Around and change the rules. What i do to modify my mortgage . I wish i had an answer. Your story sounds very similar to hundreds of other of the borrowers. There is a lot of confusion. I do not know really what to offer other than to check out the resources that Lender Consortium has put together. It is unfortunate that ithere have been a lot of modifications. Host thank you so much for being here. That is your money segment where we look at how taxpayer dollars are spent. We were look more on that on future mondays. We will be back at 7 00 tomorrow. We now go to the American Enterprise institute which is holding a panel on a forprofit and federal education. [captioning performed by national captioning institute] [captions Copyright National cable satellite corp. 2012] we are just getting back. The energy level is probably going to get mellow. We will make that work for us. Todays panel is on the question of forprofit and federal education policy. This is a topic that we at aei have been talking about for an extended stretch. In support of the Templeton Foundation, we have been running the private enterprise projects, trying to think about the opportunities and the challenge. How do make this work for kids in the communitys . How do we think about some of the challenges the potential perils . This panel is a close of a series of panels and conversations. We have commissioned a number of pieces that will be coming up as a book this spring. We have the opportunity to work. Phones, inose of the was cell turn them off. Why this topic . The vast majority of what we do in america k12 is done by public institutions. It is done by institutions run by states. And a lot of other work including most Charter Schools are run by nonprofit. Then there is a substantial slot of activity that is for profit. They run schools or colleges. They sell everything from pencils to paper to textbooks to curricula to school systems. We do not often think about that. We do not often think about the upside or downside. That is what we want to get into. For instance, our friend at parent revolution said when speaking about the apparent trigger that there is a need to regulate. We need to think about where to draw the lines. They choose not to encourage that for profits be permitted. They believe the introduction of a new stockholder group, a shareholder seeking profit, will make the Public School system less oriented toward putting children first. That is the question period does allowing folks to operate for profit cause us to be less likely to put students first . That is todays conversation. We have with the spike extraordinary individuals to think more deeply about these questions. We havestacey childress, where shes a model team. She was on the faculty of the Harvard Business school where aboutote and talk aboed education. We also have the chief operating officer for learnit systems. Before she worked as an nt development for educate our line. She also has a background in statewide politics where she managed several campaigns. Michael horn, is a director of education of the insight institute. We also have with us assistant deputy secretary for innovation improvements at the department of education. Jim manages most of the competitive programs including i 3. He was the east coast league for the venture fund and cofounder of learnednow. Also have the cofounder and ceo. This one of the citys ties performing schools where he was chief academic officer in principle. Lets get started. Im going to ask you to kick this off. Both of you are executives at forprofit education companies. We just heard the point out that the challenge is that perhaps stakeholders are quantitate president over the kids. Why is education for profit rather than nonprofit . Let me first start by saying what it is and then answer the question and why we decided to organize it as a forprofit. This is a web site that gives students and teachers high quality lessons. As a country as a start to move toward the common standards, it is really challenging to implement those standards. Learnzillion gives teachers tools to make that transition and effectively. That is a little bit about what learnzillion is. Why do we decide to organize as a forprofit . We actually started at a public charter school. I was a principal. It was in trying to solve a problem that the idea came about to begin with. The problem was we had these amazing hardworking teachers who were spending most of their day in isolation without the ability to share expertise they were developing inside the classroom. Or was students in a way that could get them what they needed when they needed it. The idea for learnzillion was what if we use a platform to share this expertise in a way that will help with professional development and give students the lessons they need. I have two children. As also very interested in the parenting perspective of having full transparency about what my kids were learning each day. When we started to work on this idea and realized that it needed to be a separate organization that fought about this to scale, what is the best way to organize ourselves to get the job done . It was not from the starting point up how can we recognize an opportunity to make money . It was how do we take a problem that exists at most schools and tried to follow that and what is the best vehicle . Much to my surprise, as went to Business School translating everything out learning from the forprofit terminology, we decided that were going to be the surviving a forprofit. There were a few reasons. One is a web site we were going to need to have really talented technologists on board. We needed really good computer programs. We needed something that works for teachers. We wanted something that spoke to web 2. 0. We knew if youre going to retreat highquality programmers it is a point to do it as a nonprofit. Another was access to capital. We wanted to do something that would start out in d. C. But would have a chance to have legs and nationally and potentially even internationally. We felt like in order to scale in the ways you wanted to that access to capital would be important and being able to look to investors. Finally, michael fonder and i both teachers. If we did not do that we should not be around for that long. Probably wouldple proble be willing to look at it. Lets give discipline to create something that really creates values for us. Those are some of the reasons we decided to go the forprofit route. We are a fullservice provider. I was not at learn it will we decided to become forprofit. I did not considere it. I took a pay cut. It is immediately assume that if you are for profit that year only stakeholder is your investor or york stock colder. For us at learn it, we have an academic and a financial bottom line. We are very focused on student achievement in focused on making sure that we are meeting the needs of the stakeholders which are the students, families, principles that we serve. At the end of the day, nonprofits are always going to be doing the right thing. For profit have other complications going on. You have written about this. As we think about those issues . A lot of people make that first assumption. There is conflicting interests. To return value to their shareholders you have to do something that pleases customers and keeps them. In your case delivering great academic results this critical to delivering good results for shareholders. 