressed borrowers, systemic bias towards defanlt, lender and school roles
-Who are distressed borrowers? What do we know and not know about them?
-Review the numbers, trends, costs to borrowers and taxpayers
-No way out for some!
-Why is Income-Based Repayment (IBR) not sufficient?
-Common misperceptions about distressed borrowers
C. Reviewlbrainstorm buckets of issues
1. Safety NeflReliefIssues
Context
Potential policy options
• Cancellation
• Expanding exemptions
• Statute oflimitations
• FTC Holder Rule?
• False certification?
• Disability discharge?
• Enforcement by agencies
• Private enforcement
• Bankruptcy reforms (currently focused on private loans)
2. Collections Problems
Context
• Automatic cease of collection efforts during rehabilitation
• Collection fees-one time, not capitalized
• Collection fees-based on actual cost
• Collection agencies vs. in-house model
• Improving training
3. Servicing Abuses
Context
• Contract incentives and performance measures
• Enforcement
• Recourse for borrowers
4. Prevention
Context
• Change financial incentives for guaranty agencies and others
• VFAs?
• Direct Loan default aversion prevention program?
• Enforcement of HEA
• Targeted outreach/counseling
s. Ways out of defaultlRepayment options for defaulters and others

Context
-Problems accessing consolidation or rehabilitation
-No way out for some
IBRandICR
• IBR as a way out of default-make it available immediately
• Limiting accrual of interest in IBRand/or during deferments
• Automatically offering IBR to some delinquent borrowers .
• Allowing borrowers to re-enter IBR
• Choice of repayment plan for borrowers exiting IBR
• Role of Income-Contingent Repayment (ICR)
• Exercise the Department of Education's authority to put defaulted
borrowers in ICR when no other option is available
Rehabilitation and Consolidation

• Define "reasonable and affordable" for rehabilitation
• Get rid ofthe "one time only" rule for loan rehabilitation
• .Purchase rehabilitated FFEL loans that others won't
• Make the credit reporting consistent for rehabilitation and
consolidation.
• Eliminate the 45% "excess consolidation proceeds" standard that leads
to borrowers being pressured into consolidation
• Allow Direct consolidation loans to be reconsolidated to exit default
Related issues
• Definition of standard plan and pre-default flexible repayment plans
• Expanding deferment
• Counseling for borrowers/Training for counselors
D. Review problems and potential solutions for impact, leverage, and feasibility
----- ---- --- ------------ --- ---- -- -- -------- -- - ----- -- ---- --- . -- - - - - -- ------- ---_. -- - - - - - - . -----_._--
From: Alliance for Economic Stability, Inc. [info@eally.org]

Sent: Thursday, July 01, 20102:07 PM
To: Duncan, Arne
Cc: margotrogers@ed.gov; Rose, Charlie; Shireman, Bob; Ceja, Alejandra; Tighe, Kathleen S.; West, Keith; Erceg, Marta; Hamel, William;
Roberts, Jim; Sorensen, Howard; Aspling, David; William Taggart; Madzelan, Dan; Bergeron, David; Mayes, Edgar
Subject: Letter to Secretary Arne Duncan 07-01-10
Attachments: Letter to Secretary Duncan 07-01-10.pdf
Dear Secretary Ducan,
Please see the attached letter. Thank you.
Sincerely,
The Alliance for Economic Stability, Inc.
1
Alliance For Economic Stability, Inc.
th
747 Third Avenue, 25 Floor
New York, New York 10017
July 1,2010
Arne Duncan, Secretary

LBJ Education Building
Room # 7W31l
I Dear Secretary Duncan:
We have written you and Inspector General Kathleen Tighe concerning the failure of the Department of
Education's ("DOE") Office of Inspector General to design a proper audit and investigation of
Bridgepoint Education, Inc.'s ("BPr') incentive compensation scheme. We recently wrote a report
showing that Ms. Tighe has wrongfully' expressed an inability to protect the Federal Student Aid ("FSA")
program from incentive compensation,abuses. This is apparently the result of either some bias, conflict or
influence that is allowed to affect discretion (which is not known to us) or complacency.
•
The below statements were extracted from Senator Dick Durbin's Speech on "For-Profit Colleges and
Federal Student Aid: Preventing Financial Abuses" given on June 30,2010 at the Nationai Press ClUb.
"In many for-profit schools, recruiters' salaries are determined by how many students they sign up....The
goal seems to be to bring in as many students as possible - regardless of their ability to succeed or
graduate - load them up with loans, and leave taxpayers on the hook if students default....The big for-
profit colleges spend more than a quarter of their revenue on advertising and marketing. To compare,
McDonald's only spends 3 percent of its revenues on advertising."
Ifthe Inspector General's BPI audit is not properly designed and executed, then the changes and sanctions
that the FSA will be able to obtain will not remediate the abuse, and will only embolden BPrs peers to
violate the law.
The AES is available for any further assistance in this regard. Thank you.
Manuel P. Asensio
Director, President and
Chief Executive Officer
IMs. Tighe misstated the success of qui tam lawsuits when compared to the DOE's results despite the
DOE's far greater resources and direct authority in Congressional testimony.
----- _ ----------"- -- ---- -- -- --- - ----- ------------------------------------- ~ ~- ~--~~------ --_.~-~._.~---
From: Pauline Abernathy [pabernathy@ticas~orgl

Sent: Thursday, April 22, 2010 7:30 AM
To: Manheimer, Ann; Arsenault, Leigh; Gomez, Gabriella
Cc: Shireman, Bob; James_R._Kvaal@who.eop.gov
Subject: Fw: Gainful employment fact sheet, memo and Q&A
Attachments: QA on Gainful Employment· Final.pdf; Neg Reg Fact Sheet· Final. pdf; TICAS memo on CRA Report 4_15_10.pdf
FYI.
.---- Original Message -----

Cc: 'Patrice.willoughby@mail.house.gov' <Patrice.willoughby@mail.house.gov>; 'Patricia.villarreal@mail.house.gov' <Patricia.villarreal@mail.house.gov>;
'Gloria.Chan@mail.house.gov' <Gloria.Chan@mail.house.gov>; Connie Myers <connie.myers@nelsonmullins.com>; Debbie Frankie Cochrane; 'Angela M. Peoples'
<Ieg@usstudents.org>; 'Deanne Loonin' <dloonin@nclc.org>; Jamienne S. Studley <jstudley@publicadvocates.org>; Barmak Nassirian <barmak@aacrao.org>
Sent: Wed Apr 21 16: I0:092010
Subject: Gainful employment fact sheet, memo and Q&A
Tri-Caucus members:
In response to several questions about "gainful employment," the Project on Student Debt worked with student, consumer and higher education organizations to create the attached
fact sheet and Q&A. Produced jointly by the U.S. Student Association, National Consumer Law Center, Public Advocates, American Association of Collegiate Registrars and
Admissions Officers, and Institute for College Access & Success, the attached provide background on gainful employment and incentive compensation, as well as answers to
common questions about the regulatory process and gainful employment. Also attached is a two-page memo to interested parties regarding the recent Career College Association
paper on gainful employment.
We hope you find these materials helpful and will contact us with any questions related to college access and succes «QA au Gainful Employment· Final.pdf» s.
«QA on Gainful Employment - Final.pdf «Neg Reg Fact Sheet· Final.pdf»» «Neg Reg Fact Sheet - Final.pdf> «TICAS memo on CRA Report 4_15_10.pdf» >
«TICAS memo on CRA Report 4_15_10.pdf» .
Pauline Abernathy
Vice President
www.ticas.org and www.J1[Qjectonstudentdebt.org
1
From: Shireman, Bob
To: Yuan, Georgia; Bergeron, David; Kanter, Martha
Cc: Rose, Charlie; Dannenberg, Michael (MichaeI.Dannenberg@ed.gov)
Subject: FW: Gainful employment fact sheet, memo and Q&A
Attachments: QA on Gainful Employment - Final.pdf; Neg Reg Fact Sheet - Final.pdf; TICAS memo on eRA Report 4_15_10.pdf
--~~~-~-~ .._...--.---'--- ..
.---,~-~.----.- -~ ..• ~.".".~-~.-._.~ •. ,,----.--.---_._._-_._--,.-.~ .. ~-_._._----_ .." - - - _.."-_..•_"_.>.>---,-_.• __._..
~"-~. __
_"_._--"-,-_._.~_._-----~. __.-
.~. ._--~_._~
From: Pauline Abernathy Imailto:pabernathy@ticas.org]

To: Manheimer, Ann; Arsenault, Leigh; Gomez, Gabriella
Cc: Shireman, Bob; James R. Kvaal@who.eolMJQli
Subject: Fw: Gainful employment fact sheet, memo and Q&A
FYI.

Cc: 'Patrice.willoughby@mail.house.gov' <Patrice.willoughby@mail.house.gov>; 'Patricia.villarreal@mail.house.gov' <Patricia.villarreal@mail.house.gov>;
'Gloria.Chan@mail.house.gov' <Gloria.Chan@mail.house.gov>; Connie Myers <connie.myers@nelsonmullins.com>; Debbie FrankIe Cochrane; 'Angela M. Peoples'
<leg@usstudents.org>; 'Deanne Loonin' <dloonin@nclc.org>; Jamienne S. Studley <jstudley@publicadvocates.org>; Barmak Nassirian <bannak@aacrao.org>
Sent: Wed Apr 21 16:10:092010
Subject: Gainful employment fact sheet, memo and Q&A
Tri-Caucus members:
In response to several questions about "gainful employment," the Project on Student Debt worked with student, consumer and higher education organizations to create the attached
fact sheet and Q&A. Produced jointly by the U.S. Student Association, National Consumer Law Center, Public Advocates, American Association of Collegiate Registrars and
Admissions Officers, and Institute for College Access & Success, the attached provide background on gainful employment and incentive compensation, as well as answers to
common questions about the regulatory process and gainful employment. Also attached is a two-page memo to interested parties regarding the recent Career College Association
paper on gainful employment.
We hope you find these materials helpful and will contact us with any questions related to college access and succes «QA on Gainful Employment - Final.pdt» s.
«QA on Gainful Employment - Final.pdf «Neg Reg Fact Sheet - Final.pdt»» «Neg Reg Fact Sheet - Final.pdt> «T1CAS memo on CRA Report 4_15_IO.pdt» >
<<TICAS memo on CRA Report 4_15_10.pdt» .
1
i -----_._--- -------- -- - -.-,,~_.""-_. ..
__ - "_._..."._. -----
Pauline Abernathy
Vice President
www.ticas.org and www.pB!iectonstudentdebt.org
2
NCLC the instlh.Jte far
-NATIONAL PUBLIC
college &
access success M~p.!9.~HaTR~§1
CONSUMER
LAW
CENTER"
_,,_c_ _
Q&A on Gainful Employment

April 2010
Q. Will defining gainful employment hurt good schools offering quality programs?
A. No! Schools that provide meaningful education and training that students can afford will
benefit, while schools that do not will have to improve their programs or lower their prices in
order to remain eligible to participate in federal aid programs.
Q. Will it hurt minority and low-income students by reducing their access to college?
A. No! To the contrary, defining gainful employment will help poor and minority students by not
subsidizing unscrupulous schools offering programs that leave students deep in debt with no
ability to repay. For example, one major for-profit school is making private loans directly to its
students while telling investors it expects nearly 60% to default.
The for-profit sector made the same claim about college access when Congress first proposed
limiting federal aid for schools with high student-loan default rates. In fact, the cohort default
rules did not reduce student access but did reduce students loan defaults. Similarly, defming
gainful employment will protect students and taxpayers from being ripped off while prompting
some schools to improve their programs and/or charge less if they want to continue receiving
federal aid.
Q. Why not give the industry and Department more time to study the issue andjointly develop a
proposal?
A. The Department repeatedly solicited input during the three month long negotiated rulemaking
process, and the for-profit sector never offered a single proposal for defining gainful
employment. Instead, it focused its efforts on arguing that the Department did not have the
statutory authority to define gainful employment. Existing law has long required certain
programs to prepare students for gainful employment, but without a definition, the Department
cannot enforce the law.
Q. Does federal law require only for-profit programs "to prepare students for gainful
employment"?
A. No, the law applies to any vocational program ofless than two years, including those offered by
nonprofit and public colleges. Most community colleges offer such programs, but have nothing
to worry about. This is because fewer community college students borrow, and those who do,
borrow much less than students in other sectors. As a result, most community college programs
would easily meet the gainful employment tests currently under consideration. By contrast,
students attending for-profits have the highest average debt levels of any sector and are the most
likely to default on their student loans.
Q. Would improving consumer disclosures be a better solution?

A. Without a definition of gainful employment, the Department cannot enforce the law or protect
students and taxpayers. With students attending for-profits now accounting for such a large and
rapidly growing share offederal student aid, enforcing this statutory requirement is more
important than ever before.
NCLC tile.> institute for
-NATIONAL PUBLIC
college &
access success M~P.!91~~]R~!1
CONSUMER
LAW
C E N T E R®
-----
Protecting Taxpayers & Students:
Incentive Compensation & Gainful Employment Regulations
April 2010
Last spring, the Obarna Administration initiated a negotiated rulemaking process to update and
strengthen regulations intended to prevent the exploitation of students and protect taxpayer
investments in college financial aid. Based on input at public hearings around the nation, the
Education Department identified areas needing revision, including incentive compensation and
gainful employment.
While these financial aid regulations apply to public, nonprofit and for-profit colleges, the stakes
for students and taxpayers are highest in the for-profit sector:
• Nearly half of student loan borrowers who entered repayment in 2007 and defaulted by
2009 attended for-profit schools (44 percent), even though only 7 percent of students
attend these schools.!
• Nearly one infour Pell Grant dollars went to students attending for-profit schools in
2008-09 (24% or $4.3 billion), almost double the share a decade earlier?
• Students at for-profit institutions are more likely to borrow, and to borrow much more,
than students in other sectors:
o At for-profit institutions, 96 percent of bachelor's degree recipients had student loans
in 2008, and their average debt was $33,050. At public and non-profit colleges, 65
percent of bachelor's degree recipients had loans, and their average debt was $22,750.
o At for-profit institutions, 98 percent of associate's degree recipients had loans in
2008, and their average debt was $19,700. At public and non-profit colleges, 40
percent of associate's degree recipients had loans, and their average debt was
$10,900. 3
Incentive Compensation: To protect students from high-pressure and deceptive sales tactics,
federal law has long banned colleges from providing "any commission, bonus, or other incentive
payment based directly or indirectly on success in securing enrollments or financial aid."
• The Bush Administration undercut this prohibition by allowing such payments if they
were not based "solely" on the number of students recruited or aid received.
• Since this change in 2002, egregious examples of overly aggressive recruiting have
emerged. One for-profit recently paid $78 million to settle a whistleblower False Claim
Act lawsuit and paid an additional $10 million to the Department of Education to resolve
claims over improper incentive compensation to recruiters.
• The Obama Administration proposed making the regulations consistent with the statutory
ban on incentive compensation, while providing colleges with public guidance to help
1TICAS analysis of U.S. Department ofEducation three-year Cohort Default Rate data for FY 2007.
2 U.S. Department of Education, Office of Postsecondary Education (OPE), "Pell End of Year Report," 2008-09,
1998-99, !illp:llwww2.ed.govlfinaid/pro fl resourcesldata/peII-data.htmI
3 Calculations by TICAS on U.S. Department of Education, National Center for Education Statistics (NCES),
National Postsecondary Student Aid Study (NPSAS), 2007-08, hltn:llnces.ed.gov/surveys/nl1sasl
them comply and allowing them to pay employees based on performance unrelated to the
number of students enrolled or amount of aid awarded.
• A group non-federal negotiators, including representatives of public, non-profit and for-
profit colleges, met throughout and between negotiating sessions to debate and discuss
new regulations for incentive compensation. Their shared agreement formed the
backbone of the draft regulations discussed by the larger group of negotiators, but the for-
profit representative changed position and blocked consensus on the revised regulations
in the final minutes of the last session.
Gainful employmeut: In order to be eligible for federal student aid programs, federal law
requires most programs offered by for-profit institutions, and any program of less than two years,
to "prepare students for gainful employment in a recognized occupation." Yet the current
regulations include no official defmition of "gainful employment." As a result, some
unscrupulous schools are recruiting students for expensive programs that do not train people for
jobs that pay enough to cover the cost of attending the program. Such programs leave students
deep in debt they cannot repay, and cost taxpayers millions of dollars in Pell Grants and
defaulted student loans.
• The Obama Administration has proposed defining gainful employment to ensure that
students and taxpayers get their money's worth, and that students have a fair shot at being
able to repay their student loans after graduating.
o Defining gainfUl employment will prevent students and taxpayers from getting ripped
off, not limit access to quality programs. Just as it has before, the for-profit sector is
falsely claiming that any changes will deny students access to vital programs. When
Congress first proposed limiting federal student aid for schools with extremely high
student default rates, the for-profit sector also claimed it would reduce student access.
However, the cohort default rules did not reduce student access and did reduce loan.
defaults. Similarly, defining gainful employment will simply require some schools to
improve their programs and/or charge less.
o A recent analysis by UBS concluded that many schools could afford to lower prices
and still make a healthy profit given their high operating margins, including a 37%
operating margin at ITT, 34% at Strayer, and 28% at Apollo. UBS found that any
impact from the Department's gainful employment proposal would be more than
offset by for-profits' gains from state budget cuts for public colleges, which create
lucrative opportunities to recruit students to for-profit institutions. 4
• The Obama Administration has welcomed suggestions for how best to measure gainful
employment.
o During the three-month-Iong negotiated rulemaking process that began last fall, the
for-profit sector never offered any proposals for defining gainfUl employment.
o The Education Department plans to issue a draft regulation in May, after which there
will be a public comment period. After comments are received, final rules will be
issued by November 1,2010, and the new rules will begin to take effectJuly 1,2011.
4 UBS Investment Research, Education 101, March 18,2010, by Andrew Fones.

MEMO
TO: Interested Parties

FROM: The Institute for College Access & Success
DATE: April 15, 2010
RE: Charles River Associates Report on Gainful Employment prepared for the
Career College Association
The Career College Association (CCA) recently commissioned a study of how their
institutions and programs would fare under an Education Department proposal for defining
gainful employment.! As a condition of participating in federal student aid programs,
federal law has long required most programs offered by for-profit institutions and any
program of less than two years to "prepare students for gainful employment in a
recognized occupation." Yet there is no official definition of "gainful employment." With
enrollment in these programs rising rapidly-now accounting far nearly I in 4 federal Pell
Grant and federal student loan dollars-the Obama Administration has proposed defining
gainful employment.
Using data provided by CCA and not publicly available, Charles River Associates (CRA)
found:
• Students from for-profit colleges are much more likely to default on student loans.
According to their own analysis, even after controlling for demographic differences
among students, for-profit college students are twice as likely as other college students
to default;
• Few for-profit programs would be affected by proposed definition. Their own
analysis found that only a small minority offar-profit programs currently do not meet
the proposed 8-percent median debt-to-income ratio test; and
• No loss of student access to college. Their study indicates that other colleges would
be well positioned to absorb the students who might have enrolled in programs that
failed to meet the test-and would serve them much better.
Their own [mdings therefore further support the Administration's proposing a clear and
enforcable definition of gainful employment that will prevent taxpayer dollars from being
used to subsidize programs that leave students worse off than before---"-<1eep in debt and no
better prepared for gainful employment.
Twice as Likely to Default

Demographic factors, such as income, gender, race and family size, playa role in the
likelihood of defaulting on federal student loans, but they do not tell the whole story. CRA
controlled for these and other factors to determine the effect of a student's school on the
likelihood of defaulting, and found that students attending for-profit colleges were twice as
I"Report on Gainful Employment," prepared by Charles River Associates for the Career College
Association, April 2, 2010, including Executive Summary dated March 29, 2010.
c",
likely to default as students at other colleges? Even if all students at for-profits completed
their academic programs, CRA estimates that about 12 percent of their students would still
default on their student loans,.compared to about six percent at community colleges after
controlling for demographic differences.
Few Programs Would Be Affected

Using CCA data on student graduation, tuition charges, and indebtedness for more than
·10,000 academic programs, CRA found that 82 percent offor-profit school programs
would currently pass the Department's proposed 8-percent median debt-to-income test.
The Department's proposal is intended to ensure that the majority of graduates of a
particular program are able to repay their loans without hardship, and more than four out of
five for-profit programs would meet this standard. The Department has also offered two
alternative ways for colleges to demonstrate that their programs are sufficiently preparing
students for gainful employment, but the CRA report does not estimate the effects of these
alternatives. It is possible that some or many programs will meet one of these alternative
gainful employment standards, narrowing the share of affected programs even further.
No Loss of Student Access

Colleges with programs that cannot demonstrate that they are adequately preparing
students for gainful employment under any of the proposed standards will have several
options. They could improve their program quality so that students are better prepared for
employment opportunities, or they could reduce what they charge so that students are
better able to repay what they borrowed to attend the school. This is similar to what
happened when the Department first began enforcing sanctions for very high cohort default
rates. In response, many schools adjusted their practices to lower their default rates so the
schools would remain eligible for federal student aid, and the share of students defaulting
on their student loans decreased substantially.
Even if some schools choose to eliminate, rather than change, a program, students
currently enrolled in these programs will have plenty of options, including enrolling in
public, private non-profit, or the vast majority of for-profit programs that meet the
Department's proposed standards. While enrollment has increased in all college sectors,
state budget shortfalls and shrinking endowments have limited many public and nonprofit
colleges ability to increase enrollment. Given that the vast majority of for-profit college
programs currently meet the Department's gainful employment standard, and the sector
says it has the ability to rapidly expand enrollment, students will still have plenty of
options, but at a lower cost and greater benefit. Taxpayers and the economy will benefit as
well from lower student default costs and a better-trained workforce.
2 Figure 7 in the eRA analysis shows that students at private not-for-profit 2-year or less institutions were
less likely than for-profit students to default, but more likely than students at other types of colleges. We
exclude them here because only one percent of students in the Beginning Postsecondary Students
Longitudinal Study (BPS: 96/98/01), which eRA used for its analysis, attended these types of colleges.
2
----------~-- ------- ----- -- ---- ----- ----- ---- -------------_._---- ---- ------------- -- ----- _.- ---- ---- ---- -- ----- -- --------- --- ------ - -- ----- ----- - --- --- -- ------_.- ---- ----- ---------- --- -------------- -------- .~'"~_ ... _._--_. __ ._-

Sent: Thursday, April 22, 20102:54 PM
To: Kvaal, James R; Shireman, Bob; Arsenault, Leigh; Eric.Stein@do.treas.gov; Peggy.Twohig@do.treas.gov; Levine, Brian S.
Cc: Lauren Asher
SUbject: FW Chairman Miiler statement and updated coalition letter on student loan bankruptcy
Attachments: Coalition letter to Chairman Cohen_4-21-10.pdf
FYI
.......... _ ~ _ __ _..- ---_._----_._ __._ __ ..
News. U.S. House of Representatives

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EDUCA TION & LABOR COMMITTEE

Congressman George Miller, Chairman
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Thursday, April 22, 2010

Press Office, 202-226-0853
Chairman Miller: Time to Restore Fairness for College Loan Borrowers in Bankruptcy
Congress Should End Special Treatment for Private Student Loan Providers
WASHINGTON, D.C. - Today U.S. Rep. George Miller (D-CA), the chairman of the House education committee and the lead author of a historic
new college affordability law, announced his support for legislation that would allow Americans to discharge their private student loans in
bankruptcy, the same way they can discharge other types of private debt. The House Judiciary Committee today held a hearing to examine the bill,
the Private Student Loan Bankruptcy Fairness Act of2010 (RR. 5043), which was introduced last week by U.S. Reps. Steve Cohen (D-TN) and
Danny Davis (D-IL). U.S. Sens. Dick Durbin (D-IL), Sbeldon Wbitehouse (D-RI), and AI Franken (D-MN) have introduced a companion bill in
the Senate.
"Last month, Congress took a groundbreaking step to reform a federal student loan system that for too long worked in the best interests of big banks
and corporate tycoons, instead of students and families. Sadly, our nation's bankruptcy laws are another example of how lenders' well-heeled
lobbyists successfully gamed the system and won special treatment - at the expense of millions of Americans working hard to pay back their college
debt.
1
~ ~ ~- ~~~ - ---~---
"In 2008, the Democratic Congress took important steps to provide long overdue consumer protections for students when borrowing financially risky
private student loans, but more needs to be done. Private student loans remain far more expensive for borrowers than federal student loans, and often
carry tricky terms and conditions. Especially in this economy, private student loan borrowers deserve the same basic protections consumers receive
when using their credit cards, buying a car, or paying their electric bills.
"As Congress continues working on reforms to end Wall Street shenanigans, this legislation is a clear, common sense step we can take to restore
some financial fairness for millions of consumers. I want to thank Reps. Cohen and Davis for their unparalleled efforts to stand up for students and
borrowers around the country and call on all of our colleagues to join us in ending this special giveaway to for-profit companies."
BACKGROUND
Bankruptcy legislation enacted by President George W. Bush in 2005 included a provision - slipped quietly into the bill- that provided special
treatment to for-profit lenders by severely limiting Americans in bankruptcy from discharging the private college loans they borrow.
Unlike federal student loans, which have a cap on interest rates and can have flexible repayment options for borrowers, including an Income Based
Repayment program authored by Miller, private student loans have no interest rate cap and no cap on the total amount a student can borrow. Due to
this 2005 change, bankruptcy law now treats private student loan borrowers the same as individuals trying to escape child support payments, alimony·
overdue taxes and criminal fines.
H.R. 5043 is supported by a broad coalition of student groups, consumer advocates and higher education organizations, including Consumers Union,
Consumer Federation of America, The Institute for College Access and Success and the National Association of Student Financial Aid
Administrators. To learn more about the bill, click here.
###
2
April 21, 2010
The Honorable Steve Cohen
Chainnan, Subcommittee on Commercial and Administrative Law
Committee on the Judiciary
U.S. House of Representatives
Dear Chairman Cohen:
On behalf of the undersigned organizations, we are writing to express our strong support for the Private Student
Loan Bankruptcy Fairness Act 01201 O.
Private student loans are one of the riskiest, most expensive ways to pay for college. Like credit cards, they
typically have variable interest rates that are higher for those who can least afford them. However, private
student loans are treated much more harshly in bankruptcy than credit cards and other comparable types of debt.
Private student loan borrowers also lack access to the important deferment, income-based repayment, or loan
forgiveness options that come with federal student loans. This leaves most private loan borrowers at the mercy
ofthe lender if they face financial distress due to unemployment, disability, illness or military deployment, or
when a school shuts down before they can finish their certificate or degree.
"
The Private Student Loan Bankruptcy Fairness Act 012010 would reverse the unfair and unjustified special
bankruptcy protections for private student lenders included in the 2005 bankruptcy law. Our broad coalition of
groups representing students, consumers, and institutions of higher education, and civil rights and public policy
organizations thanks you for your leadership on this important issue.
Signed,
American Council on Education
Americans for Financial Refonn'
Consumer Action
Consumer Watchdog
Consumers Union
National Association of College Admission Counseling
National Association of Student Financial Aid Administrators
Rock the Vote
U.S. Public Interest Research Group
UNCF
• A large nwnber oforganizations are working together to advance Americans for Financial Refonn's (AFR) common interest in: an accountable, transparent and secure
financial system, and to accomplish our shared policy goals. Because the organizations involved and the issues addressed are diverse, not every organization works on or has a
policy position on every specific issue. We are unanimous in our call for change to repair our nation's broken financial system, establish integrity in the financial markets, and
facilitate productive economic .activity that benefits all segments of our communities.
AYOl0825 S.L.C.
AMENDMENT NO. Calendar No. _

Purpose: To address exceptions to discharge in bankruptcy,
and for other purposes.
IN THE SENATE OF THE UNITED STATES-nlth Cong., 2d Sess.
8.3217
To promote the financial stability of the United States by

improving accountability and transparency in the finan-
cial system, to end "too big to fail", to protect the
American taxpayer by ending bailouts, to protect con-
sumers from abusive financial services practices, and
for other purposes.
Referred to the Committee on _----:_--::- ~ and

ordered to be printed
Ordered to lie on thc table and to be printed
.AMENDMENT intended to be proposed by Mr. FRANKEN
Viz:
1 At the end of title II, add the following:

2 SEC. 212. EXCEPTIONS TO DISCHARGE IN BANKRUPTCY.
3 Section 523(a)(S) of title 11, United States Code, is

4 amended by striking "dependents, for" and all that follows
5 through the end of subparagraph (B) and inserting "de-
6 pendents, for an educational benefit overpayment or loan
7 made, insured, or guaranteed by a governmental unit or
8 made under any program funded in whole or in part by
AYOI0825 S.L.C.
2
1 a governmental unit or an obligation to repay funds re-
2 ceived from a governmental unit as an educational benefit,
3 scholarship, or stipend;".
April 21, 2010
The Honorable Steve Cohen

Chairman, Subcommittee on Commercial and Administrative Law
Committee on the Judiciary
U.S. House of Representatives
Dear Chairman Cohen:
On behalf of the undersigned organizations, we are writing to express our strong support for the Private Student
Loan Bankruptcy Fairness Act 0/2010.
Private student loans are one ofthe riskiest, most expensive ways to pay for college. Like credit cards, they
typically have variable interest rates that are higher for those who can least afford them. However, private
student loans are treated much more harshly in bankruptcy than credit cards and other comparable types of debt.
Private student loan borrowers also lack access to the important deferment, income-based repayment, or loan
forgiveness options that come with federal student loans. This leaves most private loan borrowers at the mercy
of the lender if they face fmancial distress due to unemployment, disability, illness or military deployment, or
when a school shuts down before they can finish their certificate or degree.
•
The Private Student Loan Bankruptcy Fairness Act 0/2010 would reverse the unfair and unjustified special
bankruptcy protections for private student lenders included in the 2005 bankruptcy law. Our broad coalition of
groups representing students, consumers, and institutions of higher education, and civil rights and public policy
organizations thanks you for your leadership on this important issue.
Signed,
American Council on Education
Americans for Financial Reform'
Consumer Action
Consumer Watchdog
Consumers Union
Demos; A Network for Ideas & Action
National Association of College Admission Counseling
National Association of Student Financial Aid Administrators
Rock the Vote
U.S. Public Interest Research Group
UNCF
• A large number of organizations are. working together to advance Americans for Financial Refonn's (AFR) common interest in an accountable, transparent and secure
financial system, and to accomplish our shared policy goals. Because the organizations involved and the issues addressed are diverse, not every organization works on or has a
policy position on every specific issue. We are unanimous in our call for change to repair our nation's broken financial system, establish integrity in the financial markets, and
facilitate productive economic activity that benefits all segments of our communities.
----- ------ ------ --------------- ----- ----- - ---------------,-- ---------- ------- ------ ---------------------~---_._-- "" .... --------- -------------- ".,-_._._.. _---_._--------

