Trade Act of 2015

Floor Speech

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Mr. President, yesterday the senior Senator from Arizona, the chairman of the Senate Armed Services Committee, came to the floor to speak to an issue and mentioned my name several times during the course of his remarks on the floor. I come here this morning to respond to the senior Senator from Arizona.

The issue is a decision by the Department of Defense on October 7 of this year to place the University of Phoenix, a for-profit university, on probation and prohibit the company from enrolling new Department of Defense tuition assistance and MyCAA beneficiaries. Under this Department of Defense order, the company--University of Phoenix--was barred from accessing military bases. This is a serious action, and there is a reason for it.

The senior Senator from Arizona came to the floor to protest this decision by the Department of Defense and to also protest other actions that have been taken relative to other for-profit universities. I come this morning to respond.

What is at stake is something that is very essential. When men and women volunteer for our military and hold up their hands and say ``I am willing to die for this country,'' they make a promise and we make a promise. Our promise is that if you will serve this country and risk your life for America, we will stand by you when you come home. If you are injured, we will provide medical care. If you want to pursue education and training, we will help you do it; in fact, we will help your family do it. And there are many other benefits that we rightly promise to these members of the military.

Department of Defense tuition assistance and the GI bill, which has been characterized as the GI bill since World War II, is really the vehicle that gives to many of these servicemembers, while they are serving and after they have completed their service, a chance to build their lives. They are generous programs, and they should be. MyCAA is generous to their families, and it should be. But these are virtually once-in-a-lifetime opportunities. We hope these members of the military choose well in terms of the courses they need to take and the training they need to prepare for their lives after they have served our country. We have a responsibility when it comes to those who are currently in the service to monitor the activities of the schools that are offering education and training as part of these programs. We would be derelict in our responsibility if we did not.

The Department of Defense wrote a memorandum of understanding to all schools saying: If you want to offer Tuition Assistance program training and education, if you want to offer training for the families of servicemembers, here are the rules to play by. And I think virtually every institution of higher learning knows going in to follow the rules, whatever the institution may be.

Let me say a word about the University of Phoenix. This is not just another for-profit school; it is the largest by far. At the height of its enrollment, the University of Phoenix, a for-profit university largely offering online courses, had as many as 600,000 students. That is dramatically more than the combined enrollment of all the Big Ten colleges and universities. Over the years--in the last 5 years, the size of their student body has declined; it is now slightly over 200,000. As an individual institution, it is the largest in America, and it certainly is the largest of the for-profit colleges and universities. You can hardly escape the advertising, the naming rights to the stadium where the Arizona Cardinals play their football games in Arizona. They have advertising on television, radio,

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and billboards. It is a company that markets in every direction and as a consequence has built a large student enrollment.
How about the University of Phoenix in terms of dollars it receives? That is interesting. Unlike universities and colleges around the United States, whether in North Dakota, South Dakota, Nebraska, Illinois, or wherever, these for-profit universities get a substantial portion of their revenue directly from the Treasury through Pell grants and student loans. Dramatically higher percentages of their revenue come from Treasury than virtually any other college or university. This is unique to the for-profit college and university sector. They are the most heavily subsidized for-profit private businesses in America today.

Let me give an example of what I am talking about. Eighty-two percent of the revenue going to the University of Phoenix--$2.7 billion--comes out of title IV. When it comes to Department of Defense tuition assistance, University of Phoenix is the fourth largest recipient in the United States--$20 million. Under the GI bill, it is the largest recipient from the Department of Defense and the Treasury--$346 million. Their CEO, Mr. Cappelli, is paid $8 million a year in total compensation, which is dramatically more than virtually any other university president in the ordinary course of higher education--what is a record.

