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Cummings Investigation

On December 12, 2011 Ranking Member Elijah Cummings announced an investigation into the compensation packages of top executives at for-profit colleges.

Cummings sent document request letters to the CEOs of the following 13 for-profit schools seeking copies of compensation agreements for senior executives as part of an effort to determine whether salaries, bonuses, and other compensation are appropriately tied to the performance of students they educate, the vast majority of whom pay for their education with federal tax dollars.

“The American taxpayers fund these schools through billions of dollars in tuition assistance, but there is little evidence that lavish executive pay is linked to the well-being of the students they are supposed to educate,” said Cummings.  “Congress has a responsibility to ensure that taxpayer funds are being used first and foremost for the benefit of students, not to line the pockets of corporate executives.”

 

Institution

Revenues from U.S. Taxpayers

(e.g. Title IV loans & grants)

Executive Pay

(Top 5)

CEO Pay

Student Default Rate

 

 

 

 

 

Apollo Group, Inc. (AZ)

88%

$27.9 million

$6.5 million

20.9%

Bridgepoint Education, Inc.

85%

$5.8 million

$2.2 million

19.8%

Capella Education Co. (MN)

78%

$8 million

$3.8 million

6.5%

Career Education Corp. (IL)

82%

$11.5 million

$4.6 million

21.6%

Corinthian Colleges, Inc. (CA)

82%

$12.6 million

$3.03 million

36.1%

Devry, Inc. (IL)

77%

$10.9 million

$6.1 million

17.8%

Education Mgmt Corp. (PA)

77%

$12.3 million

$3.8 million

16%

Grand Canyon Education, Inc. (AZ)

85%

$6.3 million

$2.2 million

7.4%

ITT Education Services (NY)

59%

$12.2 million

$6.7 million

26.3%

Kaplan Education Inc. (NY)

89%

**

**

30%

Lincoln Educational Services (NJ)

Between 62 & 96.9%

$3.6 million

$1.01 million

27.7%

Strayer Education, Inc. (VA) *

78%

$6 million

$1.5 million

12.8%

Universal Technical Institute (AZ)

73%

$6.1 million

$2.2 million

12.2%

-- Statistics from chart are from 2010 unless otherwise noted --

 

*Data for 2010 not available, reflects statistics from 2009

**Kaplan Higher Education is a wholly owned subsidiary of the Washington Post Company that is not required to disclose this information to the SEC

Background

For-profit schools receive the majority of their funding from U.S. taxpayers in the form of student assistance, including Title IV loans and grants, Title X tuition assistance, and Veterans Education Assistance Act funds.  When compared to public and nonprofit schools, for-profit companies spend a smaller percentage of their funds on student education, reserving more for marketing, advertising, recruitment, and other non-education expenses.  Their student success rates are lower, and their students are more likely to default on loan payments.  Studies have found that CEOs at for-profit colleges consistently make much more than their counterparts at public and nonprofit schools.

Cummings's Prior Work

Over the past three Congresses, Cummings has been a nationally recognized leader investigating excessive corporate salaries, bonuses, stock options, and other compensation.  As a Member of the Oversight Committee, he has investigated unwarranted bonuses for AIG executives, conflicts of interest with compensation consultants, the disconnect between corporate pay and company performance, and the widening gap between the ultra-rich and middle-class American workers.

Since becoming the Committee’s Ranking Member earlier this year, Cummings has continued this fight.  In August, he called on Committee Chairman Darrell Issa to hold hearings on executive compensation after a report revealed that 25 of the top 100 CEOs received more in compensation last year than their company paid in 2010 federal income taxes.

Last month, Cummings led the charge to investigate the compensation of executives at Fannie Mae and Freddie Mac, who reportedly were paid more than $12 million in bonuses despite inadequate efforts to help American families facing foreclosure and despite Inspector General reports finding deficient management practices.