To: Eric.Stein@do.treas.gov; Peggy.Twohig@do.treas.gov; Kvaal, James R.; Shireman, Bob; Gomez, Gabriella; Arsenault, Leigh;
Michael. Barr@do.treas.gov
Subject: Private student loan tps and amendments to Senate CFPB
Attached are draft short talking points and legislative language on the three private student loan issues in the financial reform bill:
1. CFPB authority over private loans by schools and other nonbank entities (Schumer amdt #26);
2. CFPB backstop enforcement authority over Sallie Mae and other banks with under $1 Ob in assets (Reed amdt #262)
3. School certification of private student loans (the attached contains information for drafting the amendment as well as a bit of
legislative history--not for circulation).
4. One pager on all three private student loan issues in the bill (circulated previously)
Chairman Harkin strongly supports the third amendment and his staff is being very helpful. Senator Durbin is a champion on these
issues as well, and his staff are checking which he'd like to offer. We've also been in touch with staff for Senators Bennet and Brown
(OH) on these issues as well. Thank you again for all your help and support. Pauline
~ ~
'.'-~'
.
.--:--.,
~ 1D ~
Nonbank Backup Authority Mandatory cer! polis admt added Senate CFPA and.
erage tps and am, tps and amdt.... tps and amdt.do... to hr4173.pdf... private loans ...
Pauline Abernathy
Vice President
1
Why the CFPA Needs Full Authority Over All Private Student Loans
March 19, 2010
Private student loans are one of the riskiest ways to pay for college, yet a large uumber of
students have private loans as well as, or instead of, safer federal student loans.
• Private student loans are expensive, mostly variable-rate loans that cost more for those
who can least afford them. They lack the fixed rates, consumer protections and flexible
l
repayment options of federal student loans. Private student loans typically:
o have uncapped, variable interest rates reaching as high as 18% in recent years;
o do not offer deferment for those who lose their jobs, or even discharge in cases of
death or permanent disability;
o can raise the interest rate if the borrower is late paying off any debt they owe; and
o unlike credit card debt, private loans are not dischargeable in bankruptcy.
• .Nearly two-thirds (64%) of undergraduate private loan borrowers in 2007-2008 borrowed
less than they could have in safer federal loans, including one-quarter (26%) of private
loan borrowers who took out no federal loans at all.
• At for-profit colleges, which are attended disproportionately by African-American and
Latino students, 42% of undergraduate students took out private loans in 2007-08.
African-American undergraduates are now the most likely to take out private loans of any
racial or ethnic group.
Under the current Senate fmancial reform bill, private student loans may remain the "wild
west" of student lending. The Senate-proposed CFPB may not have the authority to oversee the
largest provider of private student loans-Sallie Mae-or for-profit schools that are making
loans knowing that more than half their students will default.
• No oversight over the largest private student lender. The CFPB may not have
supervision or enforcement authority over Sallie Mae, the largest private student lender
which made nearly $5 billion in private loans in 2008-2009, because the Sallie Mae Bank
through which it fmances private loans has total assets under $10 billion? Under the
House-passed bill, the CFPA would have back-up authority to act if the primary
regulatory agency failed to do so. The Senate CFPB would not have this authority.
• No clear authority over predatory loans by schools and other nonbanks. The CFPB
would not have full authority over nonbank entities unless they were determined to be
"large," and therefore would not have clear have authority over schools making private
loans to their own students, including Corinthian Colleges, ITT Educational Services, and
Career Education Corporation. Corinthian Colleges has told investors that it expects 56
3
to 58 percent ofthese borrowers to default. The company still profits because the loans
increase enrollment and with it a profitable flow of federal grant and loan dollars that
outweighs the planned write-offs. For-profit schools can get up to 90% of their revenues
from federal grants and loans.
The House-passed CFPA has full authority over .!ill private student loans since these loans
can pose the same serions risks whether issued by a financial institution or by a school.
The House bill also requires lenders to confirm with the school that the borrower is in fact a
student, is eligible to borrow the requested amount, and has been notified of any untapped
federal loan eligibility. This gives schools a critical opportunity to counsel students before they
take out a private loan. Sallie Mae, the largest private lender, reports that school certification of
4
private loans reduces the amount borrowed nearly 30% of the time. Research has also found
s
that school certified loans have sigoificantly lower default rates than uncertified loans.
I "Private Loans: Facts and Trends," The Institote for College Access & Success, August 2009. Available online at:
b!m.;Lim:Qjectonstudentdebt.orgifiles/pub/private loan facts_trends 09.lli!f
2 Private stodent loan originations data available online at:
!illP:llstudent)endinganalytics.~d.comistudent_lending_analytic s/20 I 010 IIsla-forecasts-24-decline-in-2009 I0-
private-student-Ioan-originations.html
Sallie Mae asset data available online at:
!illPs:llcdr. ffiec.govlPublicNiewFacsimileDirect.aspx?ds~calJ&idType~fdiccert&id~58177 &date=12312009
3 Corinthian Colleges, Inc. 4Q20 I0 Investor Call. Transcript available online: .
!mp:llseekingalpj)a.comiarticleI186144-corinthian-colJeges-inc-f2q I0-qtr-end-12-31-09-earnings-call-
transcript?source=yahoo&page=-I .
4 Sallie Mae's public conunents to the Board of Governors ofthe Federal Reserve System on the Proposed Rule
Implementing Title X ofthe Higher Education Opportunity Act of2008, dated May 26, 2009. Available online at:
Jll!p:llwww.federalreserve.gov/SECRS/2009/May/20090529/R-1353/R- J353 052609 2 J079 591049709690 I.lli!f
5 Moody's Investors Service, ''''Direct-To-Consumer'' Stodent Loans: Higher Risk," August II, 2009.
Amendment on Backup-Enforcement Authority
Over All Banks Making Private Student Loans
Draft April 14, 2010
Private student loans are one of the riskiest ways to pay for college, yet a large
number of students have private loans as well as, or instead of, safer federal
studentloans. Private student loans are expensive, mostly variable-rate loans that cost
more for those who can least afford them. They-lack the fixed rates, consumer
protections and flexible repayment options of federal student loans. Private student
loans typically:
.• have uncapped, variable rates reaching as high as 18% in recent years;
• can raise the interest rate if the borrower is late paying any debt they owe; and
• unlike credit card debt, private loans are not dischargeable in bankruptcy.
Students at for-profit schools and African-American students are the most likely
to end up with dangerous private student loans. At for-profit colleges, which are
attended disproportionately by African-American and Latino students, 42% of
undergraduate students took out private loans in 2007-08. African-American
undergraduates are now the most likely of any racial group to take out private loans.
Under the bill reported by the Banking Committee, the CFPB may not have full
authority over the largest provider of private student loans-Sallie Mae. The CFPB
may not have supervision or enforcement authority over Sallie Mae, the largest private
student lender which made nearly $5 billion in private loans in 2008-2009. This is
because the Sallie Mae Bank through which it currently finances private loans has total
assets under $10 billion.
Example: Joan from Massachusetts took out private loans from a lender who offered
hera 30-year repayment plan and flexible deferment and forbearance options. But Sallie
Mae, who services the loans, will not honor those agreements, and charges a $150 fee to
grant a forbearance for three months. Despite requesting it repeatedly, she has never
seen her promissory note with the terms of the loan. A Sallie Mae customer service
representative actually told her, "We can do whatever we like."
This common-sense amendment gives the CFPA back-stop authority to act if the
primary regulatory agency fails to do so.
• Banks with assets under $10 billion-well over 90% of banks-would continue
to have their consumer protection examinations done by their existing
regulators. However, if the primary regulators failed in their oversight, the CFPB
could step in.
• This is identical to the provision contained in the House-passed bill.
Proposed Legislative Language:

Senator Reed's Amendment #262 would add the language from the House bill that gives
the CFPB back-up enforcement authority over banks with assets under $10 billion,
which would ensure the CFPB could act if others don't. It appears that Merkley #91
(which would aggregate the assets of all affiliates in determining whether an institution
was above or below the $10 billion threshold) would NOT address the Sallie Mae
problem because Sallie Mae is not a bank holding company.
Insertthe Polis~Murphy-BishopAmendmentto HR 4173 in the Senate Financial Reform

Bill, Subtitle H - Conforming Amendments, at the end of Section 1199 - Amendments to
TILA, making conforming changes (e.g., changing Agency to Bureau) and adding the
following two additions to the amendment:
Insert an "(i)" on page 4, line 3, after "Provision of Information.--", and on line 11

insert the following after the word "Agency":,
"; (ii) creditors will disclose to the SEC or relevant regulatory entity and report to
the Bureau at least annually any loans issued under subparagraph (B); and
(iii) creditors will report data at least annually to the Bureau in a manner developed
in consultation with the U.S. Department of Education"
fumlanation and rationale for two additions:

Subsection (ii) will ensure that investors and the CFPA know which loans were not certified
by a school (because the school did not respond to the lender within 15 days). Research by
Moody's and others has shown that uncertified loans have higher default rates and are
more likely to exceed the permissible loan amounts.? This information will also ensure
schools are held accountable for responding to lender requests in a timely manner and
counseling students as required.
Subsection (iii) will ensure that essential data on private educational loans are available.
The only publicly available data on private lending is currently collected through NPSAS, a
national self-reported sample survey conducted only once every four years by the U.S.
Department of Education. For example, there are no campus-level data available on private
loan borrowing. Campus-level data is essential in order to hold colleges and lenders
accountable for patterns of unnecessary or excessive borrowing, and to provide consumers
with a way of comparing private loan borrowing at different schools.
Legislative History:
The House-passed version of the Higher Education Opportunity Act of 2008 (HEOA)
included a mandatory certification provision that was deleted in conference. Schools,
students and Sallie Mae, the largest private lender, supported the amendment. However,
Senator Shelby objected to the provision, reportedly at the request of First Marblehead, a
private student lender that was making uncertified private loans as the time. One of the
stated objections was that the amendment gave schools the ability to block a loan simply by
not responding to the lender's request for certification. The amendment now being
proposed does not give schools this ability (schools must respond within 15 business days
or the loan can be disbursed), and First Marblehead no longer makes uncertified loans and
has indicated it would not oppose this amendment. In addition, we did not know in 2008
that nearly two thirds of private loan borrowers were not borrowing the maximum in
federal loans first, underscoring the need for school certification of private loans and for
more adequate and timely data on private loan usage.
7 Moody's Investors Service, ''''Direct-To-Consumer" Student Loans: Higher Risk," August 11, 2009. Discussed
in detail in Rep. Danny Davis' September 23, 2009 testimony before the House Judiciary Subcommittee:
www,judiciary.hQuse.gov/hearinWpdfLDavis090923.p..l!f.
Amendment on Authority Over Nonbank Institutions that Make Loans
Several large for-profit colleges are making private loans directly to their students-'-
knowing the many, even most, will not be able to repay. Corinthian Colleges has told
investors that it plans to make $150 million in such loans this year even though it expects 56
to 58 percent of the borrowers to default.! The company considers these loans good
investments because they will increase enrollment and with it a profitable flow of federal
grant and loan dollars that outweighs the planned write-offs. For-profit schools get up to 90%
of their revenues from federal grants and loans. Financial analysts describe several schools as
having "significant internal lending exposure" (Height Analytics report, September 23, 2009).
Yet under the bill reported by the Banking Committee, the CPPB would not have clear
authority over predatory loans by schools and other nonbanks. The CFPB would not have
full authority over nonbank entities unless they were determined to be "large."
This amendment would help give the CFPB full authority over Jill private student loans
regardless of the type of institution making them. Private student loans can pose the same
serious risks whether issued by a bank or a school. The CFPB must have the power to address
problems without gaps in authority. Nonbank enforcement cannot be left to the FTC. The
FTC has too a small staff to oversee consumer financial protection and has no examination
powers. It failed to use its authority to address problems in the nonbank sector prior to the
fmancial crisis, and it is failing to act now to stop schools from making loans to students they
know will not be able to repay. The FTC also will nothave the expertise that the CFPB will
develop in the area of financial consumer protection.
Example: A for-profit school in Florida told a family that it was common to take out
variable-rate loans and refinance them upon graduation. The family believed they were
borrowing federal loans, but realized too late that they were in fact private loans. Refinancing
and consolidation are impossible, so they are now saddled with tens of thousands of dollars in
private loans with ever-rising interest rates that are currently between 12-14%. Why should it
matter whether these loans were made by a school or a bank if deceptive practices were used?

Senator Schumer'sArnendment #26 restores full enforcement authority over all nonbanks,not
just the "larger" ones.
I Corinthian Colleges, Inc. 4Q20 I0 Investor Call. Transcript available online:

!J1!p://seekingalpha.com/article/186144-corinthian-colleges-inc-12q 10-qtr-end-12-31-09-eamings-call-
transcript?source=yahoo&page=-l
F:\PIIIFRIAMDS\POLlS_OI.XML
[Rules #155 REVISED]
AMENDMENT TO H.R. 4173

OFFERED BY MR. POLIS OF COLORADO, MR.· PAT-
. .
• •
RICK MURPHY OF PENNSYLVANIA, AND MR.
BISHOP OF NEW YORK

. .
Page 1018, after line
.
25, insert
.
the following:
1 SEC. 4818. AMENDMENTS TO TRUTH IN LENDING ACT.
2· (a) IN ·GENERAL.-Section 128(e) of the Truth in

3 Lending Act is amended- .
4 (l)'by striking paragraph (3) and inserting the
5 following new paragraph (3):
6 "(3) ·IN,8TITUTIONAL CERTIFICATION RE-
7 .QUIRE;D.-(A) Except as provided in subparagraph

8 (B), before a creditor may issue any funds with re-
9 spect to an extension .of
.
credit described in para-
.
10 graph (1), ~e creditor shall obtain from the relevant

11 institution of higher edueationsuch institution's eer-
12 tification-
13 . "(i) of the enrollment status. of the bor-
14 rower;
15 "(li) of the borrower's cost of attendance
.
16· at the institution as determined by the institu-
17 ti6n unaer part
.
F . of title IV of the Higher
·18 Education Act of 1965;
tIVHLC\120809\120809.15:i.xml (456585112)
December 8. 2009 (2:47 p.m.) .
,,'.' - .
F.:\P11\F.R\AMDS\POLlS_OI.XML
[Rules #155 .REVISED]
2
,1 "(iii) of the difference between the bor-
2 rower's cost of attendance and the borrower's

3 estimated financial assistance received under
4 title IV of the Higher Education Act of 1965
5 and other, assistance known to the institution,
6 as applicable; and
7 "(iv) that the institution has-
8 •
"(I) informed the borrower-
, ,
9 "(aa) about the availability of,

10 , , and the borrower's potential eligibility
11 for, Federal financial assistance under
12 this title, including disclosing the
, 13 terms, conditions, and' interest rates • •
14 of Federal student loans;

15 , "(bb) of the borrower's ability to
16 select a private e,ducational lender of,
17 the borrower's choice; I
18 "(cc) about the impact of a pro~
,
19 posed' private education loan on the

20 borrowers' potential eligibility, for
, 21 other financial assistance, including
22 Federal financiai assistance under the
23 Higher Education Act of 1965; and
24 "(dd) about a borrower's right to
25 accept or reject a private education
f:IVHLC\120609\120609.153.xml (456565112) ,
December 8, 2009 (2:47 p.m.)
F:IPIIIFRIAMDSIPOLIS_OI.XML
. [Rules #155 REVISED]
3
1 loan within the 30-day' period fol-
2 lowing a private educational lender's
3 approval of a borrower's application
4 . and about a borrower's 3-day right to·
.5 cancel altogether;
6 "(II) determined whether the bor-
7· rower has applied for and exhausted the
. .
8 . Federal financial assistance available to
9 the borrower under the Higher Education
10 Act of 1965 and informed the borrower ac- .
11 cordingly; and
12 ."(III) counseled the borrower on the
13 borrower's financial aid options.
14 "(B) A creditor may issue funds with respect to
15 an extension of credit described iI\ paragraph (1)
16 without obtaining from the relevant institution of
.
17 higher education such institution's certification if
18 such institution fails to provide such certification
19 within 21 :calendar days or 15 business days, which-
. 20 ever comes first, of the creditor's request for such .
21 certification.";
22 (2) by redesignating paragraphs (9), (10), and
. .
23 (11) as paragraphs (10), (11), and (12), respec-
24 tively; and
I
•
.'
,
. I
f:WHLC\120B09\120809.153.xml (456565112) .
Oocember8, 2009 (2:47 p.m.>,
.,
F:IPIIIFRIAMDSIPOUS_OI.XML
4
1 ,(3) by inserting after paragraph (8) the fol-
2 lowing new paragraph (9):

3 "(9) PROVISION OF INFORMATION.-0n or be- ,
,4 ' fore the date a creditor issues any funds with re-
S spect to an extension of. credit described in para-
•
6 graph (1), the creditor shall notify the relevant insti"

7 tution of higher education, in writing, of the amount
8 of. the extension of credit and the student on whose
9 'behalf credit is extended. The form of such written
• •
10 notification shall be subject to the regulations of the

11 .Agency.".
12 (b) REGULATIONS.-
13 (1) DEADLINE FORREGULATIONS.-Not later
14 than 365 days after the date of enactment of this
15 Act, the .Agency shall issue regulations in final form
16 to implement paragraphs (3) and (9) of section
17 128(e) of the Truth in Lending Act, as amended by·
18 subsection (a).· Such regulations shall become effec-
. .
19 tive not later than ,6 months after their date of
•
20 Issuance.
,
21 (2) EFFECTIVE DATE.-The regulations in ef-

22 fect pursuant to section 128(e) of the Truth in
23 Lending Act as of the date of the enactment of this '
24 'Act shall remain in effect until the effective date of
25 the regulations issued under paragrap)J. (1).
f:IVHLC\120800\1 20809.1 53,xml (456565112) •

December 8. 2000 (2:47 p,m.)
F:IPIIIFRIAMDSIPQUS_Ol.XML
5
1 (c) STUDY AND REPORT ON PRIVATE EDUCATION
2 LOANS AND PRIVATE EDUCATIONAL LENDERS.-
•
3 (1) REPORT.:-Not later than 2 years after the
4 date of enactment of this Act, the Director and the

5 . Secretary of Education,· in consultation with the
,
6 .Corrunissioners of the. Federal Trade Commission,

7 and the Attorney General, shall submit a report to
8· the Committee on Financial Services and the Com-
9 mitteeon Education and Labor of the House, of
•
10 Representatives and the Corrunittee on· Banking,
11 Housing, and Urban Affairs and the Committee .on
12 . Health Education, Labor, and Pensions of the. Sen-
13 ate on private education loans (as that term is de-: .
.• 14 fined in section 140 of the Truth in. Lending Act (15
.
15 U.S.C. 1650» and private educational lenders (as

16 that term is defined in such section).
17 , (2) ,CONTENT.-,The report required by this·
. 18 subsection s11all examine, at a minimum, the fol-
19 lowing:
20 (A) the growth and changell of the private
,
21 education loan market in the United Statell; .

22 (B) factors. influencing such growth and
23 changes;
24 .(C) the extent to which students and par-
25 ents of students
,
rely .on private education loans
f:IVHLCil20809112OB09.153.xml . (458565112)
Oecember 8. 2009 (2:47 p.m.)'
•
'.
F:lPll\FR\AMDSIPOllS_OI.XML
6
1 to finance postsecondary education and the pri-
2 vate education loan indebtedness of borrowers, •
3 ' (D) the characteristics of private education

4 'loan borrowers, including the types of institu-
5 tions of higher education they attend, socio-
6 economic characteristics (including income and
7 education levels, racial characteristics, geo-
8, graphical background, age, and gender), what.
9 other forms of financing borrowers use to pay .
"
10 for education, whether they exhaust their fed- ,

11 eral loan options before taking out a private
12 loan, whether such borrowers are dependent or
13 independent students (as determined under part
14 F of title N of the Higher Education Act of
15 1965) or parents of such students, whether
16 such borrowers are students enrolled in a pro-
17 gram leading to a certificate, license or creden-
18 tial other than a degree, an associates' degree, .
19 a baccalaureate degree, or a graduate or profes-
20 .sional degree 'and, if practicable, employment
21 and repayment behaviors;
22 (E) the characteristics of private edu-
23 cational lenders, including' whether such credi-
24 tors are for-profit, non-profit, or institutions of
25 higher education;
f:IVHLc\120809\120B09,153,xml (456565112) ,
December 8, 2009 (2:47 p,m.)
F:IPIIIFRIAMDSIPOUS_Ol.XML
[RuIes # 155 REVISED]
7
1 (F) the underwriting criteria used by pri-
2 vate educational lenders, including the use of
3 cohort default rate (as such term is defined in
4 . section 435(m) of the Higher Education Act of
5 1965);
• . \ 6 (G) the terms, conditions, and pricing of
7 private education loans;
8· (H) the consumer protections available to
9 private education loan borrowers, including the
.10 effectiveness of existing disclosures and require-
11 ments and borrowers' awareness and under-
12 standing about terms and conditions of various
13 .financial products;
14 (1) whether federal regulators and the pub-
15 lic have access to information sufficient to pro-
16 vide them· with assurances that private edu-
17 cation loans are provided in accord with the
18 Nation's fair lending laws and that allows pub-
19 lic officials to determine lenders' compliance
20 with fair lending laws; and
21 (J) any statutory or legislative rec-
22 ommendations necessary to. improve consumer.
23 protections for private education loan borrowers
24 and to better enable federal regulators and the
tIVHLC\120B09\120809.153.Xml (458585112)
December B. •2009 (2:47 p.m.)
•
•
F:\P111FRIAMDSIPOUS Ol.XML
8
1 public' to ascertain private educationill lender
2 compliance with fair lending laws..
3 (d) REPORT.- Not later than 18 months after the
4 issuance of regulations under subsection (b)(I), the Con-
5 sumer Financial Protection Agency and the Secretary of
. ,
6 Education shall jointly submit to Congress a report on the
7 compliance of institutions and private educational lenders
. .
8 with the amendments made by this section. The report .
9 shilll include the degree to which specific institutions uti-'
.
10 liiecertifications in effectively encouraging the exhaustion
11 of Federal student loan eligibility and lowering student
12 debt.
f:IVHlCl120B09\120B09.153.xml (456565112)
December B. 2009 (2:47 p.m.)
---------- ---- --------------- - - - -------~-. ----- -------.---------------------- --------------_ .. _ _•... __. . _ - - - - -

Sent: Wednesday, April 21, 2010 11 :54 PM
To: Eric.Stein@do.treas.gov; Peggy.Twohig@do.treas.gov; Kvaal, James R.
Cc: Shireman, Bob; Arsenault, Leigh
SUbject: FW: Student loan certification amendment to CFPB
Eric, Peggy and James,

I wanted to check in with you on the three private student loan issues in the Senate financial reform bill. I believe Treasury staff are
working with Sens Durbin and Reed on an amendment that would give the CFPB enforcement authority over private loans made by
banks with more than $1 b in assets and by any nonbank, which is great. The remaining issue is requiring lenders to have schools
certify private loans before disbursement (which Sallie Mae says reduces the loan amount 30% of the time, and it gives the school a
chance to inform students of safer federal loan options). The House-passed bill requires school certification thanks to the Polis
amendment included in the floor managers amdt. I have spoken with the staff of Senators Harkin, Bennet (CO) and Brown (OH) about
offering this amendment in the Senate. All three are supportive and have discussed it with Dodd's staff, but none has committed to
offering the amendment or had it drafted, and time is now running out.
Chris Lindstrom from US PIRG and I are meeting with Brian Appel on Sen Bennet's staff tomorrow afternoon on the amendment, which
is encouraging but I'm concerned about time running out. Do you have any advice for us? Any assistance the Administration can
provide would be greatly appreciated. This is a very significant issue. Below is the email I sent Bennet's staff including a two pager
with talking points, legislative specs and some confidential leg history.
Thank you again for all your support and assistance! Pauline
Pauline Abernathy
Vice President

Sent: Thursday, April1S, 2010 6:S3 PM
To: 'Appel, Brian (Bennet)'; 'Silvern, Joy (Bennet)'
Cc: 'Swarthout, Luke (HELP Committee)'; 'Christine Lindstrom'; 'Connie Myers'
Subject: Student loan certification amendment to CFPB
1
__.ii-_ ------------ ----- ---------- ---------------- -------- - .. --- .. _--------------~.-
-_._-_._---_...-.. . ..... __ .. _ - - - - .._._-_.
Brian and Joy,

I wanted to follow up on our previous conversations to ask if your boss would be interested in offering a version of Rep. Polis' student
loan certification amendment to the CFPB on the Senate floor. It seems like a particularly great fit for your boss given his cmte
assignments and Colorado State's leadership on this issue. It would also be a highly tangible benefit for families--it would ensure
students were told about any remaining eligibility for safer federal grants and loans before they took out a dangerous private student
loan. I have taken the liberty of cc'ing Chairman Harkin's staffer on this email.whoisastrongsupporterandexpertonthisissue.as
well as Chris from PIRG, which has a long record of championing this issue as well. The amendment would be widely supported.
I have attached a two pager with draft talking points, legislative specs and some confidential leg history. I've also attached the fact
sheet Rep Polis put together on his amendment as well as his amendment. .
I'm reaching out to some other offices as well who have expressed an interest in this issue, but it feels like a particularly great fit for your
boss. Can you let me know either Way? Thank you. Pauline
~ -mJ -mJ
Mandatory cert polis admt added Private Loan
tps and amdt Be... to hr4173.pdL Certification Fac...
Pauline Abernathy
Vice President
2
-;
F:IPII\FRIAMDSIPOLIS Ol.XML
A:M:ENnMENT TO H.R. 4173

OFFERED BY MR. POllS OF COLORADO, MR. .PAT-
• •
RJCKMURPHY . OF PENNSYLVANIA, AND MR.
. .
BISHOP OF NEW YORK.
Page 1018, after line

.
25, insert
.
the following:
1 SEC. 4818. AMENDMENTS TO TRUTH IN LENDING ACT.
2· (a) IN GENERAL.-Section 128(e) of the Truth in

3 Lending Act is amended-
4 (l)'by striking paragraph (3) and inserting the
5 following new paragraph (3):
.
6 "(3) ·IN,8TITUTIONAL CERTIFICATION RE-
7 .QUIRED.-(A) Except as provided in subparagraph

8 . (B), before a creditor may issue any funds with re-
9 spect to an extension of credit described in para-
10 graph (1), the creditor shall obtain from the relevant
11 institution of higher education such institution's cer-
12 tification-
13 . "(i) of the enrollment status. of the bor-
14 rowe~
15 "(il) of the borrower's cost of attendance

16· at the institution as determined by the institu-
17 tion unuer part F of title IV of the Higher
·18 Education Act of 1965;
~\VHLC\1~0809\1211s09. j 5:i.xml (456565112) .

December 8, ~a08 (~:47 p.m.) .
.- -.
:- '- . .
F:\P11\FRIAMDS\POUS_OLXML
[Rules #155 .REVISED]
2
"(iii) of the difference between the bor-
rower's cost of attendance and the borrower's

estimated financial assistance received nuder
title IV of the Higher Education Act of 1965
and other. assistance known to the institution,
as applicable; and
"(iv) that the institution has-
•
"(I) informed the borrower-
"(aa) about the availability of,
.. and the borrower's potential eligibility
for, Federal financial assistance under
this title, including
-
disclosing
. . ' .
the
terms, conditions, and interest rates , .
of Federal student loans;

. "(bb) of the borrower's ability to
select a private educational lender of.
the borrower's choice;
"(ee) about the impact of a pro-
.
posed· private education loan on the
borrowers' potential eligibility. for
other financial assistance, including
Federal financiai assistance under the
Higher Education Act of1965; and
"(dd) about a borrower's right to· ,
I
•
accept or' reject a private education

• •
f:\VHLCl120809\120809.153.xml· (458585112)
. December 8, 2009 (2:47 p.m.)
F:IPII\FR\AMDSIPOLIS.OI.XML
3
1 loan within the 30-day' period fol-
2 lowing a private educational lender's
3 approval of a borrower's application
4 ' and about a borrower's 3-day right to·
,5 cancel altogether;
6 "(II) determined whether the bor-
7, rower has applied for and exhausted the
8' ,Federal financial assistance available to
,
9 the borrower under the Higher Education

10 Act of 1965 and informed the borrower ac- '
11 cordingly; and
12 "(III) counseled the borrower on the
13 borrower's financial aid options.
14 "(B) A creditor may issue funds with respect to
15 an extension of credit described in paragTaph (1)
16 without obtaining from the relevant institution of
17 higher education such institution's certification if
18 such institution fails to provide such certification
19 within 21 'calendar days or 15 business days, which-
, 20 ever comes first, of the creditor's request for such
, 21 certification.";
22 (2) by redesignating paragraphs (9), (10), and
23 (11) as paragTaphs (10), (11), and (12), respec-
24 tively; and
, .
f:IVHLC\120809\120809.153.xml (456565112) ,
December.8, 2009 (2:47 p.m."
'.
F:IPIIIFR\AMDSIPOLlS_OIXML
[Rules #155 REVISED)
4
1 ,(3) by inserting after paragraph (8) the fol-
2 lowing new paragraph (9):
3 "(9) PROVISION OF INFORMATION.-On or be- ,
4, fore the date a creditor issues any funds with re- '
5 spect to. an extension of credit described in
. ' .
para-
,
6 graph (1), the creditor shall notifY the relevant insti-

7 tution of higher education, in writing', of the amount
8 of the extension of credit and the student on whose
9 'behalf credit is extended. The form of such written
, ,
10 notification shall be subject to the regulations of the

11 Agency.". '
12 (b) REGULATIONS.-
, 13 (1) DEADLINE FORREGULATIONS.-Not later
,
,14 than 365da~ after the date of enactment of this

,
15 Act, the Agency shall issue regulations in final form

16 to implement paragraphs (3) and (9) of section
17 128(e) of the Truth in Lending.l\.ct, as amended by
\ 18 subsection (a). Such regulations shall become effec-
19 tive not later than ,6 months after their date of
•
20 Issuance.
21 (2) EFFECTIVE DATE.-The regulations in ef-
22 fect pursuant to section 128(e) of the Truth in
23 Lending Act as of the date of the enactment of this '
24 'Act shall remain in effect until the effective date of
25 the regulations issued under paragraph (1).
,'f:IVHLCI12080S1120809,153.xml (456565112)
December 8. 2009 (2:47 p.m.)
F:IPIIIFRIAMDSIPQUS_OIXML
5
1 (c) STUDY AND REPORT, ON PRIVATE EDUCATION
2 LOANS AND PRIVATE EDUCATIONAL LENDERS.-
•
3 (1) REPORT.:'-Not later than 2 years after the

4 , date of enactment of, this Act, the Director and the
5 ,Secretary of Education" in consultation with the
. '
6 'Commissioners of the, Federal Trade Commission,

7 and the Attorney General, shall submit a report to
8' the Committee on Financial Services and the Com-
9 mitteeon Education and Labor of the House, of
•
10 Representatives and the Committee on' Banking,
11 Housing, and Urban Mairs and the Committee on
12 ' Health Education, Labor, and Pensions of the. Sen-
13 ate on private education loans (as that term is de~ ,
.14 fined in section 140 of the Truth in Lending Act (15
15 U.S.C. 1650)) and private educational lenders (as
16 that term is defined in such section).
17 , (2) 'CONTENT.~Thereport required by this'
, 18 subsection shall examine, at a minimum, the fol-
19 lowing:
20 (A) the growth and changei;l of the private
•
21 education loan market in the United States;

22 (B) factors, influencing such growth and
23 changes;
•
24 ,(C) the extent to which students and par-
25 ents of students
. -rely on private education loans
'
t.IVHLC\1208091120809.153.xml (458565112)
a.
December 2009 (2:47 p.m.)'
•
F;1P11\FR\AMDSIPOLIS_Ol.XML .
6
1 to finance postsecondary education and the pri-
2 vate education loan indebtedness of borrowers, •
3 . (D) the characteristics of private education

4 .loan borrowers, including the types of in$titu-
5 tions of higher education they attend, socio-
6 economic characteristics (including income and
7 education levels, racial characteristics, geo-
8. graphical background, age, and gender), what.
9 other forms of financing borrowers use to pay .
. . ,"
10 for education, whether they exhaust their fed-

11 eral loan options before taking out a private
12 loan, whether such borrowers are dependent or
13 independent students (as determined under part
14 F of title IV of the Higher Education Act of
15 1965) or parents of such students, whether•
16 such borrowers are students enrolled in a pro-
17 gram leading to a certificate, license or creden-
18 tial other than a degree, an associates' degree, .
19 a baccalaureate degree, or a graduate or profes-
20 .sional degree. 'and, if practicable, employment
21 and repayment behaviors;
22 (E) the characteristics of private edu-'
23 cational lenders, including whether such credi-
24 tors are for-profit, non-profit, or institutions of
25 higher education;
.. t.\VHLCl120Bo9\120809.153.xml (456565112) .
December 8, 2009 (2:47 p.m.)
F:IPIIlFRiAMDSIPOLIS_Ol.XML
[Rules #155 REVISED)
7
1 (F) the underwriting criteria used by pri-
2 vate educational lenders, including the use of
3 cohort default rate (as such term is defined in
4 section 435(m) of the Higher Education Act of
5 1965);
• .\ 6 (G) the terms, conditions, and pricing of
7 private education loans;
8 (H) the consumer protections available to
9 private education loan borrowers, including the
,10 effectiveness of existing disclosures and require-
11 ments and borrowers' awareness and under-
12 standing about terms and conditions of various
13 ,financial products;
14 (I) whether federal regulators and the pub-
15 lic have access to information sufficient to pro-
16 vide them· with assurances that private edu-
17 cation lOl1lls are provided in accord with the
18 Nation's fair lending laws and that allows pub-
19 lic dfficials to determine lenders' compliance
20 with fair lending laws; and
.'
21 (J) any statutory or legislative rec-.