University of Phoenix students cumulatively owe more in student debt than any educational institution in America. University of Phoenix students owe $35 billion in student loans. Only half of the University of Phoenix borrowers are paying down their debt 5 years after graduation or after they have dropped out of school. Phoenix's overall 3-year repayment rate--that means how many borrowers are making payments on their debt after 3 years--is 41 percent. Less than half of the University of Phoenix students and graduates after 3 years are paying back. Their 5-year repayment rate is 47 percent. Nearly one out of every two students who graduated or dropped out in 2009 has defaulted within 5 years. The University of Phoenix's 5-year cohort default rate--students who graduated in 2009 and defaulted by 2014--is 45 percent. The Arizona location--which includes online students across the country--the 4-year bachelor's-seeking graduation rate is 1 percent and the 6-year bachelor's-seeking graduation rate is 10 percent.

In the for-profit college and university industry, there are three numbers to remember. Ten percent of the students graduating from high school go to these for-profit schools. Twenty percent of all the Federal aid for education goes to these schools. Why? They are very expensive. The tuition they charge is dramatically more than colleges and universities across the country. But here is the number to remember: As an industry, 40 percent of all the student loan defaults are students who attend for-profit colleges and universities. Why? It is so darned expensive that students can't continue the education and drop out or they complete the education and many times find that the diploma is worthless.

Let's go back to the Department of Defense. We want to protect our men and women in uniform from being exploited by any college or university, for-profit or not. The Department of Defense wrote a memorandum of understanding and said: If you want to offer courses to our men and women in uniform, here are the rules to play by.

On October 7, the Department of Defense announced that they placed the University of Phoenix on probation and prohibited them from enrolling new servicemembers in the DOD Tuition Assistance and MyCAA Programs. They barred them from accessing military bases. The decision, the Department said, was based on violations of the memorandum of understanding, which I described this morning, based on their own review.

Yesterday the senior Senator from Arizona came to the floor to protest the decision by the Department of Defense. There were several things he said during the course of his floor statement which I would like to address.

The senior Senator from Arizona claimed that the Department of Defense's ``actions were taken without due process'' and based on ``an outside investigative report.'' The Senator went on to say that it ``wasn't a department investigation. There was no scrutiny.'' He said that on the floor to protest the Department of Defense decision.

Here are the facts. The Department of Defense conducted nearly 4 months of review of the University of Phoenix's practices after the report by the Center for Investigative Reporting raised allegations relating to the company strategy using corporate sponsorship of events on military bases to skirt the Federal rules on recruitment that had been spelled out in the memorandum of understanding.

The Department of Defense placed the University of Phoenix on probation when its review ``revealed several violations of the Department of Defense Memorandum of Understanding.'' DOD also gave the company 14 days to provide the Department of Defense with materials in response to the decision.

To argue that there was no due process in this is betrayed by the facts.

The senior Senator from Arizona went on to say: ``If the University of Phoenix is guilty of some wrongdoing, I want to be one of the first to make sure that proper penalties are enacted.''

Here is the fact: The Department of Defense confirmed that the University of Phoenix is guilty of wrongdoing. The Department of Defense's notice to the university stated that ``it conducted a review of the agreements between the University of Phoenix and the DoD, as reflected in the DoD MOU. ..... This review revealed several violations of the DoD MOU attributed to the University of Phoenix, including, but not limited to, transgression of Defense Department policies regarding use of its official seals or other trademark insignia and failure to go through the responsible education advisor for each business related activity requiring access to the DoD installations. .....'' They go on to say that they found that ``the frequency and scope of these previous violations of the DoD MOU is disconcerting.''

Despite this, the senior Senator from Arizona is urging the Department of Defense to ignore what they found in their investigation and to reverse their decision putting the company on probation.

The senior Senator from Arizona went on to call Phoenix's violations ``minor breaches in decorum'' and ``technical in nature.''

