Recruitment practices fined in the U.S. are just fine in B.C.

Under the B.C. Liberal government these past four years, things have been good for the University of Phoenix. The skyrocketing tuition fees for public schools have made its prices more competitive, and new legislation allows it and other private schools to apply to legally use the word university in their names and to grant B.C. degrees.

Ironically, although the B.C. government handed the University of Phoenix and others new powers, the school has faced increasing government pressure in its Arizona home to improve how it does business. That campaign culminated last September when the university agreed, without admitting guilt, to pay US$9.8 million to settle a dispute with the United States Department of Education. The fine-the largest ever paid by a U.S. private school-was for various practices related to recruiting students for the largely on-line private university, practices that the Department of Education said ranged from "illegal to unethical to aggressive".

Although the fine was big news in the U.S., it was ignored by media in Canada, where the University of Phoenix is growing but still a fringe player on the education scene. It has a campus in Calgary and plans to open one in Toronto soon. In B.C., the school has served 700 students. Most of the students-about 500 of them-studied at the school's Burnaby campus, and the rest attended "satellite" classes in centres like Nanaimo and Abbotsford. The Victoria classes are held in a downtown hotel.

Interestingly, the practices that brought the school to the attention of the American federal government are legal here, and many are probably business-as-normal for private postsecondary schools.

According to a September 2004 article in the Phoenix daily newspaper, the Arizona Republic, a 45-page report from the Department of Education "details several examples of compensation and sales practices" that were questioned. The report is based on interviews with more than 60 employees and former employees of the University of Phoenix. The practices included putting underperforming enrollment counsellors in a "red room", where they worked under intense management supervision until they could get their numbers up; using an evaluation and salary system that "provides incentive payments based both directly and indirectly on success in securing enrollments"; and providing "substantial incentives" to its staff to recruit unqualified students and ones who cannot benefit from the training offered.

The department also alleged that the university "systematically and intentionally operates in a duplicitous manner so as to violate the department's prohibition against incentive compensation while evading detection".

The school is owned by Apollo Group Inc., a publicly traded company. Benjamin Colling, the school's director of admissions and business development in Vancouver, himself a graduate of Simon Fraser University, said he believes the school would have been found innocent had the case proceeded. However, the health of the company depends on steady investment, he said, so the school didn't want to be in the news through years of battles with the U.S. government. "It didn't make sense for us to go through a two- or three-year investigation."

Though Colling said the school is innocent of the tactics alleged by the American government, he conceded there is pressure to bring in students and money. "In many private companies there is a lot of pressure to succeed," he said. "In the University of Phoenix there is pressure to increase enrollment." The thing is, he added, the school can't be "too aggressive" in how it brings students in. The school has duties to its investors, its customers, and the Department of Education: "It's always a matter of balancing those needs."

The University of Phoenix has taught more than 250,000 students in the United States, making it one of the two largest private educators in the nation. In the U.S., about 60 percent of the school's tuition revenue comes from loans, according to the Republic article. That public funding provides American authorities with the rationale for prohibiting the kind of high-pressure sales tactics of which they accused the University of Phoenix.

"I think people don't realize it, but the regulations are extremely tight in the United States," Colling said, adding that, by comparison, British Columbia is a relatively loose jurisdiction.

In B.C., the school is among the almost 200 accredited by the Private Career Training Institutions Agency, making its students eligible for public student loans just like they are in the States. (According to the 2001-02 Canada Student Loan annual report, the most recent available, the default rate for public university student loans is 19.08 percent; for private institutions, the default rate is a whopping 35.5 percent.) But over the past couple of years, the B.C. Liberal government has rewritten the rules governing private education institutions, moving the schools into a situation where they are "self-regulated" through the PCTIA, which has a board of directors made up of private-education insiders. The new legislation covers "fair and ethical business practices", said Paul Woolley, a spokesperson for the Advanced Education ministry, but when it comes to how recruiters are paid, he added, "We don't have any rules around it."

Asked if we should have such rules, Woolley said that's really a question for Advanced Education Minister Ida Chong. Chong refused requests for an interview.

And the province has managed to help the University of Phoenix and other private schools in other ways, especially by removing the cap on public postsecondary tuition fees for the past three years. "The public schools are becoming much closer in price," Colling said. "Tuition has gone a little bit crazy with public institutions, and therefore it's allowed private institutions to become a little more competitive."

The University of Phoenix's application for degree-granting status in B.C. would move it more closely under the oversight of the Ministry of Advanced Education. It is also applying, due to provincial legislation introduced in 2002, to legally use the word university in its name in B.C., an application for which the public-comment period closed March 24. Woolley said decisions haven't been made on either application. Daren Hancott, the University of Phoenix's Vancouver vice-president and campus director, told the Georgia Straight: "We're anticipating a good result." Asked what the school would do if denied permission to use university in its name, Hancott said, "Plan B would be to do what it takes to become a university in British Columbia."

Some educators, like Robert Clift, the executive director of the Confederation of University Faculty Associations of B.C., would like to see private schools more tightly regulated. "On one hand, I want to say it's a private business and they can do what they want," Clift said. "On the other hand, I'm also in the education field and I don't want to see students hurt."

Making education a for-profit business encourages schools to cut corners, he said. Even if the government doesn't want to crack down on private educators, Clift said, it could set policies to protect students. He suggested insisting on a reasonably long period when students starting at a new school may withdraw without forfeiting their tuition fees, or introducing a standard contract for students that includes a section about their rights. "I think just leaving it hanging out there is the wrong answer."

Jim Griffith, a former University of Victoria administrator, is now vice-president of student services and external relations for University Canada West, headed by former UVic president David Strong. With plans to start classes in a closed Victoria elementary school in September, it's the only private school to so far be granted official permission to use the word university in its name in B.C. Although Griffith doesn't rule out using commission-based agents in the future, he said he's not comfortable with the idea of paying staff members bonuses for increasing the number of students. "It makes you think of all kinds of things that can go wrong. It could open the door, at least in the academic world, to all kinds of things that would not be viewed favourably…I can see how that would lead to unethical practices, put it that way."

The registrar for the PCTIA, Jim Wright, said it isn't unusual for recruiters at private institutions in B.C. to be paid based on the numbers they bring in. "It's not uncommon," he said, adding that on enrollment, students should sign a form that says they've been told the person recruiting them may receive a commission based on their enrollment numbers.

No matter what the law says is okay in B.C., one school that can't be seen to be using that kind of recruitment practice is the University of Phoenix itself. Asked if they use the same practices here that they were charged with in the U.S., Colling said, "We're not allowed to." According to Colling, because they are based in the United States and the degrees they grant are currently American degrees, the school has to adhere to American rules even when it is working here.

That means its students actually enjoy protections that people attending Canadian-based private schools in the province do not. As the industry grows here, the students unlucky enough to sign up at schools that don't live up to their sales pitches, the taxpayers who back their loans, and the politicians who will be held responsible for failing to regulate the schools may well soon see the wisdom behind the American rules.