22 ommendations necessary to. improve consumer.
23 protections for private education loan borrowers. iI
24 and to better enable federal regulators and the
f:IVHLCI1206091120809,153,.mI (456565112) .
December
. e, ' 2009 (2:47 p,m,)
•
F:\PII\FRIAMDS\POUS Ol.XML
8
1 public to ascertain private educational lender
2 compliance with fair lending laws..
3 (d) REPORT.- Not later than 18 months after the
4 issuance of regulations under subsection (b)(I), the Con-
5 sumer Financial Protection Agency and the Secretary of
,
6 Education shall jointly submit to Congress a report on the
7 compliance of institutions and private educational lenders
•
8 with the amendments made by this section. The report .

9 shall include the degree to which specific institutions uti-
10 lize ·certifications in effectively encouraging the exhaustion
11 of Federal student loan eligibility and lowering student
12 debt.
..
f:IVHLC\120809\120809.153.xml (456565112)
December 8. 2009 (2:47 p.m.)
POLIS/P. MURPHY/T. BISHOP AMENDMENT TO H.R. 4173
Problem:
• The share of students taking out high-cost private student loans has increased dramatically
from 5% of all undergraduates in 2003-04 to 14% in 2007-08, while the number of borrowers
grew from less than 1 mil/ion to almost 3 million. Also, the volume of private loans more
than doubled, from $7.2 billion in 2003-04 to $15.0 billion in 2007-08.;
• Unlike federal student loans, private student loans' rates can be as high as 18% in 2008 and
borrowers are not eligible for the deferment, income-based repayment, or loan forgiveness
options available to federal student loan borrowers. Private student loans are riskier, less
affordable, and resemble credit cards rather than financial aid.
• Even more alarming is that almost 2 out of 3 (64%) students with private loans borrowed less
than they could have in federal Stafford loans, up from 48% in 2003-04, and more than lout
of 4 (26%) borrowers took out no Stafford loans at all (14% did not apply for federal financial
aid and 12% filled out the FAF5A but did not take out a Stafford loan).
• Financial aid experts agree that students and their families should apply for and exhaust all
of the available federal financial aid options, which they subsidize as taxpayers, before
turning to private loans.
The Amendment:
• Reflects the provisions in the House-passed bipartisan Higher Education Opportunity Act of
2008.
• Before making a loan, requires private educational lenders to request and receive
certifications from institutions of higher education of borrowers' (1) enrollment status, (2)
cost of attendance, and (3) the difference between the borrowers' cost of attendance and the
borrower's estimated financial assistance, and that the institution has determined whether
the borrowers have applied for and exhausted federal financial aid options and informed the
borrowers about 0) their federal financial aid availability and eligibility; (ii) their ability to
select a private educational lender of their choice; (iii) the impact of a proposed private
education loan on their potential eligibility for other forms of financial aid; and (iv) their right
to accept, reject or cancel a private education loan as allowed under current law.
• Requires the Consumer Financial Protection Agency and the Department of Education to
conduct a study on private education loans and lenders as well as report to Congress on the
compliance of institutions and private educational lenders with certification provisions,
including the degree to which certifications are effectively encouraging students to exhaust
their federal student aid options and lower the amount of debt students accumulate.
; Figures calculated by the Project on Student Debt using data from the National Postsecondary Student Aid Study ofthe
National Center for Education Statistics. For more information see www.projectonstudentdebt.organd www.ticas.org.
Private Student Loan School Certification Amendment
Private student loans are one of the riskiest ways to pay for college. They are expensive
mostly variable-rate loans that cost more for those who can least afford them. They lack the
fixed rates, consumer protections and flexible repayment options of federal student loans. And
unlike credit card debt, private loans are nearly impossible to discharge in bankruptcy.
Nearly two-thirds (64 percent) of undergraduate students who took out private student
loans in 2007-08 had not borrowed the maximum in federal loans.!
Example: Jeffrey in Tennessee took out private student loans after receiving marketing
solicitations in the mail. His school's financial aid office never knew about these loans. He
says he would have borrowed less or avoided private loans entirely if someone had warned him
about the dangers of these loans. He struggles to pay $500 per month on.his private loans and
still put food on the table for his wife and two kids.
This common-sense amendment would go a long way toward preventing students from
unnecessarily taking out a dangerous private loan. It requires lenders to confirm with the
borrower's school that the student is enrolled, how much the student is eligible to borrow, and
that the student has been informed of any untapped eligibility for federal grants and loans.
• Requiring school certification gives the school the opportunity to make students aware of
safer federal loan options. Colleges that have adopted policies requiring counseling or
warning students about the risks of private loans when they learn that a student has applied
for one have significantly reduced private loan usage. 2
• Lenders report school certification reduces the amount borrowed nearly 30% ofthe time. 3
4
• Certified loans also have significantly lower default rates than uncertified loans.
• The lender could disburse the loan without the school's certification if the lender does not
hear back from the school within IS business days or 21 calendar days.
A nearly identical provision is in the House-passed financial reform bill. The Polis-
Murphy-Bishop amendment passed in the manager's amendment on the House floor.
Mandatory school certification is strongly supported by higher education, student,

5
consumer and civil rights organizations. Sallie Mae and other major lenders support
mandatory school certification as well. All agree that students should always take out the
maximum federal loan before considering a private loan6
1 Project on Student Debt. August 2009. Private Loans: Facts and Trends:
!illp:llticas,org/files/pyb/private loan facts trends 09.p-!i£.
2 See Project on Student Debt's September 23, 2009 testimony:
h1lp.;/,LprQjectonstudentdebt.org/fiIes/pyb/Asher testimony 90923.pQf
3 See Sallie Mae's comments to the Board of Governors of the Federal Reserve System:
!illp:llwww.federalreserve,gov/SECRS/2009 IMay/20090529 IR-1353/R-1353 052609 21079 591049709690 l.pQf
4 Moody's Investors Service, ''''Direct-To-Consumer'' Student Loans: Higher Risk," August 11, 2009. Discussed in detail in
Rep. Danny Davis' September 23, 2009 testimony before the House Judiciary Subcommittee:
www,judiciary.house.gov/heariDgUpdf/Davis090923.pQf.
. 5 See December 10, 2009 letter signed by 25 organizations in support of mandatory certification amendment:
!illp://12!:Qjectonstudentdebt.orgfpub view.php?idx=534.
6 On its website, Sallie Mae states: "[Federal student] loans have very attractive terms when compared to private loans. So,
get all the federal loans you can before looking into private loans." Accessed November 12, 2009 at
!illP:l!www.salliemae.com/before colleggfparents plan/ways to pay/expioring loan/-
From: Shireman, Bob
Subject: 8-10 percent citation from ACE
Attachments: Red Zone. pdf
See attached, and see for example this publication from ACE:
http://www.acenet.edu/AM/Template.cfm?Section=Search&Template=/CM/ContentDisplay.cfm&ContentFileID=le93
It says "Student aid research generally considers monthly debt burden of 8 percent or less "manageable," but recognizes that
individual circumstances and responsibilities vary widely."
The footnote says: "Several studies have suggested that debt burden levels of 8 percent to Ie percent, depending on income,
are acceptable. In addition, mortgage lenders typically use an 8 percent rule for student loan debt. For more information
see: Greiner, K (1996). How much student loan debt is too much? Journal of Student Financial Aid, 26(1), 7-16. Hansen, W.L.
& Rhodes, M.S. (1988). Student debt crisis: Are students incurring excessive debt? Economics of Education Review, 7(1), lel-
112."
_
"-_._.. .. ~. .~ _.. _--, ----- ----.. ,,~~,_._- ------" - _.,--,-----------------------. '--- -----------------
Debt Plan - Debt - The Ohio State University Page I of2
The Ohio State University www.osu.edu Help Campus m,~ BuckeyeLink Find people Webmail
Search 'III
File the FAFSA First!

Student Financial Aid II School Code 003090
Your Status Award Guide How It Works How To Apply How To Keep It Forms Grants
Jobs Loans Scholarships
DEBT MANAGEMENT
INTROOUCTION DEBT PLAN BUDGET RED ZONE EXAMPLES
PLANNING FOR DEBT
STUDENT "CANS
We recommend that Are You In The Red Zone?
you . pia n
carefully how much
very
40,000 is
money you should 30.000 c!
borrow. If you prepare
a budget each year by
'§ 20.000 ~
lj-l
itemizing all your 10000 ... Ie -. -:'
expenses--tuition,
books, housing costs, 0 j §
8'8 § 8 8. '" 8
food, transportation, o'
<;;; I<i d .,; ., or
and personal '~ It>
!" "" "'l "'l "
expenses--and Expected Anu\AalSalary
_.s,_I.Ifl:le:-P~~fqo~_~11 !rri::llt1ir*l-_p..J1;fu:',j;~I!ll,' A!'1t:rill~, ~Jl;:ii Dl;e~~Ii!fC'
subtracting
resources--family
support, summer
earnings, income from part-time jobs, all sources of financial aid, and any other
resources--you can· determine accurately how much loan money you will need to cover
your remaining expenses. The Entrance Counseling Guide for Borrowers that you received
when you applied for your first student loan includes a very informative section entitled
"Budgeting Your Money." It also includes a bud9.§Lplanning worksheet that is extremely
useful in assisting you in implementing a budget to live by.
The amount of loan money you can borrow increases as you progress in class rank (see
Federal Direct Stafford Loan Program), but this does not mean that you have to increase
the amount of loan money you borrow. It is wise to borrow only what you need to meet
your expenses. Because obtaining student loans is a fairly simpie and easy process and
repayments seem years away, it is typical for students to borrow the maximum amounts
per year without considering the amount of money they will have to repay when they
leave school. Don't end up in the Red Zone.
You would also be wise to consider what your starting salary will be when you leave. r
http://sfa.osu.edu/basic/debt.asp?tab=b 5/2012010
Debt Plan - Debt - The Ohio State University Page 2 of2
school. This is a very important factor when determining the maximum amount of loan
debt you will be able to repay. Some typical starting salaries of our graduates have been:
School of Allied Medicine $35,000

Colleges of the Arts and Sciences $31,250
College of Business $35,000
College of Education $25,141
College of Engineering $39,000
College of Food, Agricultural, and Environmental Sciences $26,500
College of Human Ecology $25,000
College of Nursing $40,000
College of Social Work $25,000
For an interactive tool to explore typical salaries in vanous professions, try

!illp: !/hotjo bs. ya h 00. com/sa Iary.
Use this worksheet to do a quick calculation to determine if your student loan debt is in
the danger zone. In a national survey sponsored by Nellie Mae (a loan guaranty agency)
in 1997, over 50% of students responded that they would borrow less if they were just
starting out. At ieast 40% reported that their loan debt delayed their ability to buy a
home and other desired purchases. Consider these examples of debt levels and payments
for Federal Direct Stafford Loans.
CREDIT CARDS
Students are inundated with credit-card applications
when arriving on college campuses each fall. You
would be wise, however, to avoid credit-card debt
while you are a college student. The average student only works 10 to 20 hours per
week, which in most instances does not provide enough income to support frequent use
of credit cards. If you feel the necessity to obtain a credit card, limit yourself to one card
to be used for emergencies only and never charge more than you can pay in full at the
end of each month. Remember, that credit card is not a pot of gold! It is a debt that you
must pay. If managed properly, it can give you a head start on establishing a good credit
record.
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You are here: Student Financial Aid> Debt> Debt Plan
I
,
http://sfa.osu.edu/basic/debt.asp?tab=b 5/20/2010
Verticals Degree Level Mix Funding Mix
American Public Education {APEI)
~lMorgln: School, Owned:

200910 R"""nuo $14S.1 Ameli""n Public Univen;ity
2009E ESIT M"'IIin 26,4% Ameli""n M,ilary University Mgmt. Sachelor.
13.0% 67.0%
Growth:
0a.-l0E Rev CAGR 38.4%
Bu,lnes, sclonce &
00-1010 lOPS CAGR 40.4%
10.0'1'. Toch.
Online Enrellment Mix: 9.0%
100% ,~,
Edueollon
Mest Recent 3 Year COR: Mo.t Recent2 Year COR: Humonlile. L~
07: Amer. Public Unlv, SyStem - 3.3% 07: Amer. Public Un..... System -0.0% 22.0%
Publle Safety, Nallenol & Moste..

Homeland secu~ty 20.0%
26.0%
Apollo Group (APOq

ReVlMorgln: seb9o!$ Owned:
2010ERevenue $5.075.1 Th, Unive.-.ity cI Ptloenix Busln.s,
201010 EBIT Margin 20.8% Westem International Unive"ity Poll Grants
47.0% 14.0'1'.
In.i~llt School. (cnlinc hlall "I>oo~
Growth: Moritus Universitv les.....) P~vate Lean.
08-1010 Rev CAGR 27.1% 1.0%
00-1010 lOPS CAGR 35.2% Nursing Socholo,"
A•• oelate. Cash
6.0% 37.5% 2.0%
Arts and 45.1% TInolV
OlJ!lne Enrollment Mix: 70%10 Selenco.4.0% Loans Employer
Technology
72.0%
"_~_~·_';,_'_·, _J
8.5% Pay7.0%
Most Recent 3 Ye,r CDR: Me.t Recenl2 Year CDR:
07: Western Int Unive"ity _ 2G.5% 07: Westem Int. Unlve"ity - 18.5% Healthea"
07: UOP -18.8% 07: UOP _9.3% Edu~Uon
20.0%
10.0% Behavioral
Selcnces4.5%
"",.,F='" '00'; " - ""'oo"'' ,.,""''- ..J c....."'.".."=..",.".-...-..,••'"'-.........,"'--
Bridgepoint Education (BPI)
R'V/Mamln: Schools Owned:

200910 Rovonue $447.6 Ashford University
200910 E81T Margin 25,3% Un!ve<sity of tho Rooki.s Health
5.7% Bacbelers
Social
ScIence
78.4% "
Growth:
00-1010 Rov CAGR 61.4% 15.0%
00-1010 lOPS CAGR 73.0% Buslne••
44.0% Ps\,<,hology
Onll"" Enrollment MIx: 99% 15.3%
Most Recenl3 Yeo, CDR: Most Recent 2 Year CDR:
07: Ashford University _ 17.4% 07: Ashford Unlve"ity -13,3% As.ocIote.
07: University c1the Rookies - 0.0% 07: Unr.r..rsity c1the Room. - '0.0% 11.9% P,lvate
Edueallen Doctoral & Masters Employer Pay Military Loons
20.0'. Otherf.l% 8.8% 10.0% 4.0% 1.0%
""..'......FO"'.
Career Education (CECOl
RevJMargln: School. Owned:

200910 RevenU<l $1,795,9 American InlerConttnenlai Univolsity
Visual Comm. DIploma! Pell Grants
200910 EBIT M0'llin 11,6% CoIorade TedlnieaJ University 17.4%
lIri.,offffe College and Design Certillcate
17.0% Private LOllIls
Growth: Le Cordon Blcu Tech. 16.0·/.
0.8%
08-10E Re. CAGR 10,9% i':Jtcben Academy
08-1010 lOPS CAGR 304% Sanford-Brown Sohcols Busin.s.
49.0% A.. oeloto. Cosh 13.8%
Srooks Instituto Culinary Arts 44.0% Tille IV Leans
Online E...ollmcnt MI., 37% 10 Brown College 10.0~.
Sochelors,
82.8%
Co~ins Colloq. Masters, CECO
Harrington Coll"9" of D.si9n Doctoral Solan...
Technology 39.0%
International Aoadorny of D••ign & Toch. 7.0'1'. Sheet
INSEEC Group School. Oth.r 1.5%
Health
lstitulo Marangoni Scllools 3.8%
Educ.llon
Mo.t Recem 3 Year CDR: Mo.t Recent 2 Yeor CDR: 18.0%
07, CECOWA_19.6% 07:CECOWA_B.6%
07', A1U -19,7% 07:AIU-'05%
Corinthian Colleges (COCO)

RevlMorgln: Schools Owned:
2D10E.RevenU<l $1.625.6 E _ t Coll"9"
201010 EBIT Morgin 14,1% Everestlnstituto Heolthcart!
E_..t University 59.0%
Grewth: WyoToch
00-1010 RavCAGR 23,3%
00-1010 lOPS CAGR !l96% Pell Grants
23.0%
TIlle IV LOllIl.
Online Enrollment MIx: 20%10 66.0·ol.
Mo.t R....m 3 Year CDR: Most Recent 2 Year CDR: Private Loans
Mechanical &
07: COCO WA·28.8% 07: COCOWA_ 15.0% Trad•• 9.0~. 2.0%
Buslne.s
07: E••restWA_31.1% 07: EverestWA-15.7% 13.0'1'.
07: ~oTschWA-19.6% 07: WyoTschWA-10,2% C~mlnol A55oc1oto. C••h coco 601.nce
Other Ju.tic. 32.0% ~" 3.0% She.t
3.0% 1.0'. 5.0%
18.0%
"'"."....'0""
Capella (CPLA)
Rev/Margin: Scheels Owned:

2OO9E Rovenu.
200!JE EBIT Msrgln
= ..
19.0%
Capella Univelsity
Inlormolloll Teohnology Doctoral Pell Grants
8.6% 34.4% 1.0%
Growth:
Educollon Ca.h
00-10ERovCAGR 21.5% 21.0% Masters 6.0%
06-1010 lOPS CAGR 39.S% Tille IV
48.0%
Leans
78.0% EmpleyerPay
Online Enrollmem Mi.: 10.0%
Mo.t R....nt 3 Yeor CDR: Most Recent 2 Year CDR: Psychology
18.0% 60chelors Other
07: CopeIl. University _.55% 07: Cepelts Unr.r..rsity • 25% 6.0%
17.6'1'.
--/'Human Services Private
26.0% Loans
,.~
For-Profit Education Industry Kelly A. Flynn, CFA

Company Summaries "One Pager" Business & Professional Services Analyst
CREDITSUISS~
(617) 556-5752
Kelly.Flynn@Credit-Suisse.com
Nota: Actual. and .. timatss for_I. end dogree level mix reflect student population at FY08 and unless otherwise noted. Funding mix e.timat•••nd actuol. are for FY09 YTO a•••timated by Cred~ Suis.. unkoso otho";so noted,
Sou,o••: Company ir'llcnnstion and C,cd~ Suisse eslim.leo, '
Verticals Degree Level Mix Funding Mix
DeVry (OY)
Rev/Ma'Rln: School' Owned:

201010 Revenue $1.800.6
201010 EBIT Margin 18.4%
G,owth:
00-10ERevCAGR 28.5% Business
00-1010 lOPS CAGR 33.6% 46.7% Boohelors Cash 6.0%
52.0%
Technology Oocloral TIlle IV DVeolonce
Onll.... En,ollment Mix: 5-10%E 26.1% 5.1% 75.0% Sheet
!dO.1 Recent 3 V"", CDR: Moel Roeen! 2 V.... CDR: 4.0%
Ma.t2n
07: W... tem Career Coliege _24.4% 07: Western ear- College - 10.2% Employer Pay
17.2,"
07, DeVI)' u........ <ty _ 17.1% 07: O.Vry Unille"ity - 9.0% 8.0%
07: ~o College WA • 21 .0% 07: Apoilo CoIl"90 WA· 7.2% Medical and Keallh certmcate
07: Chamborta;n -4.1% 07: Chamberlain _2.9% 27.2% 11.1%
Oi'. Keller _4.7% 07: KaU.r· 2.7%
07: Ros. - 0.5% 07: R05s _0.2%
Education Management Corporation jEDMC}
RevlMaroln: School. Owned:

201010 Revenue $2.'148.9 Argosy u ........ rty Business
201010 EBfT Ma.--gin 15.4% ThoAnln_ and legal Eduoallon Pell Grants
12.0% 4.0% EDMC Balance
6rovm Mookio Coilege Technology 7.9%
5h... t
Growth: So<rth Un"""<ty CUlinary9.C% 1.0'!'. 0.8%
00-1010 Rev CAGR 20.6%
Baohelors Private loans
00-1010 lOPS CAGR 37.1% Sehavlo,,"1
M.~laArts
47.0% 11.0%
Sclonces TlaelV
11.C% 21.0,"
Ontl"" Enrollmenl Mix: loans State Grants/
60.6% Dlher
Most Re<lln! 3 Y""r CDR: Most R.""nt 2 Ve... CDR' H.allh
Masters
07: EDMCWA_14.6% 07: EOMC WA - B.O% Science. t.g%
07, Brown Mookio College _25.0% 07: Brown Mackie CoDog•• 13.0% 16.0% a.hlon & Design Docl'''al
07: South Univers<ty _ 16.4% 07: South Unive"ity _7.7% 26.0% Diploma 7.g%
07: The Art In.lilutes _ 1~.5% 07: The Art Inslilute. - 7.1% 7.0'!'.
07, Argosy Unlvo..ity - 5.3% 07: Argosy University. 2.8%
ITT Educational Services (ESIJ
Rev/Margin, School. Owned:

2OD9E Reve",", 51.326.0 ITT T""hni<:allnstiMe
2OD9E EBIT Margin 36.8% Technology Business
54.0% 5.0'1'.
Pell G",nls
Growth: Nursing
13.0,"
00-1010 Rav CAGR 255% 2.0%
ll8-1QE EPS CAGR 36.7%
D",mng & P~vate leans
."
Tille IV loans
D.slgn 65.0'!'.
Online EnroIlmentMIx:
21.0% Cash
4.0,"
Mosl Roeent 3 Vear CDR: Most Recent2 year CDR:
07: ITTTech.lnst. WA_24.1% 07; ITTTech.lnst WA·11.6% 1081 Balance
07: Daniel Webster College - 4.1% 07: Daniel Webster College· 2.7% Olher Sh...t
Criminal Ju.tice Masbl'" Bachelo"'16.O% 3.7," 8.3%
1M'll 4.0%
Lincoln Educational Services (UNC)
RoY/Margin: Schools Owne~:

2009E Revenue $524.0 lincotn TechnlOllllnstitute
Automoave Pall Grants
2OD9E E81T Margin 14.9% lincoln Coll.ga of Technology 19.0%
Technology Diploma!
Nashville Autt>-Diesel Cnilog. private loans
32.5% Certificate
Growth, Briarwood College 77.9·. . 1.5%
llaallh Sol.nce
00-10E Rev CAGR 25.3% SOhln In.lilute 01 T.chnology
36.5% UNC Balance
00-10E EPS CAGR 55.7% Clem""" College
Tlae IV loan. Sh... t
Southwestern college
Skilled 62.0% 1.0%
Online enrollment Mlx: Euphoria Inst of Beauty Arts and Sol.
,ade 13.0% State Grants &
Mo.1 Recent3 Vear CDR: Mosl Recent 2 Year CDR: Cash
07: LINCWA-13,4% 10.0,"
Buslne•• & Dlher
Inlormation Baohelors As.oclate.
21.0% 6.5%
Hospltallty . Technology 1.1%
Sarvlce. 9.0% 9.g,!,.
Grand Canyon Education (LOPE)
RevlMa'gln: Soho<>ls Owned:

•
200910 Revenue $263.8 G=ld Canynn lInive"'lIy
2OD9E EBIT Margin 20.5%
Growth,
Private loan.
00-10ERevCAGR E~uoallon Masters
2.6%
OO-1DE lOPS CAGR 55.5% Busln••• 43.5% Baohelors nae IV
22.5% 55.6% 79.5%
Ca.h 10.0%
Dnll"" Enrollment Mix,
EmplOl"r Pay
Most Recenl3 Vear CDR: Most R.""nl2 Year CDR: 5.0%
07, Grend Canyon Unillersity - 2.9% 07, Grand Canyon U"ive..<ty - 1,4% Other
Heallhoare 2.5,"
L
liberal Doctoral
14.5%
Arts/Olher 0.9%
7.5% N.",A. or,,,,,,
.... _~
Strayer Education (STRA)
Rev/Margin, School. Owna~:

2OD9E Revenue $511.0 Strayer Unill...1Iy
Masters
2OO9E E81T Margin 33.6%
28.0%
Grpwth, Associates
P~vate loan.
ll8-1QE Rev CAGR 12.0%
Information 2.0%
00-1010 EPS CAGR Systems 15.C%
Undeclared
Onll.... Enrollment Mix: 5.0% Till. IV
76.0%
lit1i~ EmployerPay
Baohn[ors 15.0%
Mo.t R.cent3 Vear CDR: Mo.1 Recent 2 Vea, COR: Aocountlng 55.0%
Cash
07: Strayer lInilrorslly _ 13.0% W: Strayer lIn""'''ity - 6.0% 1M'll 3.0,"
Olher Olhe'
15.0% 4.0%
Un'lversal Technical Institute (UTI)
RevlMargln: Schools Owned:

201010 R.llenu. $411.8 Un"""," T.cnni",,1 In.tiMe DIplOma!
201010 EBIT Margin 9.0% Motcrcyole Me<:hanics Instituta Certificate 98.0%
Marino MechaniCS Institute
NASCAR Tech"1oa! Inslilute Pell G",nts
14.0%
Growth,
00-1010 RevCAGR 9.5% Tille IV loans Privabl
00-1010 lOPS CAGR 69.6% 84.0% loans
3.0'..
OnTine En,ollmen! M!.: 0% Cash
14.0%
Most Rec.n\3 Vear CDR' !dost Reoent2 Vear CDR: Motorcycle, MarIne & CTG & Other UTI Balance
A.soclates
07: UTI WA:. 13.7% 07: UTI WA: 6.6% Olher Programs 25.0," 1.6% Sheet3.4%
2.0%
-- -_. ---- -- -- -----~ -- -- -._--- .. _-_._.
.... ~- ._-~ --- ----
From: Shireman, Bob

Sent: Tuesday, May 04, 20104: 10 PM
To: Mitchelson, Mary; Minor, Robin
Subject: FW: Letter to Secretary Duncan from the Alliance for Economic Stability, Inc.
Attachments: Letter to Secretary Duncan 05-04-10.pdf
_" __" ~.~. ~ "._._" .•_ .._ _ "~ ~. __ , • •.• ".,,_.__ __

~ ~ " ' _ ~ ~ __ _ _ ,_ _
·~A._" __,
~"_~~~~ •••· _ . _ _ _ _ _ '_ _ ' _ _".""_' •.••
~_'_' ,•.• _, ~~.,~ ..••. " , ~ . ~ _ . _ , _ _._".
~ _ . • _ _"__ ,,~ •. _
From: Lorena L1ivichuzca Imqilto:lorena@millrockllc.con:tj

Sent: Tuesday, May 04, 2010 4:07 PM
To: Duncan, Arne
ec: peter.cunniingham@ed.gQ)(; Bergeron, David; Sorensen, Howard; Aspling, David; Tighe, Kathleen S.; Shireman, Bob
Subject: Letter to Secretary Duncan from the Alliance for Economic Stability, Inc.
Dear Secretary Duncan,
Please find attached a letter from the Alliance for Economic Stability, Inc. regarding Bridgepoint Education, Inc.
Lorena M. L1ivichuzca
747 Third Avenue, 25th Fioor
New York, NY 10017
TeL (212) 702-8805
. Fax (212) 918-3465
Email: lorena@millrockllc.com
This message is for the intended recipient's use only. It is not to be retransmitted without the express written consent of the sender. This e-mail may contain confidential, proprietary or legally privileged
information. If you receive this message in error, please immediately delete it and notify the sender. You must not, directly or indirectly, use, disclose, distribute, print, or copy any part of this message if
you are not the intended recipient
Copies of written communications (including e-maiJs) may be kept and archived indefinitely. T~is may include this e-mail, and any eMmail reply made to it
1
Alliance For Economic Stability, Inc.
th
747 Third Avenue, 25 Floor
New York, New York 10017
May 4, 2010
Arne Duncan, Secretary

LBJ Education Building
Room#7W311
We believe that Bridgepoint Education, Inc. is operating counter to the intent and explicit provisions of
current U.S. law covering post-secondary educational institutions receiving funds as part of Title IV of
the Higher Education Act of 1965, as reauthorized (the "HEA").
,
As you may be aware, Bridgepoint owns Ashford University and the University of the Rockies, tho\lgh it
is Bridgepoint's administration of Ashford University that is of particular concern. In 2004, Bridg~point
was started by a Wall Street private equity fund in partnership with former executives from Apollo
Group, Inc. In 2005, Bridgepoint acquired the Franciscan University ofthe Prairies, a religious-affi'iated
institution with approximately 300 students, with revenues estimated to be less than $10 million.
Bridgepoint renamed the institution Ashford University, and drove enrollment through Ashford's online
program to a reported 65,788 students as of March 31, 2010, with revenues of$526 million in the last
twelve months.
This growth has come not from educational performance but from an incentivized sales force of over
1,400 salespersons equal to one for every 44 students, and growing. Astonishingly, the vast majority of
this sales personnel growth occurred while the Office of Inspeetor General ("OIG") of the Department of
Education ("DOE") was supposedly working to remediate Bridgepoint's use of taxpayers' funds to pay
sales personnel in violation of DOE regulations.
See Table I, which shows the growth in Bridgepoint's student enrollment, and Table 2, which shows the
growth in Bridgepoint's revenues.
Our foremost concern about Bridgepoint is that the company is directly violating DOE regulations
surrounding "Safe Harbors" for incentive compensation payments to employees. Bridgepoint employees
who enroll students are compensated solely and exclusively for their sales work.
Bridgepoint's business relies upon paying its massive sales force for enrolling individuals who have little
to no ability to evaluate their alternatives or the cost and benefit of a Bridgepoint education.
Bridgepoint sets its tuition fees to be significantly lower than other large, publicly-traded companies
operating for-profit online universities. The tuition fees of Argosy University, the University of Phoenix,
Secretary Duncan
May 4, 2010
Page 2 of2
and DeVry University are 37% to 55% higher than those of Bridgepoint's Ashford University. See Table
3.
Even with significantly lower tuition fees, Bridgepoint consistently spends more tuition revenue on
marketing than on actual instruction. See Table 2. Bridgepoint spent more than $44 million on marketing
and promotions in the quarter ended March 31, 2010. This was nearly triple the amount that Bridgepoint
spent for the same period of2008. This increase was during the time ofthe compliance audit of Ashford
University conducted by OIG.
Bridgepoint also devotes a far lower portion of its tuition revenue to providing instruction than similar
companies. See Table 3. Bridgepoint devotes a far, fur lower portion of tuition fees to instruction than
more traditional and reputable not-for-profit educational institutions.
While other companies operating for-profit, online universities have been able to obtain deferential
treatment from the DOE, we believe that Bridgepoint's abuse of regulations surrounding Title IV funding
and of the intent of the HEA is far more egregious than even any of its for-profit ·counterparts.
Bridgepoint evidences aggressive enrollment tactics, illegal incentive compensation, and an incredibly
low portion of tuition devoted to instruction. ·Even in an industry built on abuses of a governmerit
program, Bridgepoint's irregularities stand out.
The DOE has the authority not only to pursue typical sanctions, but to conduct a more broad-based review
of abuse by Bridgepoint of DOE regulations and of the intent of the HEA and to issue sanctions more
much more severe than the sanctions the DOE has typically imposed upon for-profit, online education
providers. lbe DOE's past sanctions of for-profit education providers have fuiled to remediate harm and
have had the contrary effect of providing incentive to engage in the abuses discussed above.
On a personal note, for over a decade, I have been an adjunct professor of business at various community
and four-year colleges, and I know firsthand the effects that a lack of financial aid has on students' ability
to obtain a college degree within a reasonable amount of time. Many students find themselves working
full-time or part-time jobs just to fund a portion of their higher education. The enrichment of these
private enterprises at the expense of American students who are this country's future is deplorable.
Sincerely,
. '"
'aniel RodrigUez
~~f·t.
Director
cc: Peter Cunningham, Assistaot Secretary Robert Shireman, Deputy Undersecretary

Office of Communications and Outreach Office ofthe Under Secretary
Kathleen S. Tighe, Inspector General David J. Aspling, Assistant Special Agent in Charge
.Office of the Inspector General Office ofthc Inspector General
David Bergeron, Director of Policy, Howard Sorensen, General Counsel

Planning and Innovation Office ofInspector. General
Office of Postsecondary Education
Enclosures
Ji_ --~~~~~~-- ___ ' n
Bridgepoint Education, Inc. (BPI)

Table 1
Analysis of Change in Student Population and Marketing and Promotional Co
2010 2009 200. 2007
31-Mar 31-Dec 3O-Sep 3O-Jun 3 31-Mar 31~Dec 3O-Sep 30-Jun 4 , 31~Mar 31-Dec 30-Sep 30-Jun 31~Mar
Beginning of Period Student Population 53,688 54,894 45,504 42,025 31,558 30,547 22,607 19,509 12,623 12,716 8,666 6,856 4,471
1
Plus: New Students 24,300 10,600 19,500 14,600 16,800 7,100 12,600 8,100 ~800 n/a n/a n/a n/a
Total Number of Available Students 77,988 65,494 65,004 56,625 48,358 37,647 35,207 27,609 21,423
Less: End of Period Student Population 65,788 53,688 54,894 45,504 42,025 31,558 30,547 22,607 19,509 12,623 12,716 8,666 6,856
Calculated Drops and Graduates: 12,200 11,806 10,110 11,121 6,333 6,089 4,660 5,002 1,914
Drops and Graduates ~ % of Beginning Population 23% 22% 22% 26% 20% 20% 21% 26% 15%
2
Average Student Population (ASP) During Period 59,738 54,291 50,199 43,765 36,792 31,053 26,577 21,058 16,066 12,670 10,691 7,761 5,664
ASP Growth During' Period 10% 8% 15% 19% 18% 17% 26% 31% 27% 19% 38% 37% n/a
Net Increase (Decrease) in No. of Students 12,100 (1,206) 9,390 3,479 10,467 1,011 7,940 3,098 6,886 (93) 4,050 1,810 2,385
Analysis of Marketing and Promotional Expense:

- Per New Students 1;819 3,821 1;872 2,719 1,732 3,732 1,675 2,272 1,716 n/a n/a n/a n/a
Per Net Increase in No. of Students 3,654 n/m 3,887 11,411 2,780 26,212 2,657 5,939 2,193 n/m 2,395 4,751 2,642
(1) Disclosed in Bridge Point's quarterlY earnings releases.