The Department of Defense found that the University of Phoenix violated terms of its memorandum of understanding--a legal document laying out the rules and standards every institution must adhere to in order to be eligible to participate in voluntary military education programs. For instance, this document specifies that the base's education officer, not the base commander, is the sole approving authority for any and all access to the base. In their violation of this memorandum of understanding provision, the Department of Defense called the University of Phoenix's violations disconcerting in their frequency and scope.

The company had a corporate strategy of spending millions of dollars to sponsor events on military bases to skirt Department of Defense rules and the 2012 Executive order that was designed to prohibit institutions from recruiting servicemembers on military bases.

Mr. President, let me spell out some of the things that were being done by the University of Phoenix. Remember what we are talking about. This university is receiving $20 million a year through DOD tuition assistance and $346 million through the GI bill. Of course, it is a big profit center for them to continue this pursuit of the military, and they spent a lot of money to support it, and that is what got them in trouble.

The University of Phoenix spent over $250,000 in the last 3 years just in one location--Fort Campbell, KY--sponsoring 89 events. One event featured a performer named Big Smo; that alone cost $25,000. Across the country, the University of Phoenix sponsored events on military bases, including rock concerts, Super Bowl parties, father-daughter dances, Easter egg hunts, a chocolate festival, and even brunch with Santa.

The University of Phoenix paid the Department of Defense to have its staff serve as exclusive résumé advisers in

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Hiring Our Heroes job fairs and workshops, many on military bases. A Center of Investigative Reporting hidden camera documented that all of the résumé workshop materials, presentation slides, and sample ``successful'' résumés were labeled with University of Phoenix marketing, and trainers urged attendees to go to the University of Phoenix Web site for more information.
The University of Phoenix used ``challenge coins''--which the Senator from Arizona raised on the floor--with DOD seals and logos to show its close relationship with the military without receiving prior approval. The Senator from Arizona noted that other schools have done the same thing, including, he mentioned, Southern Illinois University. This Senator is not going to send a letter to the DOD protesting if they hold SIU or any school accountable for the same conduct as the University of Phoenix. The senior Senator from Arizona did, and I think he ought to reflect on that for a moment.

The senior Senator from Arizona says the University of Phoenix has a long history of serving nontraditional students, such as Active-Duty military and others.

According to Paul Reickhoff of the Iraq and Afghanistan Veterans of America, the university of Phoenix ``is constantly reported as the single worst by far'' when it comes to for-profit colleges taking advantage of its members.

The Senator from Arizona says the Consumer Financial Protection Bureau, the Education Department, and the California attorney general, Kamala Harris, drove another for-profit school, Corinthian, out of business without ever proving misconduct, and now we are attempting to do the same to the University of Phoenix.

The fact is, there are ongoing investigations into the University of Phoenix by the Federal Trade Commission related to unfair and deceptive practices, including military recruitment and the handling of student personal information. There is an investigation underway of the University of Phoenix by the Department of Education's inspector general related to marketing, recruitment, enrollment, financial aid processing, fraud prevention, student retention, personnel training, attendance, academic grading, et cetera.

There is an ongoing investigation into the University of Phoenix by the Security and Exchange Commission relating to insider trading, and not one but three different state attorneys general are investigating the University of Phoenix for unfair and deceptive practices. The Senator from Arizona comes and protests that we are involved in some sort of ideological grandstanding--that is what he said, ideological grandstanding--ignoring the evidence which I have presented this morning about the investigations into the University of Phoenix going on across agencies, State and Federal, and the investigation by the Department of Defense that led to this decision.

He also went on to say yesterday in his remarks:

Last year, the Education Department, Consumer Financial Protection Bureau--

And an individual named Ms. Harris--

mounted a coordinated campaign that drove for-profit Corinthian College out of business without ever proving misconduct.

They were able to drive a college out of business. What a coincidence that he would make that statement on the floor of the Senate yesterday, the same day it was reported that a Federal judge in Chicago ordered Corinthian College--now bankrupt--to pay $530 million to the Consumer Financial Protection Bureau, resolving a year-long lawsuit against the for-profit chain for allegedly steering students into predatory student loans.

