Monday, April 23, 2012

Small School Expands Despite Storm of Criticism For Industry

After ascending to the sixth floor in a narrow and dimly lit elevator, students are welcomed to their Flatiron neighborhood-based school, the Manhattan Institute, by its freshly painted off-white walls. Ed Schwartz, the owner and founder of this for-profit school that offers technical courses in medical care, takes pride in the little things – like the school’s bright indoor facade.   

And so he confronts those who criticize his school about its details.  Even if those critiques occur on internet forums.  “The school is freshly painted every three months,” Schwartz stated defiantly in response to a critical post on the internet review site Yelp.

It is with this audacious outlook that Schwartz recently steered the Manhattan Institute into the center of a storm of criticism from a growing and potent group of opponents whose analyses extend beyond internet review websites. 

Last fall, after a significant accreditation investment of over $100,000, this school – which took in $1.5 million in 2011 – began to offer classes to recipients of federal student aid from the US Department of Education. 

This money, called Title IV funds, comes in the form of either loans or grants.  It is what has propelled the profits of large publically traded colleges – like the University of Phoenix – over the past decade.

But that has also raised the ire of policymakers and created the storm of critiques.       

Mayor Bloomberg’s Office of Adult Education, for example, has warned potential students that debt loads from Title IV loans can become insurmountable because job prospects for graduates from some for-profits are often weak.

In New York Subway cars, the Mayor’s Office of Adult Education posted large placard signs featuring New Yorkers’ anecdotal accounts of their less than ideal experiences at for-profit schools. 

“(Students) have access to a first-rate adult education and training system with hundreds of free and low-cost classes throughout the City,” said Tara Colton, the executive director of the agency in a press release. 

But Ed Schwartz isn’t worried about this campaign. He states that his school, which has been operating since 1989, offers students reputed programs that are cheaper than his for-profit competitors.

“I have the advantage of a lower price, because I don’t have to have shareholders making money,” Schwartz said. 

Since it’s start, the Manhattan Institute offered technical degrees in various medical professions that assist doctors and nurses, such as medical billing, medical assisting, and certified nursing assisting.  These programs were short – all less than one year – and students paid their tuition in cash.  Today, however, now that the Manhattan Institute is accredited, 80 percent of students in its nine-month long medical assisting program pay at least some of their tuition with Title IV student aid funds.

Medical assisting is a profession that consists of aiding doctors with both patient care and administrative duties.  This field is in particularly high demand due to retiring baby boomers that increasingly need more medical care as they age.

Students enrolled in the Manhattan Institute’s other programs do not receive help from the federal government because Title IV funds do not apply to short one or two month long programs. 

The payoff Ed Schwarz will receive for this shift in his financing model is significant.

“Getting Title IV I knew I could double my income because now instead of charging 5,000 dollars I can charge 12,000,” said Schwartz referring to the cost of his medical assisting program.  But, in addition to profiting, Schwartz also asserts that the Manhattan Institute is filling a demand for students in an economy that increasingly needs more medical professionals.

One of those is Saher Aziz who attended the Manhattan Institute last year in the medical billing program.  As a citizen of Canada, and already a professional in that field there, she took the course to learn the idiosyncrasies of the complex American billing system.  Aziz said the school trained her sufficiently but did not provide the same quality of education she received in Canada.

“The school was not that bad.  But it was not that good either,” Aziz said

Her main complaint, however, didn’t have to do with the curriculum.  She explained that the job placement service at the school was not useful.  The Manhattan Institute’s job counselor could not find her a job and, after starting her search in December, she’s still looking for work today. 

This issue of gainful employment, as its known, is another point of contention directed at for-profit schools.  

Last June, the US Department of Education attached strings to their Title IV funds.  These new rules stated, for example, that at least 35 percent of a school’s graduates must have been paying off their student loans at the end of a year for the school to continue to be connected to the federal loan pipeline.

If students in the Manhattan Institute’s medical assisting program face similar employment challenges to what Saher Aziz confronted, then Ed Schwartz may run into the bite of these new federal regulations. 

But at this point, the school maintains a solid record.  Neither the Better Business Bureau nor the Mayor’s Office of Adult Education has received complaints in the past three years about the way Schwartz conducts his school.   

William Tierney, a professor who studies the higher education industry at the University of Southern California, believes the new federal regulations will cause the for-profit industry to contract – and he thinks that’s a good thing. 

Tierney argues that some who operate for-profit schools are unsavory characters.   “The industry will contract as the crooks are driven out; but those with staying power and good business practices are likely to survive,” Tierney said.

Although Ed Schwartz is generally skeptical of the Federal Government’s motives, he agrees that the Department of Education should tighten regulations on some parts of his industry, particularly the marketing expenditures of big schools.  Too much money is spent on television commercials, he argues.

“Every commercial break I see three or four commercials for those schools.  It’s like, boom, boom, boom.  And this is why we have such a bad name,” he said. 

In the end, despite Ed Schwartz’s assertive business mentality, he admits that the Title IV funding model is not all greener pastures. Although the Manhattan Institute is earning increased revenues, the accreditation process was a significant investment.  Also, Schwartz wonders whether his new regulator, the US Department of Education, will place new, more onerous, rules on his school.   

Because of this uncertainty, he has decided to put any further expansion plans on hold. 

“I was much happier when I was just being governed by the State of New York,” he said somberly. “If I got rid of my accreditors, and went back to the way I was before, I’d be more at peace.”

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