(2): Average Student Population defined as the arithmetic mean of disclosed total student population at beginning and end of period.
(3): BPI's IPO was completed on April 20, 2009.
(4): The U.S. Department of Education's Office of Inspector General began a compliance audit of BPI's Ashford University in May 2008,' covering the period from March 10, 2005 to June 30, 2009.
Updated 5/3/10
--------
Bridgepolnt Education, Inc. (BPI)

Table 2
Revenue, Instructional Cost, and Marketing Expense
2010 2009 2008 2007
(tn Millions) 31-Mar 31.Dec 30-Sep 30-Jun 31_Mar 31-Dec 30-Sep 3D-Jun 31-Mar 31_Dec 30-Sep 30-Jun 31-Mar
Revenue 156.1 131.8 127.4 110.9 84.3 69.1 60.3 49.9 38.9 31.2 24.2 16.6 13.7
Instructional Costs and Services1 39.4 36.S 33.1 28.4 22.1 20.7 16.4 12.7 12.9 10.7 7.8 6.1 5.3
Bag Debt Expense (included in Instructional Costs) 7.9 7.3 6.8 4.6 4.5 4.6 3.5 0.8 3 old old old old
Adjusted Instructional Cosli' 31.5 29.2 26.3 23.8 17.6 16.1 12.9 11.9 9.9 01, 01, 01' 01,
Marketing and Promotional Expense 44.2 40.5 36.5 39.7 29.1 26.5 21.1 18.4 15.1 11.5 9.7 8.6 6.3
Per Average Student Population (ASP!

Revenue I ASP' 2,613 2,428 2,538 2,534 2,291 2,226 2,268 2,372 2,424 2,463 2,264 2,139 2,419
Instruc1jonal Cost! ASP 660 672 660 648 602 669 616 605 606 845 730 786 936
Gross Profit 1ASP During PeriocP 1,954 1,755 1,878 1,886 1,689 1,557 1,652 1,767 1,618 1,616 1,538 1,352 1,495
Marketing and Promotional Expense 1ASP 740 746 727 606 791 855 792 872 938 608 607 1,108 1,112
As % of Revenue"
Instructional Cost as % of Revenue 25.2% 27.7% 26.0% 25.6% 26.2% 30.0% 27.2% 25.5% 33.2% 34.3% 32.2% 36.7% 38.7%
Adjusted Instructional Cost as % of Revenue 20.2% 22.2% 20.6% 21.5% 20.9% 23.3% 21.4% 23.8% 25.4% 01, 01, 01, 01,
Marketing and Promotional Expense as % of Revenue 28.3% 30.7% 28.6% 35.8% 34.5% 38.4% 35.0% 36.9% 36.8% 36.9% 40.1% 51.8% 46.0%
(1): Instructional Cost and Services includes bad debt expense.

(2): Adjusted Instructional Cost defined as instructional cost less bad-debt expense.
(3): Average Student Population defined as the mean of disclosed lotal student population at beginning and end of period.
(4): Revenue divided by Average Student Population (ASP), i.e. revenue per student.
(5) Gross Profit equals revenues less InstruclionaJ cost without any adjustments to remove bad debt expenses that Bridgepoint includes in Instructional Cost.
Updated 513110
.__. ----- ---
Bridgepoint Education, Inc. (BPI)

Table 3
Tuition Fees Per Undergraduate Credit Hour for BPI's Ashford University and Comparables
University (ticker) Iuition Fee % above (below) Ashford

Ashford University (BPI) 372
DeVry University (DV) 575 55%

University of Phoenix (APOL) 530 42%
American InterContinental University (CECa; 390 5%
Strayer University (STRAy 353 -5%
Argosy University (EDMC) 510 37%
Average TUition 455 22%
! ..__.._•. •• "_____
~ _ •. __••_. ~ '__.•• ••• , . • ••• ,.. •__• ·•__••••• ~ ., .. _.u._..__.. ._" .~ ... .._".... . .__,_.___ ...__ ,____ . . --- -,--,', ._._- --- -,-'.-.- - '--- ------- ------------._--~--,- -'-" -- .,,,, ,._~~- -- -- --._-- ... ----',
1: The American InterContinental University tuition fee listed is for non-degree students taking undergraduate level classes. ,r
I,
2: Strayer charges $1,590 per course for undergraduate part-time students; all courses are 4.5 credit hours.
* CPLA and APEI are not included, as Capella has a complicated fee structure, varying by undergraduate course level, and APEI caters more to the military community than Title IV
recipients.
i
L_. . ., __ ~ . ~_... ~_,, .._... _ ._- - _... _---_ - _ _.-..- ----.._---_.._..__..- __ __.----_.- ~-.---_ --~ .._--_.... - --_.- _---_ _-----_ _... ._---_._----j
Prepared 4/19/10
- -----.·0 _. ." ,,~ .._ .-- .. _._-_.

Sent: Wednesday, June 16, 20102:46 AM
To: Kanter, Martha; Shireman, Bob; Kvaal, James; Yuan, Georgia; Gomez, Gabriella; Arsenauit, Leigh; Hamilton, Justin; Madzelan, Dan;
Manheimer, Ann; Dannenberg, Michael; Smith, Zakiya
Cc: Lauren Asher
SUbject: FW: Embargoed: Statement on proposed higher ed rules -
Attachments: TICAS neg reg statement 6_16_1 O.doc; image001.jpg
~h'e'~n:stg{~t(> il)t
college &-
aCcess .success
STATEMENT OF PAULINE ABERNATHY Contact: Edie Irons
Vice President, the Institute for College Access & Success 510/318-7902
Gretchen Wright
EMBARGOED until 12am EDT 202/371-1999
June 16, 2010
Proposed Education Department Rules Would Curb Financial Aid Fraud and Abuse
Final Gainful Employment Definition Needed by November 1
"Today the U.S. Department of Education proposed important new regulations aimed at ensuring that taxpayer dollars are spent appropriately and effectively on
federal student aid. The rules cover 13 of the 14 'program integrity' issues that were part of a negotiated rulemaking process begun last year.
"We are especially pleased that the proposed rules bring the Department's policies back in line with federal law banning 'incentive compensation.' For the past
eight years, a dozen loopholes have allowed schools to pay their employees and contractors based on the number of students they enroll, how many students take
out loans, and other practices clearly prohibited by law. These -loopholes have led to high-pressure and deceptive sales tactics that can leave vulnerable
consumers with staggering debt and no way to pay it back_
"In the past few years, large for-profit colleges have come under increasing scrutiny and paid large settlements over charges of improper incentive payments, false
claims of job placement rates and salary figures for their graduates, and other recruitment-related abuses. Recent investigations have found career colleges that
aggressively recruit at homeless shelters or falsify test results to make unqualified students eligible for federal grants and loans. These new rules will help protect
both consumers and taxpayers from such exploitation.
"Other topics covered by the new proposed rules also have significant implications for students, colleges, and taxpayers, such as how schools are required to
verify students' eligibility for aid and when aid must be disbursed. The proposed rules also include some new disclosure requirements for career education
programs. We will address these and other issues in more detail during the 45-day comment period.
1
---- - - - - - - --- --- - - - - - - - - - - --------- - - - - -------- -- --- - - _._- -
"Secretary Duncan said today that the Department will issue the draft regulations on the remaining program integrity issue, the definition of gainful employment,
shortly. We urge the Department to do so in time for these rules to be finalized by November 1 and go into effect in 2011. Students and taxpayers shouldn't have
to wait yet another year to be protected from career education programs that over-charge and under-deliver. Under federal law, career education programs may
not participate in federal student aid programs unless they 'prepare students for gainful employment in a recognized occupation,' but there is currently no definition
of gainful employment. Last month we and more than 30 other organizations that advocate for students, higher education, consumers, and civil rights sent a letter
urging Secretary Duncan to propose a meaningful definition of gainful employment to effectively protect students and taxpayers."
# # # #
An independent, nonprofit organization, the Institute for College Access & Success works to make higher education more available and affordable for people ofall backgrounds. The Institute's
Project on Student Debt works to increase public understanding ofrising student debt and the implications/or our families, economy, and society. For more information see
www.projectonstudentdebt.organdwww.ticas.org.
2
the institute for
college &
access success
STATEMENT OF PAULINE ABERNATHY Contact: Edie Irons
Vice President, the Institute for College Access & Success 510/318-7902
Gretchen Wright
EMBARGOED until 12am EDT 202/371-1999
June 16, 2010
Proposed Education Department Rules Would

Curb Financial Aid Fraud and Abuse
Final Gainful Employment Definition Needed by November 1
"Today the U.S. Department of Education proposed important new regulations aimed at ensuring that taxpayer
dollars are spent appropriately and effectively on federal student aid. The rules cover 13 ofthe 14 'program
integrity' issues that were part of a negotiated rulemaking process begun last year.
"We are especially pleased that the proposed rules bring the Department's policies back in line with federal law
banning 'incentive compensation.' For the past eight years, a dozen loopholes have allowed schools to pay their
employees and contractors based on the number of students they enroll, how many students take out loans, and other
practices clearly prohibited by law. These loopholes have led to high-pressure and deceptive sales tactics that can
leave vulnerable consumers with staggering debt and no way to pay it back.
"In the past few years, large for-profit colleges have come under increasing scrutiny and paid large settlements over
charges of improper incentive payments, false claims ofjob placement rates and salary figures for their graduates,
and other recruitment-related abuses. Recent investigations have found career colleges that aggressively recruit at
homeless shelters or falsify test results to make unqualified students eligible for federal grants and loans. These new
rules will help protect both consumers and taxpayers from such exploitation.
"Other topics covered by the new proposed rules also have significant implications for students, colleges, and
taxpayers, such as how schools are required to verify students' eligibility for aid and when aid must be disbursed.
The proposed rules also include some new disclosure requirements for career education programs. We will address
these and other issues in more detail during the 45-day comment period.
"Secretary Duncan said today that the Department will issue the draft regulations on the remaining program integrity
issue, the defmition of gainful employment, shortly. We urge the Department to do so in time for these rules to be
finalized by November I and go into effect in 201 I. Students and taxpayers shouldn't have to wait yet another year
to be protected from career education programs that over-charge and under-deliver. Under federal law, career
education programs may not participate in federal student aid programs unless they 'prepare students for gainful
employment in a recognized occupation,' but there is currently no definition of gainful employment. Last month we
and more than 30 other organizations that advocate for students, higher education, consumers, and civil rights sent a
letter urging Secretary Duncan to propose a meaningful definition of gainful employment to effectively protect
students and taxpayers."
# # # #
An independent, nonprofit organization, the Institute for College Access & Success works to make higher education more
available and affordable for people ofall backgrounds. The Institute's Project on Student Debt works to increase public
understanding ofrising student debt and the implications for ourfamilies, economy, and society. For more information see
www.proiectonstudentdebt.organd www.ticas.org.
______________ _ - _ •__. ._n ._______ _ _ .__.... ....,, ... "' _ .._---------------.

Sent: Monday, April 19,2010 11:20 AM
To: Kanter, Martha; Shireman, Bob; Arsenault, Leigh; Gomez, Gabriella; Manheimer, Ann; Madzelan, Dan; Kvaal, James R.; Gordon,
Robert M.
Cc: Debbie Frankie Cochrane; Lauren Asher; Connie Myers
SUbject: Analysis of CCA paper on gainful employment
Attached is a brief TICAS memo to interested parties on the Career College Association-commissioned paper on gainful employment.
It notes that their own analysis found that:
• Students from for-profit colleges are much more likely to default on student loans. According to their own analysis, even after controlling
for demographic differences among students, for-profit college students are twice as likely as other college students to default;
• Few for-profit programs would be affected by proposed definition. Their own analysis found that only a small minority of for-profit
programs currently do not meet the proposed 8-percent median debt-to-income ratio test (although those programs currently enroll 1/3 of their
students); and
• No loss of student access to college. Their study indicates that other colleges would be well positioned to absorb the students who might have
enrolled in programs that failed to meet the test-and would serve them much better.
~ •
TICA5 memo on
:RA Report 4_15_..
Pauline Abernathy
Vice President
1
MEMO
TO: Interested Parties

FROM: The Institute for College Access & Success
DATE: April 15, 2010
.RE: Charles River Associates Report on Gainful Employment prepared for the
Career College Association
The Career College Association (CCA) recently commissioned a study of how their·
institutions and programs would fare under an Education Department proposal for defining
gainful employment.! As a condition of participating in federal student aid programs,
federal law has long required most programs offered by for-profit institutions and any
program of less than two years to "prepare students for gainful employment in a
recognized occupation." Yet there is no official definition of "gainful employment." With
enrollment in these programs rising rapidly-now accounting for nearly I in 4 federal Pell
Grant and federal student loan dollars-the Obama Administration has proposed defining
gainful employment.
Using data provided by CeA and not publicly available, Charles River Associates (CRA)
found:
• Students from for-profit colleges are much more likely to default on student loans.
According to their own analysis, even after controlling for demographic differences
among students, for-profit college students are twice as likely as other college students
to default;
• Few for-profit programs would be affected by proposed definition. Their own
analysis found that only a small minority of for-profit programs currently do not meet
the proposed 8-percent median debt-to-income ratio test; and
• No loss of student access to college, Their study indicates that other colleges would
be well positioned to absorb the students who might have enrolled in programs that
failed to meet the test-and would serve them much better.
Their own findings therefore further support the Administration's proposing a clear and
enforcable definition of gainful employment that will prevent taxpayer dollars from being
used to subsidize programs that leave students worse off than before-deep in debt and no
better prepared for gainful employment.
Twice as Likely to Default

Demographic factors, such as income, gender, race and family size, playa role in the
likelihood of defaulting on federal student loans, but they do not tell the whole story. CRA
controlled for these and other factors to determine the effect of a student's school on the
likelihood of defaulting, and found that students attending for-profit colleges were twice as
1 "Report on Gainful Employment," prepared by Charles River Associates for the Career College
Association, April 2, 2010, including Executive Summary dated March 29, 2010.
likely to default as students at other colleges. 2 Even if all students at for-profits completed
their academic programs, CRA estimates that about 12 percent of their students would still
default on their student loans, compared to about six percent at community colleges after
controlling for demographic differences.
Few Programs Would Be Affected

Using CCA data on student graduation, tuition charges, and indebtedness for more than
10,000 academic programs, CRA found that 82 percent of for-profit school programs
would currently pass the Department's proposed 8-percent median debt-to-income test.
The Department's proposal is intended to ensure that the majority of graduates of a
particular program are able to repay their loans without hardship, and more than four out of
five for-profit programs would meet this standard. The Department has also offered two
alternative ways for colleges to demonstrate that their programs are sufficiently preparing
students for gainful employment, but the CRA report does not estimate the effects of these
alternatives. It is possible that some or many programs will meet one of these alternative
gainful employment standards, narrowing the share of affected programs even further.
No Loss of Student Access

Colleges with programs that cannot demonstrate that they are adequately preparing
students for gainful employment under any of the proposed standards will have several
options. They could improve their progtam quality so that students are better prepared for
employment opportunities, or they could reduce what they charge so that students are
better able to repay what they borrowed to attend the school. This is similar to what
happened when the Department first began enforcing sanctions for very high cohort default
rates. In response, many schools adjusted their practices to lower their default rates so the
schools would remain eligible for federal student aid, and the share of students defaulting
on their student loans decreased substantially.
Even if some schools choose to eliminate, rather than change, a program, students
currently enrolled in these programs will have plenty of options, including enrolling in
public, private non-profit, or the vast majority offor-profit programs that meet the
Department's proposed standards. While enrollment has increased in all college sectors,
state budget shortfalls and shrinking endowments have limited many public and nonprofit
colleges ability to increase enrollment. Given that the vast majority offor-profit college
programs currently meet the Department's gainful employment standard, and the sector
says it has the ability to rapidly expand enrollment, students will still have plenty of
options, but at a lower cost and greater benefit. Taxpayers and the economy will benefit as
well from lower student default costs and a better-trained workforce.
2 Figure 7 in the eRA analysis shows that students at private not-for-profit 2-year or less institutions were
less likely than for-profit students to default, but more likely than students at other types of colleges. We
exclude them here because only one percent of students in the Beginning Postsecondary Students
Longitudinal Study (BPS: 96/98/01), which eRA used for its analysis, attended these types of colleges.
2
- -------- -------------_.- '-------"' ..... ------- - - ---- ----- ----- - -- - -------._--

Sent: Wednesday, April 14, 2010 10:56 AM
To: Kanter, Martha; Madzelan, Dan; Gomez, Gabriella; Arsenault, Leigh; Manheimer, Ann; Shireman, Bob; Dannenberg, Michael;
Bergeron, David; Rogers, Margot; Kvaal, James R.; Plotkin, Hal
Cc: Lehr, Susan M.; Debbie Frankie Cochrane; Lauren Asher; Connie Myers
Subject: Florida College Presidents Itr in support of Gainful Employment proposal
Attached is a strong letter from the 28 Florida community and state college presidents urging the Secretary to move forward with a
strong gainful employment definition. The letter was mailed on Monday and copies are being sent to the FL delegation as well.
For those who may not have seen it before, I have also attached the excellent two-page summary by Susan Lehr'at Florida State
College of the recent report by the Florida legislature's policy office comparing Florida public and for-profit college costs and student
outcomes. The report focuses on five programs and among its conclusions are that the public programs cost both students and
taxpayers less than for-profits, are much more likely to be accredited, and their students have higher pass rates on licensure and
certification tests.
-m ~
':..-
.. '"-",,"'
"
FL cOP Letter to FL Career Ed

Secretary Dun... IPPAGA Highlights
Pauline Abernathy
Vice President
1
FLORIDA COLLEGE SYSTEM
COUNCIL OF PRJESIDENTS
Central Florida Community College
Dr. Charles R. Dassauce, Chair
Brevard Community College
Dr. James A. Drake
Broward College
Mr. David Armstroilg Jr. April 12, 2010
i Chipola College
Dr. Gene Prough
Daytona State CoUeBe The Honorable Arne Duncan
Dr. D. Kent Sharples Secretary
. Edison State College U.S. Department of Education
Dr. Kenneth 1'; Walker 400 Maryland Ave. SW
Florida Keys Community College Washington, DC 20202
Dr. Jill Landesberg-BoyJe
Florida State College Dear Secretary Duncan:
at Jacksonville
Dr. Steven R. Wallace
Gulf Coast Community ColIeBe
As the presidents of 28 community and state colleges of the Florida
Dr. James A. Kerley College System, which prOVide education and training for over 924,000
Hillsborough Community College students, we are writing to express our support for making the Department
Dr. Gwendolyn W. Stephenson of Education regUlations more consistent with the program integrity
.Indian River State College provisions in Title IV of the Higher Education Act. Specifically, we urge
Dr. Edwin R Massey you to ensure that the draft regUlations the Department is preparing for
Lake City Community College public comment this summer contain a clear definition of "gainfUl
Dr. Charles W. Hall employment." This will help protect students from high-pressure and
Lake-Sumter Community College deceptive sales tactics for educational programs that are of little to no·
Dr. Charles R. Mojock benefit to them, and will ensure that taxpayer dollars do not subsidize such
Miami Dade College practices and prog rams.
Dr. Eduardo J. PadrOn
North Florida Community College
Mr, Johu D. Grosskopf
We support the effort by the Department to ensure that when students
graduate, they are not so burdened with debt that they cannot participate
Northwest Florida State College in the economic .recovery of our nation. We want our students to be able
Dr. Jill J. White, lnterim President
to buy a house, a car and support their families. Repayment of their
Palm Beach Community College
Dr. Dennis P. Gallon . student loans should not require a disproportionate amount of their
income. The "gainfUl employment" prOVision offered by the Department is
Pasco-Hernando Community College
Dr. Katherine M. Johnson a fair measure that will help prevent students from borrowing more money
Pensacola Junior College
than they could realistically repay, given the expected starting salary in the
Dr. Charles E. Meadows occupation for which they trained.
Polk State College
Dr. Eileen Holden We also urge the Department to carefully consider how debt is measured
St, Johns River Community College across schools. We request that debt from other schools be excluded in
Mr. Joe H. PickeIls calculations so that there will be no disincentive for our low cost public
St Petersburg College colleges to accept students who transfer to us with high debt. We want to
Dr. Carl M. Kuttler Jr. be able to help students obtain a credential and a good job without being
Santa Fe College punished for debt incurred while that student attended other institutions.
Dr. Jackson N. Sasser We support the idea that debt incurred at schools under the same control
Seminole Community College . structure should be included in the measure of gainful employment. This
Dr. E. Ann McGee
will ensure that students in these schools cannot be moved from one
South Florida Community College school or program to another to bring down student debt in a particular
Dr. Nonnan L. Stephens Jr.
school or program.
State College of Florida
Manatee·Sarasota
Dr. Lars A. Hather
Thllabassee Community CQllege

Dr. WIlliam D. Law Jr.
3001 S.w. College Road. Ocala, FL34474-4415
Valencia Community College
Dr. Sanford C. Shugart 352-873-5835 epAJ<: 352-873-5847 e dassancc@gc£edu
The Honorable Arne Duncan April 8, 2010
Debt-related measures of gainful employment should also include private

loans that are known to the school. The exclusion of private loans could
create an incentive for some schools to promote private loans before
students have exhausted their federal loan options. Again, this provision
will help protect students from high interest rates and burdensome debt.
We are heartened to see the U.S. Department of Education considering

proposed regUlatory changes that will strengthen protections for students
seeking the education and training they need to improve their fives and
provide for their famifies. We look forward to reviewing the proposed
regulatory changes that are expected sometime· this summer, and
commenting on those that will affect our colleges and students.
Sincerely,
0'-c.72 • ~~""""""-.---
Charles R. Dassance
Chair
CRDllt
c - Dr. Willis Holcombe, Chancellor - Florida College System

Presidents, Florida College System
Public Career Education Programs Differ From Private Programs on Their Admission
Requirements, Costs, Financial Aid Availability, and Student Outcomes
Report No. 10-18 by the Office of Program Policy Analysis & Government Accountability (OPPAGA)
An office of the Florida Legislature !:J11p://www.ol2Paga.state.fl.us/Summary.aspx?reportNum=10-18
Highlights from a Community and State College Perspective on the OPPAGA Report
By Susan M. Lehr, Florida State College at Jacksonville
Many important differences exist between public vocational schools/colleges and private for-profit
schools. Public institutions exist to provide affordable access to workforce training for Florida's citizens.
Private for-profit institutions exist to make money for their share holders and owners. Public
institutions have transparency of finances and education policies directed by the Legislature. Public
institutions provide: lower costs for students and the state, uniform statewide quality standards, and
high accountability through third party verification reports to state government. These high standards
protect the taxpayer's investment and ensure quality programs that meet established standards for
the express benefit of Florida's citizens and employers. This document addresses three key areas of
the OPPAGA report, which contrasts the five programs studied between the two sectors.
~gnificant Cost Savings for Students and Families
• Public institutions fulfill their state mission to provide glfordable access to workforce education
• There are significant savings to students and families for tuition and fees when the student attends
a public institution instead of a for-profit institution as demonstrated by the OPPAGA report:
o 75% savings for Massage Therapy
o 70% savings for Cosmetology Programs
o 82% for Patient Care Technicians Programs
o 38% for Phlebotomy Programs
o 16% for Nursing Assistant
• Less expense helps prevent crippling debt for students and their families
~nificant Cost Savings to the State/Tax~
• Public institutions still cost less even when the state subsidy and student costs (tuition and fees}
are combined; 3 out of the 5 programs studied were significantly less costly than the private
schools.
o Massage Therapy's total cost is $5,077 less than private for-profits per student
o Cosmetology Program's total cost is $2,726 less expensive
o Patient Care Technician's total cost is $2,254 less expensive
o Phlebotomy's total cost is $837 more than the privates per student
o Nursing Assistant's total cost is $46 more
Why is the total cost for Phlebotomy and Nursing Asst. slightly more than private institutions?
These are very small programs that are usually part of larger programs that require more
expensive faculty with higher level credentials; those costs are captured here. For example,
most public institutions offer licensed Practical Nursing or Registered Nurse and other medical
programs that require faculty with Bachelors or Masters Degrees. These faculties are used to
teach these small programs rather than hiring more staff. For comparison, usually the only
requirement to teach "nursing assistant" is a high school diploma, experience and a license.
• An additional cost factor for these 5 programs includes accreditation (see chart below); higher
standards cost more. Further, pass rates on licensure and certifications were also higher for public
programs (see exhibit 9 in OPPAGA report).
Public Programs Private For-Profit

Program Accredited Programs Accredited
Massage Therapy 100% 67%
Cosmetology 92% 63%
Phlebotomy 95% 26%
Patient Care Technician 89% 44%
Nursing Assi.stant 83% 13%
• Another difference between public and private institutions is that 100"/0 of all public institutions
participate in FETPIP, which is the state's third party verification system to report job placement
and wages earned. Very few of the for-profit institutions participate (less than 13%), instead they
rely upon institutional self-report. This is why OPPAGA used surveys rather than the FETPIP data.
Admission and Completion Standards
• State policy for public institutions requires students to have basic skills in order to graduate.
o All students are tested before admission regardless of the credentials they bring. This is to
determine ifthey can function at the grade level at which the program is taught.
o Students are usually admitted if they test within 2 grade levels; beyond that they cannot
catch up to pass the basic skills test at the level set by the state for their program of study.
This is required by the end of their program in order to complete/graduate.
th
o For example, in Patient Care Technician the instruction is offered at the 10 grade level, so
th th
a student may enter with an 8 - 9 grade functioning level. However, the student is
required to obtain academic remediation (often provided within the context of their
th
program - math related to medication calculations). They must pass at the 10 grade basic
skills level before a public institution can allow them to graduate. There are a few
exceptions, such as for apprenticeship programs.
o Students may leave programs at an occupational completion point before completing the
program. For example, in Patient Care Technician, a student might leave to obtain lesser
skilled jobs (nurse aide, advanced home health aide, patient care assistant) prior to
completion. These public students could not be counted as completers/graduates.
---- ---- - -------- , ----- - - ---- --- -- - - - , - - - ---, - ,--------------- , - - - _. -----. - - -
From: Pauline Abernathy [pabernathy@ticas,org]

Sent: Tuesday, May 11, 2010 10:37 AM
Subject: Inside Higher Ed on banker support for school certification of private loans
Today's Inside Higher Ed (below) reports on the attached letter from lenders, financial aid administrators and students urging the
Senate financial reform bill to require that all private loans be certified by schools. The Consumer Bankers Association, EFC, NCHELP
and more than 40 groups representing schools, students and consumers are now on record in support of the Senate adding this
common-sense policy. With lenders, schools and students all in agreement, we hope the Senate will act on this iSSue.
--m
NASFAA CBA
!CAS SchoolCert It
Unlikely Bedfellows on Student Loans