The CFPB Director, Richard Cordray, said in a statement, ``Today's ruling marks the end of our litigation against a company that has severely harmed tens of thousands of students, turning dreams of higher education into a nightmare.'' I don't understand how the Senator from Arizona could come to the floor the same day this Federal decision was reported and raise this issue without some knowledge of what the Corinthian Colleges were doing. What they were doing was lying. They were misrepresenting to the Federal Government how many students were employed after they graduated. It turns out Corinthian was paying employers several thousand dollars to hire their students--graduates--for a month or two so they could report to the Federal Government they had jobs.

Of course, when the money ran out from Corinthian, the students lost those part-time jobs. Corinthian was caught. They were asked to provide information to refute what I have just said. Instead of doing that, they started dissembling and going out of business. They were also steering students to what they called genesis loans at Corinthian College. Students were paying outrageous tuition and fees for bachelor's degrees, $60,000 or $75,000, and then they were facing genesis loans, they called them, with interest rates as high as 15 percent.

This industry does have good schools and good courses in the for-profit business sector, I am sure, but there has clearly been misconduct. We have to call them on it and hold them responsible. It is our Federal Government that virtually acknowledges the accreditation of these schools that offer Pell grants and direct student loans to their students, creating the impression among students and families that these are perfectly good colleges and universities. We have a responsibility to students and families across this Nation to police their ranks when there is misconduct. In this case, the Department of Defense looked closely and decided that the University of Phoenix was involved in misconduct. That is why they reached their decision.

There was a letter that was prepared by a number of organizations--I will not read all of their names--but it was sent October 27 this week to the Honorable Ashton Carter, the Secretary of Defense, thanking the Department for their recent action when it came to the University of Phoenix. These organizations went on to catalog the things I have said this morning. They also talk about the students these organizations have worked with. This letter says servicemember complaints regarding the University of Phoenix fall into three categories: servicemembers who were signed up for loans without their knowledge or permission after being promised they would incur no loans, servicemembers who were misled about the cost of tuition increases at the University of Phoenix, servicemembers who were misled about the accreditation and transferability of University of Phoenix credits.

Yesterday, the senior Senator from Arizona cited three students. I would like to read from this letter. They note three students who were members of the military commenting on the University of Phoenix. First, Cody Edie, of the U.S. Marines said:

I was told these credits would transfer anywhere nationwide but as I began my transition from active duty I found out they will not transfer to the schools in my home state. I wasted my time and 15 credits for nothing.

A statement from Erin Potter, U.S. Army:

I was told by the University of Phoenix that I would be eligible for grants that I did not have to pay back. I came to find out they enrolled me in loans and now I cannot afford the payments.

From Dennis Chamberlain, U.S. Army:

I attended the University of Phoenix to obtain my bachelors degree. I racked up close to $20,000 in debt to attain my degree. I feel they targeted me for my military student aid. I struggle every month paying back the student loans I could have avoided. I was shot twice in Afghanistan by shrapnel from RPGs.

The letter is signed by about 20 different organizations: the Air Force Sergeants Association, the Association of the U.S. Navy, the American Association of State Colleges and Universities, Blue Star Families, Paralyzed Veterans of America.

I ask unanimous consent to have this letter printed in the Record.

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Mr. President, I am going to wrap up. I read carefully what the senior Senator from Arizona had to say yesterday. I hope I have addressed each of the major points he raised. There was indeed an investigation. There were standards which the University of Phoenix agreed to follow and then failed to follow. There is an effort underway to make sure we protect the men and women in the military and their families from exploitation when it comes to their GI bills. We should continue that effort.

I hope my friend and colleague from Arizona who has made a record in the Senate of speaking up, standing up to avoid those misuses of Federal funds, will continue in that same vein when it comes to this issue. We want money well spent. We want our men and uniform well served.

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