Inside Higher Ed, May 11, 2010
http:.f.fwww.insidehighered.com.IIayout.fset.fprint.fnews12010.f05.f11.fcertify
Maybe we can all get along,
An unusual coalition of lending, financial aid, and student groups have teamed up to urge members of Congress to require providers of non-
federal student loans to get colleges' approval before they make such loans to students. In a letter last week to leaders in the Senate, three
groups oflenders, two student groups and the National Association of Student Financial Aid Administrators asked Senate leaders to include
such a provision in legislation (S. 3217) they are drafting to reform the country's financial system.
The proposal, a version of which was incorporated into parallel legislation that the House of Representatives passed last fall, is designed to
assure that borrowers turn to more-expensive (and riskier) private student loans only after they've exhausted federal, state, and
institutional grants, or at least less costly federal student loans.
"Requiring school certification that confirms students' attendance and loan eligibility -- as is currently required on all federal student loans --
discourages unnecessary borrowing which could lead to delinquency and default during repayment," the groups say in the letter. "It also
gives financial aid administrators an additional opportunity to counsel students about less expensive forms of financial aid and ensures that
1
-.-" -'--- ----- -------------"-, -- ------- ",._ .. ,._-- ---------------_.~-- --------------- ... _---'--------- --------------.-."._- ,,---- __
. ._-------------.., , - - - - - - - -
students do not inadvertently disqualify themselves for less costly aid. Simply put, school certification will help ensure that private loan
borrowers maximize their ability to borrow federal loans and only turn to private loans after exhausting federal loan eligibility."
The letter was signed by Consumer Bankers Association, the Education Finance Council, and the National Council of Higher Education Loan
Programs; the National Association of Student Financial Aid Administrators; and the Institute for College Access & Success and the U.S.
Public Interest Research Groups.
It is not unheard of for banks and other lenders to be on the same side of issues as financial aid officers or advocates for students; a roughly
similar coalition developed around the federal government's Z007 creation of a repayment system based on borrowers' post-graduation
income, for instance.
But recent years have seen much more conflict than collaboration among lenders, students and financial aid officers, most evident in the fact
that just two years ago, when Congress renewed the Higher Education Act, lenders were deeply divided over the idea of requiring college
officials to "certify" that a student needed the money he or she was preparing to borrow from a private loan provider.
Because of the opposition, which came mostly from lenders who marketed their loans directly to student borrowers, the Z008 legislation
instead required students themselves to obtain much of the same information (about their cost of attendance, the amount of federal aid they
qualify for, etc.) that the original proposal would have mandated.
So what has changed from two years ago? A better question might be what hasn't.
The most obvious difference in the student loan market is that Congress passed legislation this spring that will end lending through the
bank-based Federal Family Education Loan Program. Policy makers are hopeful that ending the competition between the federal
government's two student loan programs -- whatever its other pros and cons, which were in the eye of the beholder -- will end the deeply
divisive and distracting enmity that has dominated much of the federal conversation about student loans for nearly two decades, perhaps
opening the door to much more cooperation among parties in the financial aid world.
The other enormous shift that has occurred is in the student loan market itself. Two years ago, there still appeared to be a vibrant market for
direct to consumer student loans, so lenders that purveyed such loans successfully argued that channeling students through their financial
aid offices could result in favoritism toward lenders with which financial aid officers had cozy relationships. But the bottom has more or less
dropped out of the direct-to-consumer market for private student loans, as evidenced by the fact that one of the primary opponents of the
certification process, MyRichUncle, is now out of business.
And Education Department data published last summer showing a sharp rise in the proportion of college students with private student
loans, and in the proportion of private loan borrowers who had taken out those loans without first borrowing the maximum possible (or
sometimes any at all) in lower-cost federal loans, offers persuasive evidence that federal policy lags what's happening in the market, said
Pauline Abernathy, vice president at the Institute for College Access & Success.
2
·S·F·
NATIONAl. ASSOCIATION OF STUDENT FINANCIAl. AID ADMINISTRATORS
* FROM THE OFFICE OF THE PRESIDENT AND CEO *
May 7, 2010
I The Honorable Harry Reid

I Majority Leader
Washington DC, 20510
The Honorable Mitch McConnell

Minority Leader
Washington DC, 20510
Dear Senators Reid and McConnell:

("1
~",~;:;,
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On behalf of the National Association of Student Financial Aid Administrators and the undersigned ,t,
organizations, we urge you to include a vitally important student loan-related provision as part of -.
'-,«.,
",,-,
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the Restoring American Financial Stability Act of2010 (S. 3217). In December, the U.S. House of
Representatives passed the Wall Street Reform and Consumer Protection Act of 2009, which t:J
rj
"
included a provision (Sec. 4818) that would require private educational lenders to obtain ,~",
,"
institutional certification prior to making loans to students. It is vital that the Senate include a ;>".
'.',','
similar provision in its bill that would require school certification as a replacement for provisions in ':-,
i'')''1
current law requiring a complex borrower self-certification procedure. ,.~"\
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The goal of school certification is simple: Assure that borrowers use private education loans ouly '"
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after exhausting less expensive federal, state, and institutional aid. ()
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Requiring school certification that confirms students' attendance and loan eligibility - as is ('.""
<-~c;:'
currently required on all federal student loans - discourages unnecessary borrowing which could <.,\
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lead to delinquency and default during repayment. It also gives financial aid administrators an ,""
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additional opportunity to counsel students about less expensive forms of financial aid and ensures "''...,"•"
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that students do not inadvertently disqualifY themselves for less costly aid. Simply put, school ..., "
certification will help ensure that private loan borrowers maximize their ability to borrow federal
loans and ouly turn to private loans after exhausting federal loan eligibility.
School certification is in the interest of all stakeholders involved in private education loans,
especially borrowers. Student loan providers also support full school certification on private
education loans because they receive school-certified assurance that students are taking on
permissible debt levels tied to a specific period of enrollment. Research has found that school-
certified loans also have significantly lower default rates than uncertified loans. All stakeholders -
schools, lenders, and most importantly students - stand to benefit from private loan certification.
PHONE: 202.785.0453 FAX: 202.785.1487 WE8: www.nasfaa.org

1101 CONNECTICUT AVE NW, 5UITli 1100, WASHINGTON, DC 20036-4303
c..,
NASFAA May 7, 2010
We hope you will take the opportunity in S. 3217 to adopt this important amendment that helps
students and their families meet the challenge of financing a higher education. Please contact us if
we can provide you with any additional information on this important matter.
Sincerely,
C(fea.v ;,;. ~,,;;)
Joan H. Crissman
Interim President & CEO
NASFAA
CC: Senators Christopher Dodd, Richard Shelby, Tom Harkin and Michael Enzi
On Behalf of:
Consumer Bankers Association (CBA)

Education Finance Council (EFC)
National Association of Student Financial Aid Administrators (NASFAA)
National Council of Higher Education Loan Programs (NCHELP)
The Institute for College Access and Success (TICAS)
U.S. Public Interest Research Groups (US PIRG)
2
- - --- --- ----- --- - ._-- - - - -- --- -------------------------- ------

Sent: Tuesday, June 22, 2010 9: 19 PM
To: Kvaal, James; Shireman, Bob; Arsenault, Leigh; Gomez, Gabriella; McGuire, MaryEllen C.
SUbject: FW: Senate counteroffer rejecting mandatory cert provisions!
Senate financial reform conferees rejected the House offer on mandatory private loan certification and backup enforcement authority for
Sallie Mae Bank and other banks under $10 billion. I'm looking at what they did on school loans. Has the Administration
weighed in?
~
1EJ
Senate Title X
Counteroffer 6 ...
Pauline Abernathy
Vice President
TICAS: 510.318.7900' Direct: 510.318.7903
1
** Senate Counteroffer **
REVISED
June 22, 2010
Title: Title X
Matter: Bureau of Consumer Financial Protection
The Senate accepts the following House proposals for amendments to the Base text:
I. Recede to Senate on provisions relating to the structure of the Consumer Financial

Protection Bureau (Bureau). House offer #1.
2. With modifications, amend Senate provision funding the Bureau with funds from the
Federal Reserve System. House offer #2.
3. With modification, add House provision providing for authorization of appropriations of

the Bureau for 2010-2015. House offer #2.
4. Add House provision directing Consumer Advisory Board to include experts in civil
rights. House offer #3.
5. With modifications, add new provision to subject pay day lenders, money remitters,
check cashers and private student loan providers to supervision by the Bureau. House
offer #4.
6. With modification, add provisions excluding auto dealers. House offer #8.
7. With modification, amend Senate provisions excluding attorneys. House offer #8.
8. Amend Senate provision requiring Federal Reserve Board regulations relating to

interchange transaction fees for electronic debit transactions and imposing limits on
payment card network restrictions with a technical correction. House offer #10.
9. With modification, amend Senate provision requiring disclosures and regulation of

remittance trans~ers. House offer # II.
10. Add House provision with revisions directing Bureau to issue regulations on reverse
mortgages. House offer #12.
11. With modification, amend Senate provisions relating to Energy & Commerce Committee.
House offer #13.
12. Amend Senate provisions relating to Judiciary Committee jurisdictions. House offer # 13.
1
..J.
13. With modification, add new provision relating to compensation, benefits and protections
of Bureau employees, including employees transferred from existing agencies. House
offer #14.
14. With modification, add House provision creating an ombudsperson at the Bureau. House
offer #15b.
15. Add House provisions directing Bureau to regulate exchange facilitators. House offer
#15d.
The Senate does not accept the following House proposals for amendments to the Base text:
I. Add House provisions authorizing the Bureau to participate in examinations and take
enforcement actions against insured depository institutions and credit unions with assets
of $10 billion or less. House offer #5.
2. Strike Senate provision requiring additional Regulatory Flexibility Act analyses prior to
proposed rulemakings of the Bureau. House offer #6.
3. Add House provision streamlining the authorities of the Federal Trade Commission in
issuing regulations, administering and enforcing the Federal Trade Commission Act.
House offer #7.
4. Add House provisions excluding pawnbrokers and employee benefit and compensation
plans. House offer #8.
5. Add House provisions setting the standard the Comptroller of the Currency or a court
must use in preempting State consumer laws and requiring the Comptroller or a court to
find that a substantive federal consumer protection standard is in place before preempting
a state law. House offer #9.
6. Add House provisions requiring private student loan providers to obtain mandatory
certifications from institutions of higher lending. House offer #15a.
7. Add House provisions requiring the Federal Reserve Board to retain a Consumer
Advisory Council. House offer #15c.
8. Add House provision directing Bureau to regulate person-to-person lending. House offer
#15e.
The Senate proposes the following amendment to the Base text:
I. This amendment would further clarify .a provision in the merchant's exemption in the
base text to make clear that small, non-fmancial businesses who finance the sale of their
own products or services are not subject to the CFPB's rule-writing or enforcement. The
base text does this by drawing a bright line based on revenues. However, some small
businesses aren't categorized by revenues; rather, they are deemed to be small businesses
based on the number of employees. This amendment adds the latter group to the
2
'"
exemption, as long as they are non-financial and legitimately fmancing their own
products or services.
3
From: Susanin, Chris [csusanin@fppartners.com]
To: Shireman, Bob
SUbject: RE: Slides
Bob,
Thanks for taking the time to review our slide deck on the for-profit space on Friday. I am sorry we couldn't meet with you in person. We hope you found the
conversation useful and insightful (Steve is a character). I hope the data came across in an objective, fact-based fashion. We really wanted to show that with an
appropriate level of business risk placed on the companies (appropriately) that they'd still have margins and returns that are best-in-class (and well above the Dow
30 companies). If there is a better way to present some objective financial analysis and data that could be helpful and additive to your existing resources, we are
more than happy to help in an arm~ength fashion. .
I hope we have a chance to continue a healthy dialogue.
Thanks again!
Chris
Christopher M. Susanin
Portfolio Manager
FrontPoint Partners
FronlPoint Consumer & Industrials Fund
Two Greenwich Plaza
Greenwich, CT 06830
p: (917) 934-1790
f: (203) 622-5230
email: csusanin@fgpartners.com
From: Black, Andrew

To: 'bob.shireman@ed.gov'
Cc: Susanin, Chris
Subject: Slides
,._._._"------ ---- --------------------

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In the last 10 years, the for-profit education industry has grown at 5-10 times the
historical rate of traditional post-secondary education
Annual enrollment growth of Total U.S. postsecondarY institutions vs. For profit institutions
I m1Total industry enrollment growth • For-profit enrollment growth I
25% I I
20%
15%
10%
5%
0% ~f--
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: National Center for Education Statistics, 2009
--------
Which has drastically accelerated the for-profit's share of total US post-secondary
enrollments and led to the rapid growth of for-profit institutions
In 1990, < 1% of all postsecondary In 1990, < 10% of all postsecondary

students attended for-profit colleges... schools were for-profit...
For profit students as a % of total U.S. postsecondary students For profit institutions as a % of total U.S. postsecondary institutions
9% I I 30% I I
8%
25%
7%
6%
20%
5%
15%
4%
3%
10%
2%
1% 5% ~ I
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
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...by 2009, almost 10% of students ...by 2009, 25% of schools are for-profit
attend for-profits
Source: National Center for Education Statistics. 2009
--- - ------ ------ -------

Despite being less than 10% of total enrollments, for-profits now claim nearly 25%
of the $102 billion of Federal Title IV student loans and grant disbursements
For-profit share of Title IV disbursements (Pen grants and Federal stafford loans), 1998 - 2009
27% 1 I
26%
In 2009, For-Profit schools collected $4.4 billion of the $18.2 billion
25%
in Federal Pell Grants, or about 24% of all Pell Grant funding -
24% double the proportion from ten years a92:
23%
22%
21%
20%
19%
18%
17%
16%
15%
14%
13%
12%
11%
10%
9%
8%
7%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
I!iI Pell grants • Subsidized stafford loans o Unsubsidized stafford loans
Source: College Board, FedBizOps.gov, NCLC

5
----------------------.------------ ------------- - ----- -- --------- ------------------------ ------------

Total Federal disbursements of Title IV Stafford Loans and Pell Grants and For-profit's share, 1987 - 2009
Dollars in billions
Year Pel! Grants Stafford Loans Pell Grants Stafford Loans For Qrofit Pel! Grants Stafford Loans
1987 $3.5 $7.3 $0.9 $1.8 $2.7 25% 25%
1988 $3.8 $8.0 $1.0 $2.1 $3.1 27% 27%
1989 $4.5 $8.2 $1.1 $2.3 $3.4 24% 28%
1990 $4.8 $8.3 $1.1 $1.9 $3.0 23% 23%
1991 $4.9 $8.8 $1.1 $1.5 $2.6 22% 17%
1992 $5.8 $9.5 $1.2 $1.3 $2.5 21% 14%
1993 $6.2 $9.9 $1.1 $1.0 $2.1 18% 10%
1994 $5.7 $14.1 $0.9 $1.4 $2.3 15% 10%
1995 $5.5 $19.9 $0.7 $2.0 $2.7 13% 10%
1996 $5.5 $22.8 $0.7 $1.9 $2.6 13% 8%
1997 $5.8 $25.1 $0.7 $2.2 $2.9 12% 9%
1998 $6.3 $26.3 $0.8 $2.3 $3.0 12% 9%
1999 $7.2 $27.2 $0.9 $2.6 $3.5 13% 10%
2000 $7.2 $28.4 $o:S $3~ $3.9 13% 10%
2001 $8.0 $29.5 $1.1 $3.4 $4.5 14% 12%
2002 $10.0 $32.1 $1.4 $4.1 $5.6 14% "13%
2003 $11.6 $36.5 $1.8 $5.2 $7.0 15% 14%
2004 $12.7 $41.6 $2.1 $6.6 $8.7 16% 16%
2005 $13.1 $45.7 $2.3 $7.9 $10.3 18% 17%
2006 $12.7 $48.0 $2.4 $8.8 $11.2 19% 18%
2007 $12.8 $49.4 $2.5 $9.5 $12.0 19% 19%
2008$14.7 $56.8 $3.1 $12.4 $15.5 21% 22%
2009 $18.2 $70.9 $4.4 $17.0 $21.4 24% 24%
Pelt Grants Loans grew by

quadrupled from $1 580% from $3 billion
billion to $4 billion to $17 billion
...but with the leniency shown to the industry under the Bush Administration, the
dollars that flowed to the industry exploded to over $21 billion, a 450% increase
Source: College Board
6
- - - - - c - - - - - - ------ .._-- -- ------ .-----.-. --"._. ------ ----------- - - - - - - -------- - --T--

T
How is this possible?! The for-profit industry has bought almost every lobbyist
and has infiltrated the highest levels of government...a prime example
Sally Stroup was a pivotal player in the deregulation of the for-profit industry...
. because she worked for the for-profit industry .
Sally Stroup Bi09..ml!!!v..;.

• 2001 - 2002: Director of Industry and Government Affairs for the Apollo Group
(top lobbyist for APOL)
• 2002 - 2006: Assistant Secretary for Postsecondary Education, U.S. Dept of

Education (top postsecondary education position)
• 2006 - 2008: GOP Deputy Staff Director, U.S. House of Representatives

Committee on Education and Labor (largest recipient of political contributions from
for-profit education industry)
• 2008 - Present: GOP Staff Director, U.S. House of Representatives Committee on

Education and Labor
.. .and not surprisingly, her colleagues at the Dept of Education were all driven by similar goals
Name Former DOE position Current Lobbying Firm For-profit Education client
William Hansen Deputy Secretary of Eductaion, 2001 - 2003 Chartwell Education Group APOLLO GROUP
Jonathan Vogel Deputy Counsel to the Department of ED, 2002 - 2005 Sonnenschein, Nath & Rosenthal GRAND CANYON UNIVERSITY
Lauren Maddox DOE Asst Sec for Communications, 2006 - 2008 Podesta Group CAREER EDUCATION CORP
Rebecca Campoverde DOE Asst Sec for Congressional & Legislative affairs, 2005 - 2008 Kaplan, Inc. KAPLAN, INC
Victor F. Klatt III GOP Staff Director for House ED and Labor, 2005 - 2008 Van Scoyoc Associates APOLLO GROUP
---~~ ~~ ~ -- -----~--- ~~-~- -~~ ~ ~ ~ - ~ - ~- - ~--- ~------- - -

At many major for-profit institutions, federal Title IV loan and grant dollars now
comprise close to 90% of total revenues
2001 2009
Other,
11%
Title IV,
Apollo Group Other, 48%
52%
Title IV,
89%
Other,
15%
Other,
35%
ITT Technical
Institute
Title IV,
65%
Tille IV,
85%
Note: Tille IV figures include 2008 unsubsidized loan limit increases
Source: Company-reporled tinancia/s 8
--~~~~~~ ~ -- ------------------------- ---------- ------- --- ----- -------- ----

This growth has driven even more spectacular company profitability and wealth
creation for industry executives and shareholders
ITT Technical Institute (ESI) Profitability has grown 5-fold since 2006...
ESI operating margin %. Q106 ~ Q409 ESI operating profit ($ millions), Q106 • Q409
~%I I $165 I I
$155
$145
40%
$135
$125
35%
$115
$105
30% $95
$85
$75
25%
$65
$55
20%
$45
$35
15%~ I i ' , i I $25
S)'O S)'O Dr'o S)'O S)'\. S)'\. s)'\ S)'\. S)'b S)'b 'i:J'b S)<tJ ,!!:>OJ S)OJ S)OJ DOJ ~ro f::j'O ~ro ~'O S)"" S)....
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Do., S)OJ
,,0: ",0 ":Ja t/<0 ",,0 ",0: ",a- boa ,..,a ."a ..,a. '0<0: "a ",a ":Ja tP ,,0 "VO: "JO fI "c:J ",0 ";)0 tP ,,(J- ').(1- ",a. tP ,,0 ",0 <>;,0 tP
...and the top 5 executives at ESI, Corinthian colleges (COCO) and Apollo Group (APOl)
collectively earned over $130 million from 2007-2009
IQp 5 executives total compensation
-
ESI COCO APOL Total
2007 $9,834,695 $4,938,982 $10,441,170 $25,214,847
2008 $8,923,791 $8,849,386 $26,766,979 $44,540,156
2009 $14,366,540 $11,222,377 $34,707,377 $60,296,294
3-y, totalcomp $33,125,026 $25,010,745 $71,915,526 C!130,051,29I)
Total camp = salary, bonus, stock awards, option awards, non-equity incentives
Source: Company-repotted financials and proxy statements 9
---------- .. _-_.-_...... .., -"

Now many of the US for-profit education companies are among the most profitable
businesses in the world
Other industries of strategic importance to the U.S.

which are funded by taxpayer dollars are restricted
to lower operating margins on contracts...
So how can Title IV-funded education companies

earn substantially more money than nearly every
other major US business?
Source: Company-reported financials and proxy statements 10
-------- - - --- ---- . -- _.~-~'- .".... _---- ---------- --------------------- ----- -------- ----- -------------------------------- --- ------------ -- - ---- ----- -------- --- ------------ ----- --- -- -------- ----" ------------ -- - --- ----------- --- --------
This growth however, is primarily a function of government largesse, as Title IV
has accounted for more than 100% of the revenue growth of these companies
~pollo GroupJAPOLI 2007 2008 2009
•
Total revenues $2,724 $3,141 $3,974
Year-year growth $417 ,C $833
More than 100% of the
% revenue from Title IV"" 65% 77% 89%
revenue growth 01 APOL,
Title IV revenues $1,770 $2,419 $3537 COCO and ESI is d iven by
Year~year growth $648 ( $1,119
an increase in Fed. ral Title
% revenue growth from Title IV 155% 134% IV dollars..
Corinthian Colleg~(COCO) 2007 2008 2009

Total revenues $919 $1,069 $1,308
Year-year growth $149 $239
% revenue from Title IV'" 75% 81% 89%
•.. and of this inCrE mental
Title IV revenues $691 $866 $1,163 $1.1 billion in TitlE IV and
$833 million in re\ enues,
% revenue growth from Title IV 117% 124%
ONLY $99 million or9%
was spent on edu( ational
ITT Technical Institute (ESI) 2007 2008 2009
Total revenues $758 $870 $1,015
expenses like fa culty
Year-year growth $112 $146 compensation anI other
% revenue from Title IV"" 63% 73% 85%
instructional c. sts
Title IV revenues $477 $635 $863
% revenue growth from Title IV 141% 157%
Dollars in milHons
*Title IV % includes 2008 Stafford unsubsidized loan limit increases
Source: Company-reported tinancials 11

Growth in Title IV means growth in Pell Grants too ...an area ripe for abuse
APOL Pell Data lfiscal.yr-end in bold)

Total Pell Yoy growth Total Pell Yoy growth Total Yay growth
Timeframe Recipients Recipients Disbursements Disbursements Enrollment enrollment
Jut 06 - Sep 06 17,241 $27,585,089 282,300 Growth in Pell Grant
Oct 06 - Dec 06 36,476 $60,746,326 291,800
Jan 07 - Mar 07 43,019 $71,799,605 298,400 Recipients and
Apr 07 - Jun 07 50,695 $83,662,013 311,100 Disbursements has
Jul 07 - Sep 07 26,327 53% $46,396,320 68% 313,700 11%
Oct 07 - Dec 07 60,289 65% $112,882,323 86% 325,000 11% dramatically outpaced
Jan 08 - Mar 08 66,492 55% $126,190,829 76% 330,200 11% actual enrollment
Apr 08 - Jun 08 63,320 25% $112,571,562 35% 345,300 11%
Jul 08 - Sep 08 50,482 92% $103,335,140 123% 362,100. 15% growth at Apollo over
Oct 08 .. Dec 08 87,345 45% $187,571,993 66% 384,900 18%
Jan 09 - Mar. 09 89,949 35% $189,277,778 50% 397,700 20%
the last several
Apr 09 - Jun 09 86,209 36% $175,581,597 56% 420,700 22% I years ...
Jul 09 - Sep 09 76,980 52% $189,413,197 83% 443,000 22%
Oct 09 .. Dec 09 122,672 40% $317,558,928 69% 455,600 18%
http://federalstudentaid.ed.gov/datacenter/programmatic.htmI
Pel! Runnin91
Dollars in millions
2007 2008 2009 Apollo received $741.8 million dollars
in Pell grant disbursements in 2009,
Total FY Pell Disbursements $262,604,263 $454,979,854 $741,844,564
yet only reported $453.5 in Pell grant
Company-reported Pell revenue $177,046,545 $282,683,610 $453,495,094
revenues...a $288.4 million difference.
Delta (disbursements less reported revs) $85,557,718 $172,296,244 ($288,349,470
And, if we assume the reported
Average Pell! student $1,762 $2,047 $2,461 average Pell per student of $2,461 in
Estimated reported Pell recipients 100,463 138,099 184,306 2009, then we are somehow missing
117K students.
Esitrn.ated non-reported Pell recipients 48,549 84,171 ( 117,189.p
What happened to this money and
these students?
Source: Federal Student Aid Data Center database, company-repotted financia/s 12
---------." .. _ - ---- --------- -----------

I
I
•
•
•
I
i-
ii '
,I
i
I
Even when assuming reported graduation rates (BIG ASSUMPTION), 50-100% of
the student body still drops out every year
APOL 2006 2007 2008 2009

Beginning enrollment 278,300 282,300 313,700 362,100
+ New students 216,600 258,500 288,200 355,800
- Graduates I drop outs (212,600) (227,100) (239,800) (274,900)
Ending enrollment 282,300 313,700 362,100 443,000
/
Assuming these graduation rates,

Graduation rate 28% 28% 28% 28%
Graduates 61,390 72,338 78,484 83,440 every year 50%+ of APOL and ESI
Drop outs 151,210 164,762 161,316 191,460 students drop-out annually.
Drops % of avg total enrollment 54% 52% 48% 48%
""Assume avg tenure btwn 3-4 years for graduates
"'- COCO recycles its entire
ESI 2006 2007 2008 2009 "- enrollment annually.
Beginning enrollment 42,985 46,896 53,027 61,983
+ New students 49,935 54,593 65,313 85,928
Graduation rate 44% 44% 44% 44% • Graduation rate estimate based on reported
Graduates 18,449 19,774 21,983 25,302 National Center of Education Statistics data;
Drop outs 27,575 28,688 34,374 41,843 figures represent average institutional graduation
Drops % of avg total enrollment 61% 57% 60% 59% rates at top 5 largest institutions
""Assume avg tenure btwn 2-3 years for graduates • For reference, 2009 Dept of ED reported
graduation rates for full-time, first time students at
for-profit schools is between 14-22%; these
COCO 2006 2007 2008 2009 graduation rates have been adjusted to include non
Beginning enrollment 66,114 60,964 61,332 69,211 first-time, full-time students, still may be largeiy
+ New students 92,185 90,105 100,210 117,352 overstated
I • Former academic counselors of APOL, ESI and
COCO claim real graduation rates at many
I locations are in the single digits
Graduation rate 33% 33% 33% 33%
Graduates 20,968 20,179 21,540 25,624
Drop outs 76,367 69,558 70,791 74,851
Drops % of avg total enrollment 120% 114% 108% 96%
*Assume avg tenure btwn 1 2 years for graduates
M
Source: Company-reporled ffnancia/s. IPEDS data (COllege Navigatolj. APOL student ouMbmes report 2009
--------------------- ---- ------ ------ ----------------- ----------- ---------- - --- ---~-- ,'------
·And yet that those who do graduate often cannot afford to repay their loans
ESI tuition, salary and expected loan ~ment breakdown
Associates ~ Bachelors ~
Avg tuition per year (2009) $19,059 $19,059
Avg annual grant contribution $2,500 $2,500
Avg annual loan amount $16,559 $16,559
Estimated total loans per graduate $33,615 $69,628
2009 avg starting salary of ESI grad $31,104 $38,880

After-tax monthly take-home pay $2,203 $2,754
Monthly loan payment $408 $845
Loan payment % of total monthly pay 19% 31%
Borrowing est assumes a 3% tuition increase annually

Monthly loan pymt assumes a 10-yr repayment period, 8% weighted avginterest rate
Assume a 15% tax rate for monthly take-home pay
Note: reported avg starting salary for ESI grads in 2009 was $31,104,
Source: Company-reported financials
15
--------.. -- -.-.- . ------ ----------- ------------------ ---------------- ------ -------------- --- -------- ------- ------ -- - -------- ------- - -- -- ----- -------------
'!
Because of the excessive drop-out rates and high debt burdens of graduates, the credit
statistics for government loans at for-profits are deteriorating at an alarming pace
Source: Company-reported financia/s; note: 2008 2-yr rates still preliminary, 3-yr rates 'estimated
16
~~-_.- - --~--~~~----_.-_.. --- - -"".~- ---- ------------ ------ . ---------- - ------ - ---------------------- ----------.-.- ---- -------_ .. - ------------------
H
l,A09 leJapa:l SluapnlS
aapoUI S!1U tq - sassol alOJalaql pue - )[SP aql JO lUlllq aql sxeaq oqM. os
As long as the government continues to flood the for-profit education
industry with loan dollars,
AND
the risk for these loans is borne SOLELY BY students and the government...
THEN
the industry has every incentive to:
- Grow at all costs

- Compensate employees based on enrollment
- Influence key regulatory bodies
- Manipulate reported statistics and other regulatory measures
ALL TO MAINTAIN ACCESS TO THE GOVERNMENT'S MONEY.
--', ..-- -- ,-,,- .,,----------- ----- ---- ------- - -,,-------~----------

lilts about the numbers. It will always be about the numbers. II
- Bill Brebaugh, head of University of Phoenix Corporate Enrolhnent
The entire business model of these companies is centered around growing enrollment-
it is the single most important measure of growth and profitability, period.
Boiler room tactics:

Actual APOL compensation table snapshot
• "Every 6 months we get a review that looks at how
many students we enrolled and what percentage of
them finished their first class. As long as they finish
I!NaIUI Ills ..
Cm¥hI'nnufMa1t..
.....!tIl!! 'c
_
.- ..
their first class we get full credit and after that they are DltClBD...... 1e .... -c- $Ukto$2Ok •
a1.44~ :uDltD$a
not our problem ..." .......,itMl
... ..,D1n1lWJ1ll "Ik
--,....
$I!MO_<t 1 roo.O.T,
41~
tB2SJEf +1mo.O:f.
• "We are under so much pressure we are forced to do
anything necessary to get people to fill out an
. . . . . . I HI
.... _=i1~
50 ,* lis "'-- . .$G40J*' "1m.o.T.
application ... "

5'1
12M•• !rdl
,18
S!loeo.if.IJ da --
• It's a boiler room - selling education to people who
sc.... iil"ll5
S5:wn-h: "'"
....
"""
$6tSptlf" t _. o.r.
....
4$
don't really want it." " ' -* ....

....
Sl'biadltlll
SliM"l t
....
.... $GS311l!f +!mo.o.T.
- Ashford University (BPI) former enrollment
counselor ....
....
• "The EC [enrollment counselor] review matrix is all
.......,
..,.
SffIC _
M1lSJ* +3mo.O,T•
smoke and mirrors so we could fly under the radar of

..- ....
....
the DOE. .. "
- APOL former enrollment counselor

a_T!I!l1!wn1I
7.~ ....
!I!!! JIU: • •J-q..t.
Source:' Court documents, Hendow & Albertson VS. UOP, filed 2009
19
-_._.- ._.~- - .. -
Accreditation...the inmates running the asylum
What is Accreditation and why is it important? The Accrediting Council for Independent
Colleges and Schools (ACICS)
• Accreditation helps ensure that education
provided by institutions of higher education ACICS BOARD OF COMMISIONERS
meets acceptable levels of quality
Dr. Gary R. Carlson - Chair Elect
Vice President, Academic Affairs 6 of/he 16 Board
• The Accreditation bodies are non-governmental ITT Technical Institute· members of ACICS
(non-profit) peer-reviewing groups are for-profit
Ms. Mary Hale Barry representatives
• Schools must earn and maintain proper Senior Vice President, Chief Academic Officer
Kaplan Higher Education
Accreditation to remain eligible to participate in
Title IV Programs Ms. Jill DeAtley
Vice President of Regulatory Review
• However, due to the peer-based composition of Career Education Corporation
the Accreditation boards, they cannot function Mr. Francis Giglio

as a truly independent 3rd party review system Director of Compliance and Regulatory Services
Lincoln Educational Services
• In many instances, for-profit institution's
Mr. David M. Luce
representatives sit on the boards of their Assistant Vice President, Accreditation and Licensing
own Accrediting body, inevitably influencing Corinthian Colleges, Inc.
the approval process and oversight of their own
Mr. Roger Swartzwelder
institutions! Executive Vice President, General Counsel and Chief Compliance Officer
Education Corporation of America
Wot aJl16 Board members shown
We have seen this before...rating agencies and subprime mortgages.

Is for-profit Accreditation the new credit agency scandal?
20
- -----
'!!
Accreditation...when you can't earn it, buy it
• The latest trend of for-profit institutions is to acquire the dearly-coveted Regional Accreditation through the outright
purchase of small, financially distressed non-profit institutions
• Regional Accreditation is the highest stamp of quality (Harvard is Regionally Accredited), and usually takes 5-10 years to earn
. through a long peer review process of educational materials, curriculum, teachers, etc
• But who wants to wait 5 years?!
• Once acquired, these institutions can serve as a shell for the parent organization to funnel in thousands of students and continue
the growth cycle ...
• Past examples are Bridgepoint buying Regionally-Accredited Franciscan University of the Prairies (renamed Ashford University)
and more recent examples are ITT Tech buying Daniel Webster, and Corinthian Colleges buying Heald College
Bridg§>oint Education (BPI) - a perfect model. ..
21
. __ ... ~ --------- -- --------- ----------- -------- - -- - -----

Reported statistics... Cohort Default Rates (CDRs)
Cohort Default Rates (CDRs)
• CDRs are the percentage of a school's borrowers who enter repayment on a Federal Loan during a particular
.. federal FY (Oct 1 to Sep 30), and default prior to the end of the next FY
• Effectively a 2-yr snapshot of the total students in default
• CDRs are an important measure of quality - if default rates breach the federally-mandated threshold of 25%
(soon to be 30%), schools can lose eligibility to Title IV
Can easily be manipulated to mask true defaults
• Deferrals and forbearances used en mass to carry students over the 2 year reported timeframe
• Schools partner with Sallie Mae and other lenders to delay or manage down defaults through the 2 year
timeframe in exchange for guaranteed loan volumes
.• Schools pay down student government loans with internal money and collect directly from students
22
__ " n • • • _ _ _ _ .~.~_.. _
_._---- ._--
Reported statistics ...the 90/10 rule
The 90110 rule
• 90/10 says a for-profit may become ineligible to participate in Title IV programs if it derives more than 90% of its
cash basis revenue from Title IV programs
• Applies only to for-profit institutions, effectively Rcap on total Title IV dollars that can flow to a company as a
percentage of revenues
• Intended to create a structural boundary for growth from Title IV dollars
Can also be manipulated

• Over-returning Title IV dollars to the government when students drop out and then billing students directly
• Pursue alternative government entitlement programs not counted under the Title IV umbrella (military educational
loans grants)
• When all else fails, raise tuition! Students will have to find alternative (non-Title IV) funding sources to close the
gap between tuition and the amount of total Title IV loans
23
Reportedstatistics ...completions and placements
Completions (graduation stats 1
• Company-reported metric that measures the number of students who complete a program (graduate) in 150% of
normal time (for example, 6 years of graduation data for a 4-year bachelors program)
• Non-traditional student body doesn't graduate together, and often takes much longer than normal to complete, so
hard to understand actual graduation by class
• No independent verification of graduates
Placements (employment stats 1

• Company-reported metric that measures the number of students who are placed in a job they were trained for
(gainful employment)
• This is gainful employment?
- Trained nurses become janitors at hospitals
- Homeland security degree grads become nighttime security guards at shopping malls
• And for those grads who cannot find employment. .. hire them! Most schools hire unemployed graduates
internally to boost reported placement stats
24
------ -------- --- ----- -- ----- _. --------- ---

Why the manipulation?
• Because every incremental dollar of Title IV money yields at least 50 cents of company
• So how do you make the most money? Drive enrollments as fast as you can and raise tuition!
• How do you drive enrollments? Recruit hard and advertise!
At Apollo Group, 1/3 of all Title IV received over the last 4 years was
spent on advertising and enrollment counselor compensation
Dollars in millions 2006 2007 2008 2009 2006-2009 Total

APOL
Advertising spending $232 $278 $323 $377 $1,209
Enrollment counselor compensation $330 $392 $480 $580 $1,782
APOL total ad spend + EC comp $562 $670 $802 $957 $2,991
Total Title IV received $1,536 $1,770 $2,419 $3,239 $8,964 University of Phoenix Stadium
Home to the Arizona Cardinals
Average ad spend + EC comp % total Title IV received
Enrollment counselor camp does not include stock camp
G:> In 2006, 10% of the Title IV funds received
by APOL ($155m) were spent on acquiring
naming rights for the next 20 years ...
Source: Company-reported financials, Arizona Republic
25
,
•
•
•
; I
' ro
CI:J
~
••
§
'.0
' ~
0C/)
]
,.
,
Solutions - any solution has to deal with the fundamental nature of the
-
problem
Major problems
1. Industry gets all the revenues; students and government bear all the risk
2. Because of #1, the incentive is to grow and the underwriting quality of Federal loan and grant dollars
is non-existent. .. THIS IS EVEN WORSE THAN SUBPRIME HOME EQUITY
3. Virtually all industry and company statistics used to guide regulations are self-reported and cannot
be trusted
What cannot work
Any solution that relies on industry or company-reported statistics

(enrollments, completions, placements) is a non-starter.
27
______ __ _H_._' ,__,· __ ___ _ "'N.______ _ _ --------- ----- --- --- -------------- ----- ---- --- --------_.
Solutions - share the risk·
1. Gainful employment gets at part of the problem because it deals with debt loads, but verification is
problematic
2. The Accreditation of all for-profit schools has to be put in the hands of the Department of Education,
as current Accreditation boards are compromised and the process is broken (especially for online
education)
3. The For-Profit education industry must bear a significant portion the underlying risk in
lending to students
28
--- -----------_.,-".. ~-- ------------------ ---- ----- -, ,'-_ .. _--- ------ ---------- ------ -- --- ------------ --------
What would a risk-sharing agreement look like and what would be some
likely outcomes?
• Make for-profit companies share in a portion of the losses on Federal loans
• This will immediately change behavior at every level of the organization because companies will
be punished for poor underwriting
• Aggressive recruiting and tuition hikes slow, companies improve educational quality, and
retention. Graduation and placements become more important than growth because companies
are penalized financially when students fail! .
29
Currently, for-profit institutions provision 50 - 60% on loans they make to their
own students...these are students who already have Title IV loans
• Companies are provisioning for more than 50%+ loss on loans they make to students...
which means they expect more than 1 out of every 2 loans to go bad
• But absent any regulatory threat, these companies could care less if they every loan they
made went bad because the per-student profitability of their models is so high!
• Both companies would still be hugely profitable on a per-student basis even with a 100%
losses on every loan they made
ESI coco ESI earns more than 8 times the

Title IV loans. grants and private loans $16,959 $14,443 amount it expects to lose from
Internal company loan per student i2,100 i1,770 internal loans to students.
Tuition per student (2009) $19,059 $16,213
COCO earns more than 4 times
Provision for loan losses (%) 50% 58% its expected loan losses.
Expected losses on internal loans ($1,050) ($1,027)
Operating profit per student $8,792 $4,282

Multiple of expected losses C 8.4x 4.2 JC
Note: OP / student equals change in operating profit over change in total enrollment
Loan loss provisions provided by companies
30
.... ---_...-
- - - - - - - - --- -- ---------------------------- ---------- -- ---------------------- --- -------------- -- ------- -----
w
What if companies shared in losses on Title IV loans? Risk sharing at Apollo Group
APOL is still a profitable business, even when bearing 50% of the loan losses
Dollars in millions 2009 Pro-forma results

2009 Fiscal Yr 10% share 25% share 50% share 75% share
APOL Actual results loan losses loan losses loan losses loan losses
Total company revenues $3,974 $3,974 $3,974 $3,974 $3,974
Title IV revenues (ex-grants) $2,786 $2,786 $2,786 $2,786 $2,786
Loan loss provisions 55% 55% 55% 55% 55%

Total expected loan losses $1,532 $1,532 $1,532 $1,532 $1,532
Share of risk 0% 10% 25% 50% 75%

Expected losses to APOL $0 $153 $383 $766 $1,149
Operating profit (ex-nonrecurring) $1,129 $976 $746 $363 ($20)

Operating margin % 28.4% 24.6% 18.8% 9.1% -0.5%
Net income $593 $513 $392 $191 ($11)

Assets (less cash, LTM) $1,623 $1,623 $1,623 $1,623 $1,623
Return on Assets (ROA%) 36.5% 31.6% 24.1% 11.7% -0.7%
Note: Loan loss provisions estimated based on current ESt and COCO institutional loan provisions
Source: Company-reported financia/s
31
Risk sharing at ITT Tech
ESI is still a profitable business, even when bearing 75% of the loan losses
Dollars in mUlions 2009 Pro-forma results

-ESI Actual results loan losses loan losses loan losses loan losses

Total expected loan losses $617 $617 $617 $617 $617
Share of risk 0% 10% 25% 50% 75%

Expected losses to ESI $0 $62 $154 $308 $463
Operating profit (ex-nonrecurring) $493 $431 $339 $185 $30

Operating margin % 37.4% 32.7% 25.7% 14.0% 2.3%
Net income $303 $265 $208 $113 $19

Return on Assets (ROA%) 22.8% 20.0% 15.7% 8.5% 1.4%
Note: Loan loss provisions estimated based on current ESt and COCO institutional loan provisions
Source: Company-reported. financia/s
32
---------- ----------------------------------------- -- - ------

'5
Risk sharing at Corinthian Colleges
COCO loses money as soon as it has to bear only 20% of the losses
Dollars in millions 2009 Pro-forma results
coco Actual results loan losses loan losses loan losses loan losses


Total expected loan losses $639 $639 $639 $639 $639
Share of risk 0% 10% 25% 50% 75%

Expected losses to ESI $0 $64 $160 $320 $480
Operating profit (ex-nonrecurring) $124 $60 ($36) ($196) ($356)

-Operating margin % 9.5% 4.6% -2.8% -15.0% -27.2%
Net income $69 $33 ($20) ($109) ($198)

Return on Assets (ROA%) 2.7% 2.5% -1.5% -8.2% -14.9%
Note: Loan loss provisions estimated based on curmnt ESI and COCO institutional loan provisions
Source: Company-reported financials
33
, ,, M'_
----- - ---
Summary
• The pace of the growth of the for-profit education industry and their growing claim to Federal monies
will require greater scrutiny to protect students and the integrity of Title IV lending
• The primary revenue and profitability driver for the for-profit companies is unrestricted access to Title
IV loans and grants
• . For-profit education companies are now among the most profitable businesses in the world due to
government largesse
• Regulations built around company-reported statistics are ineffective
• Disaggregation of risk from reward is the fundamental cause of all problems
34
- - -. ""'-~"""--'---- --_._ .... _-_.....-....._.... _--.,._-~ ... .. __ .. -

~ -----..-- -- ._---- ------ ---------------------- ---------.---------- -._-- ----_._.-
Total Federal disbursements of Title IV Stafford Loans and Pell Grants, 1987 - 2009
Dollars in biflions
Year Pell Grants Stafford Loans Pell Grants Stafford Loans For profit Pell Grants Stafford Loans
1987 $3.5 $7.3 $0.9 $1.8 $2.7 25% 25%
1988 $3.8 $8.0 $1.0 $2.1 $3.1 27% 27%
1989 $4.5 $8.2 $1.1 $2.3 $3.4 24% 28%
1990 $4.8 $8.3 $1.1 $1.9 $3.0 23% 23%
1991 $4.9 $8.8 $1.1 $1.5 $2.6 22% 17%
1992 $5.8 $9.5 $1.2 $1.3 $2.5 21% 14%
1993 $6.2 $9.9 $1.1 $1.0 $2.1 18% 10%
1994 $5.7 $14.1 $0.9 $1.4 $2.3 15% ' 10%
1995 $5.5 $19.9 $0.7 $2.0 $2.7 13% 10%
1996 $5.5 $22.8 $0.7 $1.9 $2.6 13% 8%
1997 $5.8 $25.1 $0.7 $2.2 $2.9 12% 9%
1998 $6.3 $26.3 $0.8 $2.3 $3.0 12% 9%
1999 $7.2 $27.2 $0.9 $2.6 $3.5 13% 10%
2000 $7.2 $28.4 /$O.~ $3.0 /$3.9" 13% 10%
2001 $8.0 $29.5
I $1.1 \ $3.4 I $4.5 \ 14% 12%
2002 $10.0 $32.1 $1.4 $4.1 $5.6 14% 13%
2003 $11.6 $36.6 $1.8 $5.2 $7.0 15% 14%
2004 $12.7 $41.6 $2.1 $6.6 $8.7 16% 16%
2005 $13.1· $45.7 $2.3 $7.9 $10.3 18% 17%
2006 $12.7 $48.0 $2.4 $8.8 $11.2 19% 18%
2007 $12.8 $49.4 $2.5 $9.5 $12.0 19% 19%
~
2008 $14.7 $56.8 $12.4 21% 22%
2009 $18.2 $70.9 $;;
$4.4 $17.0 . $21.4 24% 24%
quadrup under $4 billion in 2000 to over

billion to $4 billion $21 billion in 2009
.. .but with the leniency shown to the industry under the Bush Administration, the
dollars that flowed to the industry exploded to over $21 billion, a 450% increase
Source: College Board
1
~~ ..... _
.. ----------.-
At the current pace of growth, For-profit schools will claim 20% of enrollments,
represent 40% of schools and draw over 40% of all Title IV aid in 10 years
For-profit share of enrollment, schools, Pell grants and Loans, 2009 - 2020
For-profits % share of:

Total Total Pell Stafford Total Total Title IV disbursements ~ billions)
Year Enrollment Schools Grants Loans Title IV Non-profits ,For-profits
2007 7% 23% 19% 19% 19% $50,2 $12.0
2008 8% 24% 21% 22% 22% $56,0 $15,5
2009 8% 25% 24% 24% 24% $67.6 ( $21.4
2010 9% 26% 25% 25% 25% $71,9 $24.3
2011 10% 27% 26% 27% 27% $76,5 $27.7
2012 10% 29% 27% 28% 28% $81.2 $31.5
2013 11% 30% 28% 30% 29% $86.2 $35.8
2014 12% 31% 30% 31% 31% $91.4 $40.8
2015 13% 32% 31% 33% 32% $96.9 $46.4
2016 14% 34% 32% 35% 34% $102.5 $52.8
2017 16% 35% 33% 36% 36% $108.4 $60.1
2018 17% 37% 35% 38% 38% $114.4 $68,5
2019 18% ,0/. ~RO'" A~% 40% $120.6 $77,9
2020' 20% 40% 38% 43% 42% $126.9 ( $88.8
!S!!y Assumptions for Proiections Based on current financials of For-profit

institutions, less than 30% of the
• - Total post-secondary enrollment grows at 1.5% per year
incremental $67 billion in Title IV dollars
• For-profit enrollment grows at 10% per year (1 O-yr avg is 14.4%
annually) will go towards educating students...
• Total post-secondary institutions grow at 1.5% per year; For-profit
institutions grow at 6% per year (both long-term avg since 1990) ...nearly $50 billion will go to company'
• Avg grant and loan amounts per student grows at 5-yr historical avg profits and non-faculty and executive
growth rates, by institution type compensation
2
Source: College Board. us Dept of Education. industry estimates
_
.... .... .. _ - - -
"
Using the same data and looking at the average Pell and Stafford Loan disbursements
on a per-student basis highlights many other warning signs
Traditional vs. For-profit disbursements of Title IV Stafford Loans and Pen Grants, 1987 - 2009
For-profits % share of: Average Pell Grant + Loans

Total Total Pell Stafford Total Per Student
Year Enrollment Schools Grants Loans Title IV All schools NonMerofit For-Qfofit
1987 1% 10% 25% 25% 25% $842 $643 C $13,969:
1988 2% 10% 27% 27% 27% $899 $670 $14,262
1989 2% 10% 24% 28% 27% $933 $697 $14,640
1990 2% 10% 23% 23% 23% $ $740 $14,179
1991 2% 10% 22% 17% 19% $954 $788 $11,133
1992 2% 9% 21% 14% 16% $1,053 5 $10,831
1993 2% 9% 18% 10% 13% $1,120 $989 $9,263
1994 2% 9% 15% 10% 12% $1,385 $1,246 723 We are back to late-BO's
1995 2% 9% 13% 10% 11% $1,780 $1,616 $11,3 levels of lending to For-profit
1996 2% 9% 13% 8% 9% $1,967 $1,827 $8,402 students, a key leading
1997 2% 15% 12% 9% 9% $2,131 $1,974 $8,910 indicator for expected loan
1998 3% 16% 12% 9% 9% $2,249 $2,093 $8,317 defaults ... back then, fraud
1999 3% 17% 13% 10% 10% $2,329 $2,154 $8,15 was commonplace and
2000 3% 18% 13% 10% 11% $2,323 $2,130 , 81 regulation was minimal.
2001 3% 19% 14% 12% 12% $2,351 $2,139 $8,533
2002 4% 19% 14% 13% 13% $2,531 $2,27 $9,349
2003 4% 19% 15% 14% 14% $2,848 ,543 $9,786
2004 5% 20% 16% 16% 16% $3,146 $2,783 $9,909
2005 6% 21% 18% 17% 17% $3,3 $2,947 $10,153
2006 6% 22% 19% 18% 18% ,420 . $2,968 $10,498
2007 7% 23% 19% 19% 19% $3,407 $2,944 $10,074
2008 8% 24% 21% 22% 22% $3,740 $3,173 $10,541
2009 8% 25% 24% 24% 24% $4,525 $3,744 C $13,247
We must take note that because For-profit students receive 3-5x as much Title IV aid as
traditional students and are growing enrollment at 3x the pace of traditional schools,
these early warning signs will only grow in the coming years...
Source~ College Boald

3
---_.~ ... ----._- --,-','-.-,._--

If history is any guide, we will return to late-80's Cohort Default rates in 1-2 years,
the worst period of recorded default rates in the history of the DOE
Average Total Loans + Grants per For-profit student vs. DOE Official CDRs, 1987 - 2009
I _IAvg Loans + Grants • Official CDR I
$16,000 I I 24%
$15,000
20%
$14,000
C $13,000 16%
.,
'C ll<:
~ C
U
~ $12,000 -.-
12% IE'"
->., o
E $11,000 w
I-
- oc
~ $10,000 8%
$9,000
4%
$8,000
$7,000 0%
~
~ ~
~ ~
~
~
~.~
~
~
~
w * ~ * ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
'V
4
Soun;e: College Boom, us Dept of Educafion
--- ...._.- -- ._..- ... ,

To: Duncan, Arne
Cc: Kanter, Martha; Plotkin, Hal; Gomez, Gabriella; Shireman, Bob; Madzelan, Dan; Arsenault, Leigh; Manheimer, Ann; Hamilton, Justin;
Pauline_abernathy@ticas.org
Subject: Letter from broad coalition seeking strong regulation of career education programs
Attachments: Neg reg coalition support letter to Duncan.pdf.
Dear Secretary Duncan,
Please find attached a letter from a diverse coalition of more than 30 student, college, consumer and civil rights organizations seeking strong and
effective regulation of career education programs. Those signing the letter represent many public institutions that are subject to the gainful
employment and incentive compensation rules, as well as advocates for college access for African-American, Hispanic and low-income students.
Thank you for your initiative in reviewing the Department's current program integrity regulations to ensure their consistency with federal law and to
protect both students and taxpayers. We support your efforts and stand ready to assist you in improving the Department's regulations. Please feel
free to contact me or any of the stafflistedbelow should you or your staffhave any questions about this letter or the issues it addresses.
- Institute for College Access & Success: Pauline Abernathy (pabernathy@ticas.org) or Debbie Cochrane (dcochrane@ticas.org), 510-318-7900
Florida State College at Jacksonville: Susan Lehr (slehr@fscj.edu) or Jim Simpson (jsimpson@fsci.edu), 904-632-3391
National Association for College Admission Counseling: David Hawkins (dhawkins@nacacnet.org) or Amanda Modar (amodar@nacacnet.org),
703/836-2222
National Consumer Law Center: Deanne Loonin (dloonin@ncic.org), (617) 542-8010
Public Advocates: Jamienne Studley (jstudley@publicadvocates.org), (415) 431-7430
United States Students Association: Angela Peoples (leg@usstudents.org), (202) 640-6570
U.S. PIRG: Chris Lindstrom (chris.lindstrom@pirg.org), 617) 747-4330
Sincerely,
Lauren Asher
President, Institute for College Access & Success
----------------------
Lauren Asher
President
1
-_ _--_ _. __ .
Oakland, CA 94612
(510) 318-7900, x304
liasher@ticas.org
www.ticas.org
www.R!:Qjectonstudentdebt.org
-_.. ,,- -,,- -- ---- .._----

"-,,._------~" -- - --_. . . . _.- -_
..
May 20, 2010

As organizations representing students, higher education, consumers and civil rights, we

write to express our support for the Department of Education's efforts to make its
regulations more consistent with the program integrity provisions in Title IV of the Higher
Education Act. In particular, we urge you to propose regulations on incentive
compensation and gainful employment that will more effectively protect students from
high-pressure and deceptive sales tactics for educational programs of little or no benefit to
them, and will ensure that taxpayer dollars do not subsidize such practices and programs.
To protect both students and taxpayers, federal law prohibits "any commission, bonus, or
other incentive payment based directly or indirectly on success in securing enrollments or
financial aid," and requires vocational programs and nearly all programs at for-profit
institutions to "prepare students for gainful employment in a recognized occupation." Yet,
examples of overly aggressive recruiting are plentiful. Some for-profit institutions recently
made headlines by targeting homeless shelters in their recruitment efforts.' Another for-
profit institution paid $78.5 million to settle a whistleblower False Claim Act lawsuit" and
another $9.8 million to the Department of Education to resolve claims that it was paying
improper incentive compensation to its recruiters. '" Yet another large for-profit institution
paid $6.5 million to settle a lawsuit brought by the California Attorney General charging "a
persistent pattern of unlawful conduct," including the inflation ofjob placement and
starting salary information in order to recruit students to enroll in costly vocational
programs, and falsification of records provided to the government. 'Y
While most schools may not engage in such practices, federal data suggest these are not
isolated incidents. Students at for-profit schools are the most likely to borrow and borrow
the most. According to the most recent federal data, one in five for-profit school students
defaults on their federal loans. A full 44% of all defaulters attended for-profit institutions,
even thoughjust'7% of all students attend for-profit schools. Y Low-income, first-
generation and minority students attend for-profit institutions at disproportionate rates,
making them particularly vulnerable to illegal or unscrupulous acts by these schools. v,
Incentive Compensation. In direct conflict with federal law prohibiting institutions of

higher education from providing "any commission, bonus, or other incentive payment
based directly or indirectly on success in securing enrollments or financial aid," current
regulations permit incentive payments that are not "based solely" on the number of
students recruited, admitted, enrolled or awarded financial aid. Some schools have
aggressively exploited this and other loopholes in the current regulations to do just what
the statute is intended to prohibit. Consistent with the Department's proposals during the
negotiated rulemaking process, the proposed new regulations should conform to the law
and prohibit any employee or contractor compensation "based directly or indirectly" on
successfully securing student enrollments or aid. To avoid creating additional loopholes, it
is important that the prohibition include compensation based directly or indirectly on
applications or enrollment up to and includirig completion, as well as payments for
prospective student contact information.
•
Gainful Employment. Each year, students borrow and taxpayers spend billions of dollars
to subsidize attendance at programs required to "prepare students for gainful employment
in a recognized occupation." Yet, the Department's current regulations include no official
definition of "gainful employment." We urge you to develop regulations that define
gainful employment in a way that is measurable, enforceable, not overly burdensome to
schools, and is aligned with the following principles:
• Include all debt incurred at any affiliated school. All debt incurred at a school
under the same control structure must be included in any measure of gainful
employment that considers debt. Otherwise, schools controlled by the same
company could simply move students from one school or program to
another. Excluding debt from unaffiliated schools also has the benefit of allowing
low-cost schools to enroll and graduate students with high debt from unaffiliated
schools without fear of penalty.
• Include all private loans known to the school and its affiliates. Debt-related
measures of gainful employment must include all private loans that should be
known to the school. Excluding private loans would create a perverse incentive for
schools to promote risky private loans before students have exhausted their safer
federal loan options. Private loans that should be known to the school must include
all credit provided by any school under the same control structure as well as any
loans provided by lenders with which the school has a preferred lender
arrangement.
• Avoid loopholes for programs with both high student borrowing and low
completion rates. A low completion rate is one of the ways schools can fail to
prepare students for gainful employment. Students who borrow but do not
complete are often left carrying substantial debt without the increased earning
power that should come from a completed degree or certificate. The definition of
gainful employment should not create a loophole for schools to discourage
completion by students they consider likely to have trouble repaying their loans.
• Use only data that are accurate and consistent across colleges and programs.
Existing requirements for the calculation and reporting of completion and
placement rates are not sufficient for use in any success-based measure of gainful
employment. Accrediting agency
•
requirements vary
•
widely and allow for
substantial variation in the calculation of rates, and some schools have been found
to have falsified and manipulated their placement data. It is therefore essential that
the data and reporting standards are clear, consistent and independently verified.
Again, we applaud your initiative in reviewing the Department's current program integrity
regulations to ensure their consistency with federal law and to protect both students and
2
...
taxpayers. We support your efforts and stand ready to assist you in improving the
Department's regulations.
Sincerely,

California Community College Student Financial Aid Administrators Association
California Tomorrow
Center for Law and Social Policy
Consumer Action
NAACP
New York Community College Association of Presidents
Public Higher Education Network of Massachusetts
Student Senate for California Community Colleges
U.S. PIRG
'Golden, Daniel, "Homeless Dropouts From High School Lured by For-Profit Colleges," Bloomberg.com,
April 30, 2010. Available at http://www.bloQmberg.com/apps/news?pid=newsarchive&sid-aA2 F1VDs2Sk
"O'Reilly, Cary and Daniel Golden, "Apollo Settles University of Phoenix Recruiting Suit," Bloomberg com,
pecember 14, 2009. Available at http://www.bloQmberg.comlapps/news?pid==:20601Q87&sid=aO TscSKLRBI&pos=5
111 Gilbertson, Dawn, "Student-recruitment tactics at University of Phoenix blasted by feds," The Arizona
Republic, September 14, 2004. Available at htto:l/www.azcentral.com/specials/speciaI42/artic1es/0914apollo14.html?&wired

IV California Attorney General's office July 31, 2007 press release on settlement with Corinthian Schools at
http://ag.ca.gov/newsalerts/release.php?id-1444
v. TICAS press release available at http://projectonstudentdebt.orglpub view.php?idx=537
Based on calculations by the Project on Student Debt on data from the 2008 National Postsecondary
YO
Student Aid Study (NPSAS).
3
Sent: Thursday, June 24, 2010 7:52 PM
To: Kanter, Martha; Kvaal, James; Shireman, Bob; Hamilton, Justin
Cc: Manheimer, Ann; Arsenault, Leigh; Pauline Abernathy
SUbject: call for gainful employment definition -- letter sent to Secretary Duncan today
Attachments: Duncan_Orszag_GEJetter_6-24.pdf
I wanted to let you know that the attached letter was sent today to Secretary Duncan and OMB Director Orszag (text is pasted below as well). A broad coalition
representing students, higher education, consumers and civil rights are urging the Department to issue meaningful regulations on the definition of "gainful
employment" in time for them to go into effect next year.
Since we sent this letter earlier today, the New York Community College Association of Presidents and AFL-CIO have also signed on. In the next day or two we'll
send an updated version with these and any other additions. Please let Pauline or me know if you have any questions about the letter or coalition, and thanks, as
always, for your work on behalf of America's students and their families.
Lauren
----------------------------------------------------------
June 24, 2010

The Honorable Peter R. Orszag

Director
Office of Management and Budget
725 17th Street, NW
-_.- - - - - -- ..----_ .. -----_ . .- - .......---_ . . _ - ---._.-

11
Re: Need for career education "gainful employment" rule to go into effect in 2011
Dear Secretary Duncan and Director Orszag:
Thank you for proposing important new regulations aimed at ensuring that taxpayer dollars are spent appropriately and effectively on federal student
aid. However, as organizations representing students, higher education, consumers and civil rights, we write to urge the Obama Administration to
issue draft regulations defining "gainful employment" in time to be finalized by November 1 and go into effect in July 2011, along with rules on the
other Title IV program integrity issues addressed in the June 18, 2010 Notice of Proposed Rulemaking.
Each year, students borrow and taxpayers spend billions of dollars to subsidize attendance at programs required by law to "prepare students for
gainful employment in a recognized occupation." Yet current regulations include no definition 'of "gainful employment." It is critical that regulations
with a strong definition of gainful employment go into effect next year. To be effective, the definition must be measurable, enforceable, not overly
burdensome to schools, inclusive of all debt incurred at affiliated schools, based on accurate, consistent and independently verified data, and avoid
loopholes.
In the next year alone, taxpayers will likely underwrite more than $30 billion in loans to students attending programs that are required to prepare
them for gainful employment. Students and taxpayers shouldn't have to wait yet another year to be protected from career education programs that
over-charge and under-deliver. Your prompt action will demonstrate the Obama Administration's commitment to invest in education, cut wasteful
spending and strengthen our economy.
Sincerely,

American Federation of State, County, and Municipal Employees International
American Federation of State, County, and Municipal Employees Local 3299
Campaign for America's Future
Consumer Action
Demos: A Network for Ideas and Action
Florida Council of Presidents
2
- -_.- ._._._ .. ~
June 24, 20 I 0
The Honorable Arne Duncan The Honorable Peter R. Orszag

Secretary of Education Director
U.S. Department of Education Office of Management and Budget
400 Maryland Avenue, SW 725 17th Street, NW
Washington, DC 20202 Washington, DC 20503
Re: Need for career education "gainful employment" rule to go into effect in 2011
Dear Secretary Duncan and Director Orszag:
Thank you for proposing important new regulations aimed at ensuring that taxpayer
dollars are spent appropriately and effectively on federal student aid. However, as
organizations representing students, higher education, consumers and civil rights, we
write to urge the Obama Administration to issue draft regulations defining "gainful
employment" in time to be finalized by November I· and go into effect in July 20 II,
along with rules on the other Title IV program integrity issues addressed in the June 18,
2010 Notice of Proposed Rulemaking.
Each year, students borrow and taxpayers spend billions of dollars to subsidize
attendance at programs required by law to "prepare students for gainful employment in a
recognized occupation." Yet current regulations include no definition of "gainful
employment." It is critical that regulations with a strong definition of gainful
employment go into effect next year. To be effective, the definition must be measurable,
enforceable, not overly burdensome to schools, inclusive of all debt incurred at affiliated
schools, based on accurate, consistent and independently verified data, and avoid
loopholes.
In the next year alone, taxpayers will likely underwrite more than $30 billion in loans to
students attending programs that are required to prepare them for gainful employment.
Students and taxpayers shouldn't have to wait yet another year to be protected from
career education programs that over-charge and under-deliver. Your prompt action will
demonstrate the Obama Administration's commitment to invest in education, cut
wasteful spending and strengthen our economy.
Sincerely,

American Federation of State, County, and Municipal Employees International
American Federation of State, County, and Municipal Employees Local 3299
Campaign for America's Future
•
Consumer Action
Demos: A Network for Ideas and Action
Florida Council of Presidents
U.S. PIRG
Young Invincibles
-<!
- ------------- ------------.---- .._._,,- ..... , .,~-~._.~,------- ------- _
.__ .. .... ~- -----

Sent: Tuesday, April 13, 2010 9:40 AM
To: Madzelan, Dan; Arsenault, Leigh; Shireman, Bob; Manheimer, Ann
Cc: Lauren Asher
SUbject: Industry take on what was submitted to OMB on Friday on GE
Attachments: ITT and DV Upgrade. pdf
Have you seen this? The consumer, student and workforce stakeholders would appreciate receiving the same information as industry
where possible and appropriate. Thank you. Pauline
«ITT and DV Upgrade. pdf»
Pauline Abernathy
Vice President
1
13 April 2010
SUISS~
Americas/United States
Equity Research
CREDIT Education Services (Business & Professional Services) / MARKET WEIGHT
Education Services
Research Analysts
Kelly Flynn, CFA
6175565752
kelly.flynn@credit-sulsse.com
Upgrade DeVry and ITT On New Gainful
Patrick Eigrably, CFA
3127502974 Employment Insights
patrick.elgrably@credit-sulsse.com
Adam Shatek, CPA • We are upgrading ITT (ticker ESI) and DeVry (ticker DV) to Outperform from
3127503317 Neutral due to new insights on the DOE's Gainful Employment stance. We
adam.shatek@credil-suisse.com are raising our iTT price target to $135 from $105 and our DeVry price target to
$75 from $55 as DCF discount. rate reductions reflect perceived decreased
Gainful Employment risks. We detail our DCF analysis assumptions for DV and
ESI below. We are restricted on EDMC. All other Neutral ratings are
unchanged (see next page for details).
• We believe DOE's latest GE proposal leaves 80/0110 year parameters
unchanged. Following discussions with industrY contacts last night, we believe
that the Department of Education on Friday submitted its Gainfui Employment
and other program integrity proposed language to the Office Of Management
and Budget (the OMB) for vetting. We believe the goal is to publish the Notice of
Proposed Rule Making by May 15, or June 1 at the latest, and to publish final
regulations by November 1. We also believe the 8% debt-service-to-income
ratio and 10 percent repayment period inputs remain unchanged as of now and
that the "90% of graduates in repayment" exemption remains unchanged.
• But, we believe DOE added- a 50% completion exemption. Based on our
discussions, we believe one big change in the new draft proposal is the add back
of the "exemption" (that was removed in January after appearing in the initial
draft language) for schools with certain student completion and job placement
rates. We believe the completion rate cut off is now a more generous 50%
(versus 70% included in initial draft) and the placement rate cut-off is 70% (same
as in initial draft language; we believe most companies with placement rates
have rates above 70%).
• We think 50% completion rate exemption would help ESI, DV, & EDMC
regulatory positioning the most. We believe the 50% exemption, although not
eliminating Gainful Employment risks, would most significantly improve the
positioning for companies with placement rates at or close to 50% that would,
without an exemption, have potentially seen earnings prospects decimated by a
new Gainful Empioyment regulation; DeVry, ITT and Education Management fit
this profile. Although none of these companies release completion rates, the
DOE data (which likely understates actual completion rates because it only
includes first-time, full time students and not transfers or part time students) is
close enough to 50% to make us think these companies likely have 50%
completion rates or could achieve them in coming years without decimating
earnings prospects; most recent DOE completion rate data points are -39% for
ESI (ESI also said on recent call that 60% make It through first year), -31% for
DV and -41% for EDMC's Art Institute (-56% of company's students). Further,
we believe ESI's valuation, and DeVry's to a lesser extent, have been amohg
those most negatively Impacted by Gainful Employment concerns.
• DOE fleXibility may also fuel more investor optimism. We also acknowiedge
that the 50% completion rate change, if in fact it occurs, could fuel investor
optimism that the DOE could ease its stance further in coming months in
response to more pressure that may arise after the NPRM is posted. i
! -
DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON

TRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S ANALYSTS. U.S. Disclosure:
Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be
aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this
report as only a single factor in making their investment decision.
CREDIT SUISS~ 13 April 2010
Sector ImplicationslThesis Update

Countercyclicality and other sector regulatory concerns remain; other ratings
unchanged. We continue to worry that countercycllcallty will hurt growth in coming
quarters and we believe that, even if the Gainful Employment proposal is eased someWhat,
the broader regulatory landscape is likely to remain challenging for the foreseeable future;
we expect the DOE to tighten the Incentive Compensation rule and to generally seek to
crack down on schools' recruiting underqualified, under-informed students. Further, our
thesis on other companies under coverage is not changed significantly by our changing
view on Gainful Employment. Our concerns about APEI, APOL, COCO, L1NC and UTI are
largely unrelated to Gainful Employment. CPLA, STRA and LOPE trade at premium
valuations already, and we are not confident they would make the cut on the 50%
completion or graduation loan repayment Gainful Employment exemptions. For BPI and
CECO, although shares look cheap, we are also not confident Gainful Employment
exemptions apply, and we beiieve these companies also face other significant regulatory
risks. We are restricted on EDMC.
Valuation
Our price target changes largely reflect decreases in our discount rate used in the DCF
analyses due to lower perceived Gainful Employment risks, in our view.
Our $135 ESI price target is derived from our DCF analysis. We summarize our DCF
assumptions below:
• 2010-2020 revenue Compound Annual Growth Rate (CAGR) of 4.9%.
• 2009 operating margin of 37.9% going to 39.2% by 2020.
• A Weighted Average Cost of Capital (yVACC) of 16%.
• Terminal free cash fiow growth of 3%.
• Working capital changes and capital expenditures that remain in-line with historical
ratios.
Our $75 DV price target is derived from our DCF analysis. We summarize our DCF
assumptions below:
• A Weighted Average Cost of Capital (yVACC) of 14%.
• Terminal free cash flow growth of 3%.
ratios.
Price Price Rating· Target Price Year EPS EPS FY1E EPS FY2E EPS FY3E
Company ccy 09 Apr 10 Prevo Cur. Prevo Cur. End Ccy Prevo Cur. Prevo Cur. Prevo Cur.
·0 Outperform, N Neutral, U Underpefform, R Restricted [V] Stock considered volatile (see Disclosure Appendix).
Source: Company data, Credit Suisse estimates.
Education ServicBS 2
CREDITSUISS~ 13 April 2010
Companies Mentioned (Price as of 09 Apr 10)

American Public Education, Inc. (APEI, $46.03, NEUTRAL, TP $41.00)
Apollo Group Inc. (APOL, $63.14, NEUTRAL M, TP $65.00)
Bridgepoint Education (BPi, $23.60, NEUTRAL [V], TP $18.00)
Capella Education Company (CPLA, $90.90, NEUTRAL, TP $72.00)
Career Education Corp. (CECO, $31.70, NEUTRAL [V], TP $28.00)
Corinthian Colleges, Inc. (COCO, $17.51, NEUTRAL [V], TP $14.00)
DeVry Inc. (DV, $65.06, OUTPERFORM, TP $75.00)
Education Management Corporation (EDMC, $22.60, RESTRICTED [V])
Grand Canyon Education (LOPE, $25.68, NEUTRAL, TP $21.00)
ITT Educational Services, Inc. (ESI, $108.78, OUTPERFORM [V], TP $135.00)
Lincoln Educational Services (L1NC, $25.70, NEUTRAL [V], TP $21.00)
Strayer Education, Inc. (STRA, $238.70, NEUTRAL, TP $195.00)
Universal Technical Institute (UTI, $23.05, NEUTRAL [V], TP $19.00)
Disclosure Appendix
Important Global Disclosures
I, Kelly Flynn, CFA, certify that (1) the views expressed in this report accurately reflect my personal views about all of the SUbject companies and
securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in
this report.
See the Companies Mentioned section for full company names.
3-Year Price, Target Price and Rating Change History Chari for DV
DV Closing Target
Date
Price
CUSS)
Price Initiation!
CUSS) Rating Assumption
67
62
65.
4/27/07 34.52 29 57
6/18/07 35.22 NC 52
2/21/08 43.86 65 o x
47
6/20/08 58.54 N
7/30/08 56.75 R 42
10/8/08 45.19 52 N 37
12/5/08 58.37 53
32
4/21/09 42.12 44 us~f', 21-Feb-08 0-
8/14/09 51.89 50
10/28/09 56.13 52 ##¥###¢##¢#####¢#~
1/27/10 63.32 55 ~~#$$~~~~~$~~~~~$#
~ Closhg Prim • Target Pri::e 00 InlialiorliAssulllIllon • Rating
O=Outperforrn; N=Neutfa~ U=Underpe~orm; R=Re::trk:led; NR=Nol Rated; NC=~t Covered
3-Year Price, Target Price and Rating Change History Chari for ESI
ESI Closing Target 165 165.
Price Price InitiationJ
Date (US$) (US$) Rating Assumption 145
4/27/07 97.9 110
6/18/07 113.52 NC
2/21/08 60.17 65 N x
2/25/08 54.02 61
6/20/08 88.4 81
10/24/08 74.1 84
2/2/09 129.43 165 o 65
4/21/09 101.31 105 N
US~5 ~,~-_--,--''---,C=,:..."''-c-- _ _- - - -
~~##~#~#~~#~##A~#~
~~~$~~#~~~$~~~~~$~
~Closhg Price • TargetPri::e 0 Inliatiorll'Assumption • Rating
O=Oulpertorm; N=Neulra~ U-=U nderperlorm; R=Re£tri::ted; M'l.=Not Rated; NC= IIbl Covered
The analyst(s) responsible tor preparing this research report received compensation that is based upon various factors including Credit Suisse's total
revenues, a portion 01 which are generated by Credit Suisse's investment banking activities.
Analysts' stock ratings are defined as follows:
OJIperfam(O): The stoc~s total return is expected to outpertorm the relevant benchmark' by at least 10-15% (or more, depending on perceived
risk) over the next 12 months.
Neulral (N): The slock's total return is expected to be in line with the relevant benchmark' (range of ±10-15%) over the next 12 months.
Education Services 3
Underperform (U): The stock's tolal relurn is expected to underpertorm the relevant benchmark' by 10-15% or more overthe next 12 months.
'Relevant benchmark by region: As 0129" May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock's absolute total
return potentiai to its current share price and (2) the reiative attractiveness of a stock's totai return potential within an analyst's coverage universe",
with OutpMorms representing the most attractive, Neutrals the less attractive, and Underpertorms the least attractive investment opportunities.
Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry
factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock's totai return relative to the average totai return of
the reievant country or regional benchmark; for European stocks, ratings are based on a stock's total return relative to the analyst's coverage
universe". For Australian and New Zealand stocks a 22% and a 12% threshold replace the 10-15% level in the Outpertorm and Underpertorm stock
rating definitions, respectively, subject to analysts' perceived risk. The 22% and 12% thresholds replace the +10-15% and -10-15% levels in the
Neutral stock rating definition, respectively, subject to analysts' perceived risk.
"An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector.
Restricted (R): In certain circumstances, Credil Suisse policy and/or applicable law and regUlations preclude certain types of communications,
. including an investment recommendalion, during the course of Credit Suisse's engagement in an investmenl banking transaclion and in certain olher
circumstances.
Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at leasl8 of Ihe past 24
monlhs or the analyst expects significant volalility going forward.
Analysts' coverage universe weightings are distinct from analysts' stock ratings and are based on the expected
performance of an analyst's coverage universe' versus the relevant broad market benchmark":
CNenneighl: Industry expected to oUlpertorm the reievanl broad market benchmark over the next 12 months.
Market Weight: Industry expected 10 pertorm in-line with the relevant broad market benchmark over the next 12 monlhs.
Underweight: Industry expected to underpertorm the relevant broad markel benchmark over the next 12 months.
'An analyst's coverage universe consists ofall companies covered by the analyst wahin the relevant sector.
"The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months.
Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Ilislributioo
~perfam'Buy' 44% (60% banking clients)
NeutraVHold' 41% (61% banking clienls)
UnderperformfSelf' 13% (56% banking clients)
Restricted 2%
*For PUfPOseS of the NYSE and NASO ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy,
Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's
decision fa buy or sell a security should be based on investment objectives, current holdings, and other individual factors.
Credit Suisse's policy is to update research reports as it deems appropriate, based on deveiopments wilh the subject company, Ihe pector or Ihe
. market that may have a material impact on Ihe research views or opinions stated herein.
Credit Suisse's policy is only to publish investmenl research that is impartial, independent, clear, fair and not misleading. For more detail please referto CrOO.
Suisse's poncies for Managing Conflicts of Interest in connectton with Investment Research:
httpJiIIww.csfb.comtresearch-and-analytics/disetsimer/managin9-conflicts_disdaimer.html
Credit Suisse does not provide any tax advice. Any stalement herein regarding any US federal tax is not intended or written to be used, and cannot
be used, by any laxpayer for the purposes of avoiding any penalties.
See the Companies Mentioned section for fuff company names.
Price Target: (12 months) for (DV)
Method: Our $75 target price for DV is derived from our Discounted Cash Flow (DCF)-based model. Our target price is based on Ihe following
assumptions: 2010-20 revenue CAGR (compound annual growth rate) of 10.7%, 2010 operating margin of 19.7% going to 20.3% by 2020, a WACC
(weighted average cost of capital) of 14% and lerminal free cash flow growth of 3%.
Risks: The following factors may affect our projected results and $75 target price for DeVry: its heavy reliance on IT-related educalion which could
hurt results if IT spending declines, an economic recovery which could curt countercyclical post-secondary education companies, changes in the
regulalory and accreditory environments, and the impact of a downturn in the sludent lending environment which could threaten the magnitude of
federal loans to DeVry's students.
Price Target: (12 months) for (ESI)
Method: Our $135 target price for ESI is derived from our Discounted Cash Flow (DCF)-based model. Our base case DCF has the following
assumptions: 2009-19 revenue CAGR of 4.9%, operating margins going from 37.9% to 39.2% from 2010-20, a WACC of 16%, and lerminal free
cash flow growth of 3%.
Risks: The following factors may affect our projected results for ESI and our $135 price target: its heavy reliance on IT-related educalion which could
hurt resulls when IT spending declines, an economic recovery which has the potentiai to negatively impact countercyclical post-secondary education
services companies, impact of greater regulatory and accrediting agency requirements and the recent downtum in the sludent lending environment,
which impacts the magnitude of federal loans p"ro"'v"'id:;:e"d-"to'-i"TI-'-"st:;:u"de"'n"'ls".-,-_-,--,--,-_---:----:--,----:--,-_---:--,-_-,--,---,---,--,-_--,---,-_
Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbrevialions typically used in the
larget price melhod and risk sections.
CREDIT SUtSS~ 13 April 2010

The subject company (DV, ESI) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit
Suisse.
Credit Suisse provided investment banking services to the subject company (DV, ESI) within the past 12 months.
Credit Suisse has received investment banking related compensation from the sUbject company (ESI) within the past 12 months.
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (DV, ESI) within the next 3
months.
Important Regional Disclosures
Singapore recipients should contact a Singapore financiai adviser for any matters arising from this research report.
An analyst involved in the preparation of this report has vistted certain material operations of the subject company (ESI) with',n the past 12 months.
The analyst may not have visited all material operations of the subject company. The travel expenses of the analyst in connection with such visits
were not paid or reimbursed by the subject company, other than de minimus local travel expenses.
The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (DV) within the past 12
months.
Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares;
SVS--Subordinate Voting Shares.
Individuals receiving this report from a Canadian investment dealer that is not allillated with Credit Suisse should be advised that this report may not
contain regUlatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.
For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please vistt
. http://www.csfb.comliegaUermsicanada...research_policy.shtml.
As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.
Principal is not guaranteed in the case of equities because equity prices are variable.
Commission is the commission rate or the amount agreed with a customer when setting up an account or at anytime after that.
CS may have issued a Trade Alert regarding this security. Trade Alerts are short term trading opportunities identified by an analyst on the basis of
market events and catalysts, while stock ratings reflect an analyst's investment recommendations based on expected total return over a 12-rnonth
period relative to the relevant coverage universe. Because Trade Alerts and stock ratings reflect different assumptions and analytical methods, Trade
Alerts may differ directionally from the analyst's stock rating.
The author(s) of this report maintains a CS Model Portfolio that he/she regularly adjusts. The security or securities discussed in this report may be a
component of the CS Model Portfolio and SUbject to such adjustments (which, given the composition of the CS Model Portfolio as awhole, may differ
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CREDITSUISS~
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ITT and DV Upgrade.doc
•
13 April 2010
SUISS~
Equity Research
CREDIT Education Services (Business & Professional Services) / MARKET WEIGHT
Education Services
Research Analysts
Kelly Flynn, CFA
6175565752
kellyJlyn n@credit-suis::;;e.com
Upgrade DeVry and ITT On New Gainful
Patrick Eigrably, CFA
3127502974 Employment Insights
pa1rick.elgrably@credit-suisse.com
Adam Shatek, CPA • We are upgrading ITT (ticker ESI) and DeVry (ticker DV) to Outperform from
3127503317 Neutral due to new insights on the DOE's Gainful Employment stance. We
adam .shatek@credit-suisse.com are raising our ITT price target to $135 from $105 and our DeVry price target to
$75 from $55 as DCF discount rate reductions refiect perceived decreased
Gainful Employment risks. We detail our DCF analysis assumptions for DV and
ESI below. We are restricted on EDMC. All other Neutral ratings are
unchanged (see next page for details).
• We believe DOE's latest GE proposal leaves 80/0/10 year parameters
unchanged. Following discussions with industry contacts last night, we believe
that the Department of Education on Friday submitted Its Gainful Employment
and other program integrity proposed language to the Office Of Management
and Budget (the OMB) for vetting. We believe the goal is to publish the Notice of
Proposed Rule Making by May 15, or June 1 at the latest, and to publish final
regulatio'ns by November 1. We also believe the 8% debt-service-to-income
ratio and 10 percent repayment period inputs remain unchanged as of now and
that the "90% of graduates in repayment" exemption remains unchanged.
• But, we believe DOE added a 50% completion exemption. Based on our
discussions, we believe one big change in the new draft proposal is the add back
of the "exemption" (that was removed in January after appearing in the initial
draft language) for schools with certain student completion and job placement
rates. We believe the completion rate cut off ,is now a more generous 50%
(versus 70% included in initial draft) and the placement rate cut-off is 70% (same
as in initial draft language; we believe most companies with placement rates
have rates above 70%).
• We think 50% completion rate exemption would help ESI, DV, & EDMC
regulatory positioning the most. We believe the 50% exemption, although not
eliminating Gainful Employment risks, would most significantly improve the
positioning for companies with placement rates at or close to 50% that would,
without an exemption, have potentially seen earnings prospects decimated by a
new Gainful Employment regulation; DeVry, ITT and Education Management fit
this profile. Although none of these companies release completion rates, the
DOE data (which likely understates actual completion rates because it only
includes first-time, full time students and not transfers or part time students) is
close enough to 50% to make us think these companies likely have 50%
completion rates or could achieve them in coming years without decimating
earnings prospects; most recent DOE completion rate data points are -39% for
ESI (ESlalso said on recent call that 60% make It through first year), -31% for
DV and -41% for EDMC's Art Institute (-56% of company's students). Further,
we believe ESl's valuation, and DeVry's to a lesser extent, have been among
those most negatively impacted by Gainful Employment concerns.
• DOE flexibility may also fuel more investor optimism. We also acknowledge
that the 50% completion rate change, if in fact it occurs, could fuel investor
optimism that the DOE could ease its stance further in coming months in
response to more pressure that may arise after the NPRM is posted.
DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON

TRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S ANALYSTS. U.S. Disclosure:
Credit Suisse does and seeks to do busi~ess with companies covered in its research reports. As a result, investors should be
aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this
report as only a single factor in making their investment decision.
Sector ImplicationslThesis Update

Countercyclicality and other sector regulatory concerns remain; other ratings
unchanged. We continue to worry that countercyclicality will hurt growth in coming
quarters and we believe that, even if the Gainful Empioyment proposal is eased somewhat,
the broader regulatory landscape is likely to remain challenging for the foreseeable future;
we expect the DOE to tighten the Incentive Compensation rule and to generally seek to
crack down on schools' recruiting underqualified, under-informed students. Further, our
thesis on other companies under coverage is not changed significantly by our changing
. view on Gainful Employment. Our concerns about APEI, APOL, COCO, LiNC and UTI are
largely unrelated to Gainful Employment. CPLA, STRA and LOPE trade at premium
valuations already, and we are not confident they would make the cut on the 50%
completion or graduation loan repayment Gainful Employment exemptions. For BPI and
CECO, although shares look cheap, we are aiso not confident Gainfui Empioyment
exemptions apply, and we believe these companies also face other significant regulatory
risks. We are restricted on EDMC.
Valuation
Our price target changes largely reflect decreases in our discount rate used in the DCF
anaiyses due to lower perceived Gainful Employment risks, in our view.
Our $135 ESI price target is derived from our DCF analysis. We summarize our DCF
assumptions below:
• 2010-2020 revenue Compound Annual Growt~ Rate (CAGR) of 4.9%.
• A Weighted Average Cost of Capital fY'JACC) of 16%.
ratios.
Our $75 DV price target IS derived from our DCF analysis. We summarize our DCF
assumptions below:
• A Weighted Average Cost of Capital fY'JACC) of 14%.
ratios.
Company
Price
ccy ,. Price
•• <;,:N
Ap.
Rating*
Prevo Cur.
Target Price
Prevo Cur. End
Year EPS
Ccy
EPS FY1E
Prevo Cur.
EPS FY2E
Prevo Cur.
EPS FY3E
Prevo Cur.
Wy.ry,'}dC;-:(QYf' 'c":_'- ::,,:'qEi$' ':Q?;Q6
",'
-::0,' '-":-S5JI(j-,'::::.:' -.-75:00 Ju,n,off· :'-"U~~, - :-:::"-·':3,041: ')t05 -
,',',- -,
:,;i4~65'
ITT Educational Services (ESI US$ 108.78 N
.
a "l 105.00 135.00 Dec 09 US$ 10.50 - 11.69
.
- 12.63
•o Outperform, N Neutral, U Underpetform, R Restricted [V] Stock conSidered volatile (see Disclosure AppendiX).
Source: Company data, Credit Suisse estimates.
CREDIT SUISS~ 13 April 2010
Companies Mentioned (Price as of 09 Apr fOj

American Public Education, Inc. (APEI, $46.03, NEUTRAL, TP $41.00)
Apollo Group Inc. (APOL, $63.14, NEUTRAL [V], TP $65.00)
Bridgepoint Education (BPI, $23.60, NEUTRAL M, TP $18.00)
Capella Education Company (CPLA, $90.90, NEUTRAL, TP $72.00)
Career Education Corp. (CECO, $31.70, NEUTRAL [V], TP $28.00)
Corinthian Colleges, Inc. (COCO, $17.51, NEUTRAL [V], TP $14.00)
DeVry Inc. (DV, $65.06, OUTPERFORM, TP $75.00)
Education Management Corporation (EDMC, $22.60, RESTRICTED [V))
Grand Canyon Education (LOPE, $25.68, NEUTRAL, TP $21.00)
ITT Educational Services, Inc. (ESI, $108.78, OUTPERFORM [V], TP $135.00)
Lincoln Educational Services (L1NC, $25.70, NEUTRAL IV], TP $21.00)
Strayer Education, Inc. (STRA, $238.70, NEUTRAL, TP $195.00)
Universal Technical Institute (UTI, $23.05, NEUTRAL [VI, TP $19.00)
Disclosure Appendix
Important Global Disclosures
I, Kelly Flynn, CFA, certify thet (1) the views expressed in this report accurately retleet my personal views about all at the subject companies and
securities and (2) no part of my compensation was, is or will be directly or indirectly related to the spec,ic recommendations or views expressed in
this report.
See the Companies Mentioned section for fuli company names.
3-Year Price, Target Price and Rating Change History Chart for DV
DV Closing Target
Date
Price
CUSS)
Price Initiation!
CUSS) Rating Assumption
67
62
os.
4/27/07 34.52 29 57 .
6/18/07 35.22 NC
52
2/21/08 43.86 65 o x
47
6/20/08 58.54 N N
7/30108 56.75 R 42
10/8/08 45.19 52 N 37
12/5/08 58.37 53 32
4/21/09 42.12 44 us~~g, 2.1-FeIJ.()8 'I)
8/14/09 51.89 50
10/28/09 56.13 52 A~~~A~~#'~~#~~~~~#P
1/27/10 63.32 55 ~~#~R~~~~~$~~-~r~~~
-Closhg PriCE • TargelPri:e ~ InliationfAssumption • Rating
O=OUlperform; N=Neulra~ UdJnderpedorm; R=Resri:ted; NReoNot Rated; NC=NDt Covered
3-Year Price, Target Price and Rating Change History Chart for ESI
ESI Closing Target 165 -165.
Price Price Initiation!
Date (US$) (US$) Rating Assumption 145 -
4/27/07 97.9 110 o
6/18/07 113.52 NC
2/21/08 60.17 65 N x
2/25/08 54.02 61
6/20108 88.4 81 85
10/24/08 74.1 84
2/2/09 129.43 165 o 65
4/21/09 101.31 105 N
US$45 ~,~~~~=:;.:.:=-:-~_~~ __~~_~~__~~_~_
~~~A~A~~~P~~~~A~A~
~-~~~-~~#~~#~~~~p~~~
-Closilg P~re • TarglllPri:::e 0 InliafionfAssumption • Rating
Q;Outperlorrn; N=Neulra~ U=Underperiorm; R=Restrbled; NF\;Not Rated; NC",NoI Gowred
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total
revenues, a portion of which are generated by Credit Suisse's investment banking activities.
Analysts' stock ratings are defined as follows:
Oulperfonm(O): The stock's total return is expected to outpertorm the relevant benchmark' by at least 10-15% (or more, depending on perceived
risk) over the next 12 months.
Neutral (N): The stoc~s total return is expected to be In line with the relevant benchmark' (range of ± 10-15%) over the next 12 months.
Underpertorm (U): The stoc~s total return is expected to underpertorm the relevant benchmark' by 10-15% or more overthe next 12 months.
'Relevant benchmark by region: As of 21J1f! May 2009, Austraiia, New Zealand, U.S. and Canadian ratings are based on (1) a stock's absolute total
return potentiai to its current share price and (2) the reiative attractiveness of a stock's total return potentiat within an analyst's coverage universe",
with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities.
Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry
factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock's total return relative to the average totai return of
the relevant country or regional benchmark; for European stocks, ratings are based on a stock's totai return reiative to the analyst's coverage
universe". For Austratian and New Zealand stocks a 22% and a 12% threshold replace the 10-15% level in the Outperform and Underperform stock
rating definitions, respectively, subject to analysts' perceived risk. The 22% and 12% thresholds replace the +10-15% and -10-15% levels in the
Neutral stock rating definition, respectively, subject to analysts' perceived risk.
"An analysfs coverage universe consists of all companies covered by the analyst within the relevant sector.
Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications,
including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other
circumstances.
Volatility Indicator [V]: A stock is defined as volafile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24
months or the analyst expects significant volatility going forward.
Analysts' coverage universe weightings are distinct from analysts' stock ratings and are based on the expected
performance of an analyst's coverage universe' versus the relevant broad market benchmark":
Ouervoeigl1l: Industry expected to outpertorm the relevant broad market benchmark over the next 12 months.
Market Weight: Industry expected to pertorm in-line with the relevant broad market benchmark over the next 12 months.
Underweight: Industry expected fa underpertorm the relevant broad market benchmark over fhe next 12 months.
'An analyst's coverage universe consists of all companies covered by the analyst wffhin the relevant sector.
"The broad market benchmark is based on the expected return olthe local market index (e.g., the S&P 500 in the U.S.) over the next 12 months.
Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution
O:Jtpertorm'Buy' 44% (60% banking clients)
NeutraVHold' 41% (61% banking clients)
UnderpertormlSell' 13% (56% banking clients)
Restricted 2%
~For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform mOst closely correspond to Buy,
Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's
decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.
Credit Suisse's policy is to updafe research reports as it deems appropriate, based on developments with the subject company, the sector or the
market that may have a material impact on the research views or opinions stated herein.
Credif Suisse's policy is only to publish investment research that is impartial, independenf, clear, fair and not misleading. For more detail please refer to Cred,
Suisse's Policies for Managing Conflicts of Interest in oonnection with Invesbnent Research:
httpilwww.cslb.oomlresearch-and-analytics.disciaimer/managin9-oonfficts_discfaimer.htmI
Credit Suisse does not provide any tax advice. Any stafement herein regarding any US federal tax is not intended or written to be used, and cannot
be used, by any taxpayer for the purposes of avoiding any penalties.
Price Target: (12 months) for (DV)
Method: Our $75 target price for DV is derived from our Discounfed Cash Flow (DCF)-based model. Our target price is based on the following
assumptions: 2010-20 revenue CAGR (compound annual growth rate) of 10.7%, 2010 operating margin of 19.7% going to 20.3% by 2020, a WACC
(weighted average cost of capital) of 14% and terminal free cash flow growth of 3%.
Risks: The following factors may affect our projected results and $75 target price for DeVry: its heavy reliance on IT-related education which could
hurt resulls if IT spending declines, an economic recovery which could curt countercyclical post-seoondary education companies, changes in the
regUlatory and accreditory environments, and the impact of a downturn in the student lending environment which could threaten the magnitude of
federal loans to DeVry's students.
Price Target: (12 months) for (ESI)
Method: Our $135 target price for ESI is derived tram our Discounted Cash Flow (DCF)-based model. Our base case DCF has the following
assumptions: 2009-19 revenue CAGR of 4.9%, operating margins going from 37.9% to 39.2% from 2010-20, a WACC of 16%, and terminal free
cash flow growth of 3%.
Risks: The following factors may affect our projected results for ESI and our $135 price target: its heavy reliance on IT-related education which could
hurt res.ulls when IT spending declines, an economic recovery which has the potential to negatively impact countercyclical post-secondary education
services companies, impact of greater regulatory and accrediting agency requirements and the recenf downturn in the student lending environment,
which impacts the magnitUde of federal loans p,.,ro"-vi",de",d,-,t"-o-::,IT,-'T-,s"fu",de,,,n,,,ts,,-..,---;-c::-;--.,..-."--,-;:-:;,-----;-,,,--c-:;--,-.,-:;--,---:;-
Please refer to the firm's disclosure website at www.credit-suisse.comlresearchdisclosures for the definitions of abbreviations typically used in the
target price method and risk sections.

The sUbject company (DV, ESI) currently is, or was during the 12-month period preceding the date at distribution of this report, a client at Credit
Suisse.
Credit Suisse provided investment banking services to the subject company (DV, ESi) within the past 12 months.
Credit Suisse has received investment banking related compensation from the sUbject company (ESI) within the past 12 months.
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (DV, ESi) within the next 3
months.
Important Regional Disclosures
Singapore recipients should contact a Singapore financial adviser for any matters arising from this research report.
An analyst involved in the preparation of this report has visited certain material operations of the subject company (ESI) within the past 12 months.
The anaiyst may not have visited all material operations of the subject company. The travel expenses of the analyst in connection with such viSITS
were not paid or reimbursed by the subject company, other than de minimus iocal travel expenses.
The anaiyst(s) involved in the preparation of this report have not visited the material operations of the subject company (DV) within the past 12
months.
Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares;
SVS--Subordinate Voting Shares.
Individuais receiving this report from a Canadian investment dealer that is not affiliated WITh Credit Suisse should be advised that this report may not
contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.
For Credit Suisse Securities (Canada), inc.'s policies and procedures regarding the dissemination of equity research, please visit
http://www.csfb.comilegaUermsicanada_research_policy.shtml.
As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.
Principal is not guaranteed in the case of equities be.cause equity prices are variable.
Commission is the commission rate or the amount agreed with a customer when setting up an account or at anytime after that.
CS may have issued a Trade Alert regarding this security. Trade Alerts are short term trading opportunities identified by an analyst on the basis of
market events and catalysts, while stock ratings reflect an analyst's investment recommendations based on expected total return over a 12-month
period relative to the relevant coverage universe. Because Trade Alerts and stock ratings refiect different assumptions and analytical methods, Trade
Alerts may differ directionally from the analyst's stock rating.
The author(s) of this report maintains a CS Modei Portfolio that he/she regularly adjusts. The security or securities discussed in this report may be a
component of the CS Model Portfolio and subject to such adjustments (which, given the composition of the CS Model Portfolio as a whole, may differ
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Disclaimers continue on next page.
13 April 2010
SUISS~
Equity Research
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ITT and DV Upgrade.doc

From: Pauline Abernathy [pabernathy@tlcas.org]
Sent: Monday, May 03, 20104:34 PM .
To: Eric.Stein@do.treas.gov; Peggy.Twohig@do.treas.gov; MichaeI.Barr@do.treas.gov; Kvaal, James R.; Levine, Brian S.; Gomez,
Gabriella; Arsenault, Leigh; Shireman, Bob; Madzelan, Dan; Dannenberg, Michael
Cc: Lauren Asher
Subject: Senate letter from 39 orgs re CFPB and private student loans
Attachments: CFPB_studenUoan_letter_May-3_10.pdf; CFPB student loan statement - May 3 pdf
Attached and below is a letter signed by 39 organizations that advocate for students, consumers, higher education and civil
rights urging that the Senate financial reform bill give the Consumer Financial Protection Bureau full authority over all private student
loans, and require private loans to be certified by schools as the House-passed bill requires. Our press release is also attached.
May 3,2010 -
Dear Senator:
As advocates for students, young people, consumers, higher education and civil rights, we strongly urge you to ensure that the Restoring American
Financial Stability Act (S. 3217) gives the Consumer Financial Protection Bureau (CFPB) full authority over all private student loans. We are deeply
concerned that the bill as currently drafted may not even give the CFPB enforcement authority over the largest private student lender, Sallie Mae, or
over predatory loans made by large for-proftt colleges attended disproportionately by low-income and minority students.
Private student loans are one of the riskiest ways to pay for college, yet a significant number of students have private student loans as well as, or
instead of, safer federal student loans. Private student loans typically have uncapped, variable rates that are highest for those who can least afford
them. They lack the fixed rates, consumer protections and flexible repayment options of federal student loans, and are extremely difficult to
discharge in bankruptcy.
Unfortunately, S. 3217 does not currently ensure meaningful oversight of the largest private student lender or the riskiest products. We therefore
urge you to amend S. 3217 to ensure that the CFPB has fUll authority over all private student loans, including that:
• The CFPB has full enforcement authority over the largest private student lenders. As S. 3217 is now drafted, the CFPB may not have
supervision or enforcement authority over Sallie Mae, the largest private student lender, because it is financing private loans through the Sallie
Mae Bank, which has total assets under $10 billion. Sallie Mae made nearly $5 billion in private loans in 2008-09.
------- ------
• The CFPB has full enforcement authority over predatory loans by schools and other nonbanks. As S. 3217 is currently drafted, the
CFPB would not have full authority over nonbank entities unless they were determined to be "larger" in the market. Lenders who might fall
through the cracks include schools that make private loans directly to their students, such as Corinthian Colleges, which has told investors that it
expects nearly 60% of these loans to default. The company still profits because the federal grant and loan dollars associated with these
borrowers far outweigh the planned write-offs.
• Private loans must be certified and students informed of any remaining federal loan eligibility. The House-passed financial reform bill
requires lenders to confirm with the borrower's school that the borrower is in fact a student, is eligible to borrow the requested amount, and has
been notified of any untapped federal loan eligibility. This "school certification" gives colleges the crucial opportunity to counsel students before
they take out an unnecessarily costly and risky private loan. Sallie Mae reports that school certification reduces the amount borrowed nearly
30% of the time, and research has found that school-certified loans have significantly lower default rates than uncertified loans.
Thank you for your consideration of our views. Should you or your staff have any questions, please contact Pauline Abernathy with the Institute for
College Access & Success atpabernathy@ticas.org or (510) 318-7903.
Signed,

Americans for Financial Reform;I*]
The College Board
Consumer Action
Consumer Watchdog
Consumers Union
The Education Trust
NAACP
2
NYPIRG
Rock the Vote
U.S. PIRG
UNCF
Young Invincibles
Pauline Abernathy
Vice President
;['1 A large number of organizations are working together to advance Amer[cans for Financial Reform's (AFR) common interest in an accountable, transparent and secure financial
system, and to accomplish our shared policy goals. Because the organizations involved and the issues addressed are diverse, not every organization works on or has a policy
position on every specific issue.
3
May 3, 2010

Dear Senator:
As advocates for students, young people, consumers, higher education and civil rights,
we strongly urge you to ensure that the Restoring American Financial Stability Act
(S. 3217) gives the Consumer Financial Protection Bureau (CFPB) full authority over all
private student loans. We are deeply concerned that the bill as currently drafted may not
even give the CFPB enforcement authority over the largest private student lender, Sallie
Mae, or over predatory loans made by large for-profit colleges attended
disproportionately by low-income and minority students.
Private student loans are one of the riskiest ways to pay for college, yet a significant
number of students have private student loans as well as, or instead of, safer federal
student loans. Private student loans typically have uncapped, variable rates that are
highest for those who can least afford them. They lack the fixed rates, consumer
protections and flexible repayment options of federal student loans, and are extremely
difficult to discharge in bankruptcy.
Unfortunately, S. 3217 does not currently ensure meaningful oversight of the largest
private student lender or the riskiest products. We therefore urge you to amend S. 3217
to ensure that the CFPB has full authority over all private student loans, including that:
• The CFPB has full enforcement authority over the largest private student
lenders. As S. 3217 is now drafted, the CFPB may not have supervision or
enforcement authority over Sallie Mae, the largest private student lender, because it
is financing private loans through the Sallie Mae Bank, which has total assets under
$10 billion. Sallie Mae made nearly $5 billion in private loans in 2008-09.
• The CFPB has full enforcement authority over predatory loans by schools and
other nonbanks. As S. 3217 is currently drafted, the CFPB would not have full
authority over nonbank entities unless they were determined to be "larger" in the
market. Lenders who might fall through the cracks include schools that make private
loans directly to their students, such as Corinthian Colleges, which has told investors
that it expects nearly 60% of these loans to default. The company still profits
because the federal grant and loan dollars associated with these borrowers far
outweigh the planned write-offs.
• Private loans must be certified and students informed of any remaining federal
loan eligibility. The House-passed financial reform bill requires lenders to confirm.
with the borrower's school that the borrower is in fact a student, is eligible to borrow
the requested amount, and has been notified of any untapped federal loan eligibility.
This "school certification" gives colleges the crucial opportunity to counsel students
before they take out an unnecessarily costly and risky private loan. Sallie Mae
reports that school certification reduces the amount borrowed nearly 30% of the time,
and research has found that school-certified loans have significantly lower default
rates than uncertified loans.
Thank you for your consideration of our views. Should you or your staff have any
questions, please contact Pauline Abernathy with the Institute for College Access &
Success at pabernathy@ticas.org or (510) 318-7903.
Signed,

•
Americans for Financial Reform
The College Board
Consumer Action
Consumer Watchdog
Consumers Union
The Education Trust
NAACP
NYPIRG
Rock the Vote
U.S. PIRG
UNCF
Young Invincibles
• A large number of organizations are working together to advance Americans for Financial Reform's (AFR)
common interest in an accountable, transparent and secure financial system, and to accomplish our shared
policy goals. Because the organizations involved and the issues addressed are diverse, not every
organization works on or has a policy position on every specific issue.
2
Sent: Thursday, June 24,201012:58 AM
To: Kvaal, James; Arsenault, Leigh; Smith, Zakiya; Shireman, Bob; Hamilton, Justin; Kanter, Martha
Subject: important Juiy 1 Changes to Federal Student Loans - Project on Student Debt release
Attachments: image001.jpg
NEWS RELEASE
June 23, 2010
CONTACT: Johanna
Diaz 202/371-1999
hannon
Galleg
as
510/31
8-7915
July 1 Brings Important Changes to Federal Student Loans
Improvements to Income-Based Repayment, Lower Interest Rates, 100% Direct Loans, and More
July 1 will bring several significant changes to federal student loans that benefit new and current borrowers. Some interest rates will decrease, and
updated rules for Income-Based Repayment (IBR) will bring fair treatment to married borrowers and those who owe more than when they finished
school. Also, all federal student loans made on or after July 1 will be Direct Loans, which come straight from the U.S. Department of Education. This
1
will save taxpayers tens of billions of dollars by eliminating a parallel program that subsidized private lenders to make the same federal loans.
"These changes are great news for students and borrowers," said Lauren Asher, president of the Institute for College Access & Success, which runs
the Project on Student Debt. "IBR will work much better for married borrowers and those whose debt has grown since graduation. Many borrowers,
both students and parents, will benefit from lower interest rates. And it will finally be clear that federal student loans come from the government,
while much riskier private student loans come from banks and other private lenders."
IBR first went into effect in 2009 and has helped tens ofthousands of student loan borrowers reduce their monthly payments. Hundreds of thousands
more borrowers are likely eligible for the program, including some who would have been ineligible or faced higher payments because of two
regulatory glitches that will be fixed on July I:
1. When married couples both have federal student loans, they will no longer face higher IBR payments than their unmarried peers. For married
borrowers who file their taxes jointly, lenders will factor in the couple's total federal student loan debt, as well as their total income, to calculate
payments. Originally, IBR did not recognize that joint income has to cover bOth spouses' federal loan payments, resulting in payment requirements
up to twice what two equivalent single people would have to pay.
2. IBR eligibility will be based on either the balance when the loan first entered repayment or on the current loan amount, whichever is greater.
This will allow borrowers whose loan balances have increased (often due to accrued interest during periods of deferment or forbearance) to qualify
based on what they actually owe.
The Project on Student Debt created www.IBRinfo.org to help consumers learn about IBR and estimate their eligibility and monthly payments under
the program. On July I, the site's IBR calculator will reflect these important changes.
Other changes taking effect on July I will make need-based aid more helpful and affordable. The maximum Pell Grant increases by $200 to $5,550,
reducing current students' need to borrow. The interest rate on new need-based subsidized Stafford loans will drop from 5.6 percent to 4.5 percent for
undergraduates, and remain at 6.8 percent for graduate students. Borrowers who already have Stafford loans with variable rates will also see
decreases in their interest rates.
The switch to all Direct Loans will also mean lower interest rates for some parents. Until July I, federal Parent PLUS loans had rates of either 7.9%
or 8.5%, depending on which federal loan program a college chose. With all new Parent PLUS loans coming through the Direct Loan program, the
rate for all parents will be 7.9%.
For more information, see the Project on Student Debt's Borrower's Guide to July 1, 2010, and a chart with Federal Student Loan Terms for 2010-
2011.
# # # #
2
An independent, nonprofit organization, the Institute for College Access & Success works to make higher education more available and affordable
for people ofall backgrounds. The Institute's Project on Student Debt works to increase public understanding ofrising student debt and the
implications for our families, economy, and society. For more information see www.pro;ectonstudentdebt.org andwww.ticas.org.
This press release is available online at~ectonstudentdebt.org!files/pub/Ju1y 1 2010 NR.pQf.

Lauren Asher
President
Oakland, CA 94612
(510) 318-7900, x304
~asher@ticas. org
www.ticas.org
www_~ectonstudentdebt.org
3
FOR IMMEDIATE RELEASE Contact: Edie Irons
May 3, 2010 510/318-7902
Gretchen Wright
202/371-1999
Sallie Mae's Private Loans Exempt from Financial Reform Bill?

Broad Coalition Calls for Amendments to Cover all Private Student Loans
(Washington, D.C.) -In a letter sent today, nearly 40 organizations that advocate for students, civil rights,
higher education, and consumers called on U.S. senators to close worrisome gaps in the Senate financial
reform bill. As currently drafted, the bill does not ensure that the new Consumer Financial Protection
Bureau (CFPB) has enforcement authority over the largest private student loan provider, Sallie Mae, or
over predatory loans made by large for-profit colleges to their own students.
Private student loans typically have uncapped, variable interest rates that are highest for those who can
least afford them. They lack the consumer protections and flexible repayment options of federal student
loans, and are nearly impossible to discharge in bankruptcy.
"Private student loans are exactly the kind of dangerously under-regulated financial product that the
Consumer Financial Protection Bureau needs to oversee," said Pauline Abernathy, vice president of the
Institute for College Access & Success, home of the Project on Student Debt. "Failing to give the new
bureau full authority over all private student loans would leave young people and other vulnerable
consumers, and our economy, at the mercy of unscrupulous lenders."
With signers including some of the nation's largest organizations representing people of color (the
NAACP and National Council of La Raza), the letter notes that large for-profit colleges
disproportionately enroll minority and low-income students, and some of these colleges are making
private loans directly to their students, knowing that most will not be able to repay.
The letter calls for amending the Restoring American Financial Stability Act (S. 3217) to address private
student loans in three ways. First, by giving the Consumer Financial Protection Bureau full enforcement
authority over the largest private lenders. Second, by ensuring the bureau has full enforcement authority
over predatory student loans made by schools and other nonbanks. And finally, by requiring loan
"certification," which means lenders must confirm with the school that the borrower is really a student, is
eligible to borrow the requested amount, and has been notified of any untapped federal loan eligibility. At
the urging of many of the groups that signed today's letter, the House-passed financial reform bill
achieves these three objectives.
"Lenders, schools and students all support requiring certification before lenders issue private student
loans. This common-sense reform will help prevent urmecessary risky borrowing and reduce damaging
loan defaults," said Abernathy.
# # # #
See the coalition letter
An independent, nonprofit organization, the Institute for College Access & Success works to make higher education
more available and affordable for people ofall backgrounds. The Institute's Project on Student Debt works to
increase public understandi'ng ofrising student debt and the implications for our families, economy, and society.
For more iriformation see www.projectonstudentdebt.organdwww.ticas.org.
•
Private Student Loan School Certification Amendment
April 15, 2010
Private student loans are one of the riskiest ways to pay for college. They are expensive
mostly variable-rate loans that cost more for those who can least afford them. They lack the
fixed rates, consumer protections and flexible repayment options of federal student loans. And
unlike credit card debt, private loans are nearly impossible to discharge in bankruptcy.
Nearly two-thirds (64 percent) of undergraduate students who took out a private loan in
2007-08 had not borrowed the maximum in federal loans.' [We can find borrowers in
Colorado who took out private loans and would have benefited from this amendment.]
This common-sense amendment would go a long way toward preventing students from
unnecessarily taking out a dangerous private loan. It requires lenders to confirm with the
borrower's school that the student is enrolled, how much the student is eligible to borrow, and
that the student has been informed of any untapped eligibility for federal grants and loans.
• Requiring school certification gives the school the opportunity to make students aware of
safer federal loan options. Colleges that have adopted policies requiring counseling or
warning students about the risks of private loans when they learn that a student has applied
for one have significantly reduced private loan usage. 2 At Colorado State Universi~
financial aid officers contact any private loan applicants who have not filled out a
FAFSA or have not maximized their federal student loans. Half of the contacted
applicants opt to pursue federal loans instead. 3
4
• Lenders report school certification reduces the amount borrowed nearly 30% ofthe time.
• Certified loans also have significantly lower default rates than uncertified loans. s
• The lender could disburse the loan without the school's certification if the lender does not
hear back from the school within 15 business days or 21 calendar days.
A nearly identical provision is in the House-passed rmancial reform bill. The Polis-
Murphy-Bishop amendment passed in the manager's amendment on the House floor.
Mandatory school certification is strong~ supported by higher education, student,

consumer and civil rights organizations. Sallie Mae and other major lenders support
mandatory school certification as well. All agree that students should always take out the
7
maximum federal loan before considering a private loan.
1 Project on Student Debt. August 2009. Private Loans: Facts and Trends:
hJ;!:p: Ifticas,orglfileslpubjprjvate loan facts trends 09,pJ!f.
2 See Project on Student Debt's September 23, 2009 testimony:
l:lttp;Lfprojectonstud.entdebtQrgLfilesjpubIAsher testjmQny 90923.!2-df.

3 From "Colorado State Does Student Loans Right," HigherEdWatch.org:
hJ;!:p: Ifwww.newame[j~(j.JletjWQgs/education policy/2 007-08 Icolorado state.
4 See Sallie Mae's comments to the Board of Governors of the Federal Reserve System:
hJ;!:p://www,[ederalreserve,govISECRSI2009jMilyj20090529 IR-1353/R-1353 052609 2J.Q79 591049709690 1.!2-df
5 Moody's Investors Service, ''''Direct-Ta-Consumer'' Student Loans: Higher Risk," August 11, 2009. Discussed in detail in
Rep. Danny Davis' September 23, 2009 testimony: www.judi~iary,house,govjhearings/pdf/Davis090923.pJ!f,
6 See December 10, 2009 letter signed by 25 organizations in support of mandatory certification amendment:
!mp;/fprQj.ecton:;in_d~ntdeht.orgfpuh view,p!!p?jdx=534.
7 On its website, Sallie Mae states: "[Federal student] loans have very attractive terms when compared to private loans. So,
get all the federal loans you can before looking into private loans." Accessed November 12, 2009 at
http;lIwww.salliemae.com/before collegtiparents I:!lan/ways to I:!ay/exI:!loring lQanL
Insertthe Polis-Murphy-Bishop Amendmentto HR 4173 in the Senate Financial Reform

Bill, Subtitle H - Conforming Amendments, at the end of Section 1199 - Amendments to
TILA, making conforming changes (e.g., changing Agency to Bureau) and adding the
following two additions to the amendment:
Insert an "(i)" on page 4, line 3, after "Provision of Information.--", and on line 11

insert the following after the word "Agency":,
"; (ii) creditors will disclose to the SEC or relevant regulatory entity and report to
the Bureau at least annually any loans issued under subparagraph (B); and
(iii) creditors will report data at least annually to the Bureau in a manner developed
in consultation with the U.S. Department of Education"
fuwlanation and rationale for two additions:

Subsection (ii) will ensure that investors and the CFPA know which loans were not certified
by a school (because the school did not respond to the lender within 15 days). Research by
Moody's and others has shown that uncertified loans have higher default rates and are
more likely to exceed the permissible loan amounts. s This information will also ensure
schools are held accountable for responding to lender requests in a timely manner and
counseling students as required.
Subsection (iii) will ensure that essential data on private educational loans are available.
The only publicly available data on private lending is currently collected through NPSAS, a
national self-reported sample survey conducted only once every four years by the U.S.
Department of Education. For example, there are no campus-level data available on private
loan borrowing. Campus-level data is essential in order to hold colleges and lenders
accountable for patterns of unnecessary or excessive borrowing, and to provide consumers
with a way of comparing private loan borrowing at different schools.
.!&gislative History:
The House-passed version of the Higher Education Opportunity Act of2008 (HEOA)
included a mandatory certification provision that was deleted in conference. Schools,
students and Sallie Mae, the largest private lender, supported the amendment. However,
Senator Shelby objected to the provision, reportedly at the request of First Marblehead, a
private student lender that was making uncertified private loans as the time. One of the
stated objections was that the amendment gave schools the ability to block a loan simply by
not responding to the lender's request for certification. The amendment now being
proposed does not give schools this ability (schools must respond within 15 business days
or the loan can be disbursed), and First Marblehead no longer makes uncertified loans and
has indicated it would not oppose this amendment. Wells Fargo is the only lender that we
are aware of currently making uncertified loans. In addition, we did not know in 2008 that -,
nearly two thirds of private loan borrowers were not borrowing the maximum in federal
loans first, underscoring the need for school certification of privat y loans and for more
adequate and timely data on private loan usage.
,
S Moody's Investors Service, ""Direct-To-Consumer" Student Loans: Higher Risk," August 11,2009. Discussed
in detail in Rep. Danny Davis' September 23, 2009 testimony before the House Judiciary Subcommittee:
www.judiciary.hQlls~.gQVjhearings./pdfjDavis09Q9 23.1ldf·
· S· F· r
NATIONAL ASSOCIATION OF STUDENT FINANCIAL AID ADMINISTRATORS
* FROM THE OFFICE OF THE PRESIDENT AND CEO *
June 11,2010
To: Senate and House Financial Reform Bill Conferees
Dear Conferee:
As advocates for lenders, financial aid administrators, students and consumers, we strongly agree
on the importance of retaining the House provision requiring school certification of private
student loans in the final financial reform bill.
In December, the U.S. House of Representatives passed the Wall Street Reform and Consumer
Protection Act of 2009, which included a provision (Sec. 4818) that would require private f~
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educational lenders to obtain institutional certification prior to making loans to students. It is ")'"i
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vital that the final legislation include a similar provision that would require school certification ::;1
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as a replacement for provisions in current law requiring a complex borrower self-certification ""j,
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The goal of school certification is simple: Assure that borrowers use private education loans only Vj•
after exhausting less expensive federal, state, and institutional aid. .0.
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Requiring school certification that confirms students' attendance and loan eligibility - as is ."~'
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currently required on all federal student loans - discourages unnecessary borrowing which ",~
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could lead to delinquency and default during repayment. It also gives financial aid administrators ',,'i
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an additional opportunity to counsel students about less expensive forms of financial aid and ~J,
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ensures that students do not inadvertently disqualify themselves for less costly aid. Simply put, J"',
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school certification will help ensure that private loan borrowers maximize their ability to borrow
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federal loans and only tum to private loans after exhausting federal loan eligibility. '''''•
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School certification is in the interest of all stakeholders involved in private education loans, ",",
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especially borrowers. Student loan providers also support full school certification on private
education loans because they receive school-certified assurance that students are taking on
permissible debt levels tied to a specific period of enrollment. Research has found that school
certified loans also have significantly lower default rates than uncertified loans. All stakeholders
- schools, lenders, and most importantly students - stand to benefit from private loan
certification.
We urge you to retain this vital, common-sense provision in the conference bill. Please do not
PHONE' 202.785.0453 FAX' 202.785.1487 WE8, www.nasfaa.org

1101 CONNECTICUT AVE NW. SUITE 1100. WASHINGTON. DC 20036-4303
NASFAA June 11,2010
hesitate to contact us if we can provide you with any additional information on this important
matter.
Sincerely,
C8/Xl,0 AI· ~a:;)

Joan H. Crissman
Interim President & CEO, NASFAA
CC:
Sen. Harry Reid, Sen. Mitch McConnell, Rep. John Boehner, Rep. Nancy Pelosi
On Behalf of:
Consumer Bankers Association (CBA)
Education Finance Council (EFC)
National Association of Student Financial Aid Administrators (NASFAA)
Student Loan Servicing Alliance (SLSA) Private Loan Committee
The Institute for College Access & Success (TICAS)
U.S. Public Interest Research Group (US PIRG)
2
Brainstorming Meeting on Relief for Distressed Borrowers
April 29-30, 2010
Focus of meeting: Identify priority issues and policy reforms for bringing relief to
distressed federal student loan borrowers, especially those who have defaulted or are at
high risk of default.
Note: While private loans, college costs, and front-end counseling are all very important
topics, they are not the focus of this meeting. We may also put other issues, as well as
factual follow-up and tactics, in the "parking lot" so we can stay focused on the safety net
and relief for distressed borrowers.
Goals for meeting:

• Identify problems facing borrowers and put them in "buckets"
• Identify potential policy solutions (best ones both bring relief and deter abuses,
e.g., forcing lenders or schools to take on student debts when they break the law)
• Prioritize based on potential impact, population affected, and viability
• Identify some next steps
Overarching questions to consider:

• What could help create a sense of urgency about this problem?
• What are effective ways to frame the problem for key audiences?
• What impact, if any, might the shift to 100% Direct Lending have?
Attendees:
Robert Shireman, Deputy Under Secretary of Education, U.S. Department of Education
Deanne Loonin, Staff Attorney and Director of the Student Loan Borrower Assistance
Project at the National Consumer Law Center
Jamie Studley, President and CEO, Public Advocates
'Michelle Rodriguez, Senior Staff Attorney, Public Advocates
Margaret Reiter, Former California Deputy Attorney General, author, negotiator
representing consumers in 2009-10 negotiated rulemaking
Tim Ranzetta, President, Student Lending Analytics
Lauren Asher, President, TICAS
Pauline Abernathy, Vice President, TICAS
Luke Klipp, Policy Analyst, TICAS
Edie Irons, Communications Director, TICAS
Schedule: Friday
8:30 - Working breakfast
Thursday 10:30 - Bob leaves, short break
12:00 - Lunch 10:45-12:30 - Work session
1:00-5:30p - Work Session 12:30-1 :30 - Lunch
6: 15 - Dinner 1:30-3:30 -Next steps and wrap up
Ways to Help Borrowers Get out of Default and Back into Repayment
February 16,2010
At a time of high unemployment and rising student loan defaults, it is particularly important to .
ensure that borrowers who have defaulted on federal student loans have a way to get back into
repayment. Below are some common-sense, low- or no-cost policy changes that would
immediately and significantly help borrowers in default get back into repayment and onto more
secure financial footing.
• Make the credit reporting consistent for rehabilitation and consolidation. Currently,
the default notation is removed from the credit report if borrowers exit default through
rehabilitation, but not if they exit through consolidation. Both are legitimate options for
exiting default, and they should be treated the same. Borrowers should not have to go
through the more onerous rehabilitation process in order to remove this negative notation
on their credit report.
• Define "reasonable and affordable." Rehabilitation is not always an option for

borrowers in default because it requires reaching agreement with the loan holder or
collection agency on a "reasonable and affordable" repayment amount, and agencies
frequently demand inflated or unreasonable amounts. Defining "reasonable and
affordable" as no more than what the borrower would pay in IBR and no less than $5
would make rehabilitation a real option for all borrowers in default. This change is even
more important if consolidation is not always an option and/or the credit reporting
problem described above is not fixed.
• Allow borrowers to select IBR right away. Currently, the Department requires
borrowers coming out of default through consolidation to enroll in ICR first and then
switch to IBR, which is burdensome for both borrowers and the Department. These
borrowers should be able to select IBR immediately. To operationalize this, borrowers
may need to be granted forbearance or permitted to make interest-only payments initially
while their IBR payment is being determined, as they currently can while temporarily in
ICR. It is not clear whether this could be done administratively.
• Eliminate the 45% "excess consolidation proceeds" standard. To prevent guaranty

agencies from pressuring borrowers into consolidation, this rule establishes a fmancial
disincentive for agencies to consolidate more than 45% of their defaulted loans.
However, times have changed and the policy now harms borrowers by discouraging
agencies from counseling borrowers about consolidation. Instead, borrowers are being
pressured to choose rehabilitation, even though they could get similar and faster relief
through consolidation. Lenders and guaranty agencies would support this change, and it
may have little or no budgetary cost. For more information see HEA 20 U.S.c.
§ I 078(c)(6)(C).
17
• Purchase rehabilitated FFEL loans that others won't. The HEOA technical
corrections act (P.L.lll-039) gave the Department the authority to purchase rehabilitated
FFEL loans if others won't. However, the Department has not exercised this authority,
leaving thousands of otherwise rehabilitated borrowers stuck in default through no fault
of their own.
Ensure there is always a route out of default:
• Get rid of the "one time only" rule for loan rehabilitation. The HEOA limited
rehabilitation to one time only, reportedly solely to make.it consistent with the Perkins
loan program. However, this leaves people who default more than once with no options
if they find themselves in extreme financial straits a second time.
• Allow Direct consolidation loans to be reconsolidated to exit default. Currently,

borrowers who default on a FFEL consolidation loan can get out of default through
consolidation or rehabilitation. However, borrowers who default on a Direct
consolidation loan do not have this choice: they have to go through the more onerous
rehabilitation process. Direct loan borrowers should be allowed to reconsolidate Direct
consolidation loans so they have the same options as FFEL borrowers.
• Exercise the Department of Education's authority when no other option is available.

The Department has the authority to put defaulted borrowers in ICR. When there is no
other way for a borrower to exit default, the Department should exercise this authority so
there is always a way out. It is unclear if the Department has ever exercised this
authority. For more information, see HEA 20 U.S.C. §1087e(d)(5).
18
AYOI0825 S.L.C.
.AMENDMENT NO. Calendar No. _

Purpose: To address exceptions to discharge in bankruptcy,
and for other purposes.
IN THE SENATE OF THE UNITED STATES-Hlth Cong., 2d Sess.
8.3217
To promote the financial stability of the United States by

improving accountability and transparency in the finan-
cial system, to end "too big to fail" , to protect the
American taxpayer by ending bailouts, to protect con-
sumers from abusive financial services practices, and
for other purposes.
Referred to the Committee on and

ordered to be printed
Ordered to lie on the table and to be printed
AMENDMENT intended to be proposed by Mr. FRAL'\TKEN
Viz:
1 A.t the end of title II, add the following:

2 SEC. 212. EXCEPTIONS TO DISCHARGE IN BANKRUPTCY.
3 Section 523(a)(S) of title 11, United States Code, is

4 amended by striking "dependents, for" and all that follows
5 through the end of subparagraph (B) and inserting "de-
6 pendents, for an educational benefit overpayment or loan
7 made, insured, or guaranteed by a governmental unit or
8 made under any program funded in whole or in part by
AYOl0825 S.L.C.
2
1 a governmental unit or an obligation to repay funds re-
1 ceived from a governmental unit as an educational benefit,
3 scholarship, or stipend;".
iii

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-------- - ------------- ------- -- -- ---------------- ,-- ~~~ ~ -~--- ~ ~~ ~ ~~-~-~--- - -~ ----

From: Nassirian, Barmak [barmak@aacrao.org]

Deep Thoughts, by Paul Ginocchio.

Reports that GE draft contains a 70/70 completion/placement loophole

Cautious to read too much from one Staffer's comments

(See attachedfile: 0900b8c081adje8apdj)

From: Black, Andrew [ablack@fppartners.com]

Bob - Please find the attached slides.

From: Leahy, Matthew [mleahy@fppartners.com]

David and Bob,

From: Leahy, Matthew [F11ailto:mleahy@fppartners.com]

David and Bob,

From: Pauline Abernathy [pabernathy@ticas.org]

From: Luke Klipp

From: Pauline Abernathy [pabernathy@ticas.org]

From: Paul Brathwaite [mailto:pbrathwaite@podesta.com]

Briefing on Gainful Employment

Friday, April 23, 2010

Small hr <http://i2.cmailS.com/ti/y/93/E6S/A03/002709/csimport/20100421-ejjmr32j1ijykgjrquktg3q3ib 1.jpg>

Small hr <http://i2.cmailS.com/ti/y/93/E6S/A03/002709/csimport/20100421-ejjmr32j1ijykgjrquktg3q3ib 1.j~>

If you no longer wish to receive this email, please unsubscribe <http://cca.cmai15.com/t/y/u/okuhkj/oyugge/> .

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Career College Association <http://i3.cmaiI5.com/ti/y/93/E65/A03/002709/csimport/20100421-

Text of email sent to mayor's office:

Is this paper wholly worthless because it's making assumptions based on

The fuil report can be found at

Some of the key findings of the report include:

1. Risk factors that affect persistence and attainment

2. Pell Grant recipient status accounts for 32.9% of the

3. Household size accounts for 20.8% of the difference in

4. Parent educational attainment of a Bachelor's degree

5. Dependency status accounts for 17.2% of the difference

6. The distribution of colleges according to level and

7. The distribution of dollar loan volume according to

The report includes two main recommendations:

1. College cohort default rates should be split into two

2. Although debating differences in default rates among

FinAid Page LLC

Deanne Loonin, National Consumer Law Center

From: Lauren Asher [LAsher@ticas.org]

(Please note our new phone number and address!)

From: Lauren Asher [LAsher@ticas.org]

(Please note our new phone number and address!)

Bob, Deanne, Margaret, Tim, Jamie and Michelle,

From: Pauline Abernathy [pabernathy@ticas.org]

A student petition rejecting ED's [currently nonexistent] definition of gainful employment.

New College Board Study: For-Profit College Graduates Have

Jared Polis Patrick S. Murphy Raul M. Grijalva

"College Inc." Tonight on PBS: FRONTLINE Investigates For-Profit

From: Edie Irons [Elrons@ticas.org]

~_"'~C"_,_M' •• _<o~_.W'U.~ .. ,."M"·~ __ ~"'~'_~' '~'_"'" ' __ __

From: Shireman, Bob [mailto:Bob.5hireman@ed.gQY]

From: Beth Kowitt Imailto:beth kowitt@fortunemail.com]

From: Lauren Asher [Ijasher@ticas.org]

Try Cecilia E. Rouse@cea.eolL9Ql!

."·".• ~",~.,"w.w,,~~,,,~,, __ ...

From: Williams, Leslie Imailto:Le.williams@fordfound.org]

Thanks Lauren and Bob!

Bob, do you have Cecilia's info?

Kevin Byrne's phone number is (512) 329-0799, xl25

Hilary Pennington's email is hilarv.pennington@gatesfoundation.org

From: Anderson, Gregory [mailto:G.Anderson@fordfound.org]

From: Williams, Leslie

~_"'~C"_,_M' •• _<o~_.W'U.~ .. ,."M"·~ __ ~"'~'_~' '~'_"'" '

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