1 and the big problems we face across this country is that the Education System have in place is not always live up as incentives and a really smart way. Creating good products that treat their learning outcomes is not always rewarded in todays marketplace. It can legitimately create those tensions between the shareholders and customers interests that we ought to care about. In many cases students and teachers are not the customers we are serving. When you but at nonprofits who are the customers . It is often a purchaser in the Central District office who may or may not have learning interests or may be time to spend on a line item. It is not always line up. We of looking at funding students for a sitting in seats, not for the learning progress they may. This creates a lot of weird incentives. The nonprofits responded similarly. If you look at Higher Education, while there has been a lot of attention paid to some of the questionable practices, if you look at universities serving similar demographics of high risk students, you do not see Great Results of nonprofits either. The incentives are largely the same. You get tuition revenue up front. There have obviously been some changes with the gainful employment regulations as of late. But immensely that is how it has been set up. Ec similar ones across the you see similar ones across the state. Is your thinking as a foundation of how to invest, how you engage the strengths and weaknesses when we look across the for profits . I think michael opens up a really interesting area for conversation. It is the degree to which incentives work. I their constrained the innovation we all look for in terms of and crude outcomes for students at the same or lower cost. And the lack of clarity about what we mean by the performance. The lack the kind of data we need to make this kind of judgment either as investors or parents or interested community members. It creates a really difficult Playing Field. One rule of thumb that we have for now is that our work with forprofit right now is targeted to areas in which the Public Education for province have long been actors. Is it ok to have forprofit in education act as if there are not Market Segments in k12 . I taught at Harvard Business school. It was always surprising to me what low appetite Business School students, the vast majority youre going in the private sector, and that idiosyncratic population of folks had a very low appetite and a very high bar for risk taking in forprofit model separate very close to students. If you talk of possible spend tons of money on things like copy machines and they do not insist that the copy machines be a nonprofit to be able to reap revenues that are all Public Sector dollars. It is all tax money. It is not suspicious. The textbook folks are getting a little closer to the classroom there. A little more suspicious. That part of the sector is dominated by forprofit players, whether the old line textbook providers are those transitioning into the new digital age and thinking more a online adapted products. It is much lower heat from the conversation. The closer you get to the classroom, how about School Operators that contract with the local School District . A forprofit Company Running one are two schools or a network of schools and having a goal at the end of the year to have money left over to reinvest in the business to make a better and to return over some time to return to shareholders. Even at Harvard Business school, a very small percentage of this was ok. It seemed the paradigm was what kind of activities to be the same the Public Sector has a legitimate right to provide. Therefore it seems an encroachment from the private sector trying to somehow capture rents that are somehow more appropriately flowed through the Public Sector. Even on this panel we have some excess difference. Learnzillion operate in a space that is mostly forprofit now. We do not funds forprofit charter management organizations, weather brick and mortar or Virtual Schools. It is not because we do not think they have a legitimate right to play in that space. It is because philanthropy is better suited to support those kinds of organizations that are nonprofit and rely on the slump tropical Capital Market for their dollars and rely on the Capital Markets for their dollars to grow and share. They were actively seeking ways to help create better incentives for those forprofit players to have reasons to invest in quality and innovation. Commercial capital is already flowing their. Actors are already dominating in that space. If we believe they do not have the kind of data transparency or performance metrics that mean at the end of the day that the things that were best for teachers and students wins seems like a good use of the lamb for the in philanthropy. What do you say to the critics that say theyre trying to privatize American Education . We do hear that for about a fair bit. It is an interesting charge. Given that we did not support forprofit School Operators at all. It is more of a policy challenge that people have to our work that we believe that more choices for kids and families, particularly in neighborhoods where students have long had very low quality educational options, we think that is a good thing. We support Charter Schools in general. The privatisation charge, at least the way i perceive it is less about for profits and more about not public. Whether it is for profit charter operators or knots, the privatization charge is about not publicsector operations. It is true. We support lot of nonprofit actors that deliver Educational Services in lowincome communities. We think more choices are a positive thing. That is the part of the root of that. The charge gets more attention when you lump it together with lots of worries and fears the private sector forprofit actors are going to come in too low income communities, added a resources that ought to be spent aggregate resources that ought to be spent, and somehow take those out of the community and return them to some nameless, faceless plutocrats somewhere that are not interested in educational options. As michael said, with the incentives as murky as they are in the ability to really distinguish between schools that do very well and schools that do harder notwell, it is a harde to crack. Jim, your some it has a background working for both for profit and nonprofit in education funding. Youre the point man in education. What role does forprofit play for the federal perspective as the dax we think about how to be a range the incentives and accountabilities. Where can forprofit provide value . Where federal and state and local players in the policy context can do the most benefit in the entire sector, an art dealer making sure they like in particular is the sure they align to drive the incentives toward good outcomes. And absence of outcomes, the evidence that youre probably going to produce outcomes. Where we have seen over time is that the government has treated the opportunity. Whether it be a post secondary education. Take your pick. Often with the best intentions comic trading access and opportunities. And oftentimes it does not think through the third order implications. The benefit goes to those to attract the most students. Or they do not think about the second and third order implications. What about completion tha . You have some folks that come and without the best intentions. We do very discreetly with those factors. The sector is often slow to identify the bad actors and tried to segment them away from the general population. Were the government can come in is on the Better Outcomes and creating opportunities for more direct intervention with those that are bad actors in distinguishing between the two. Where the government needs help is creating the right incentives in this space as complicated as education. It is just that. Complicated. We are going to take our best effort to how you decide what is actually serving the student or taxpayer well . To the extent that government does that alone and there is not be back from the other side saying here is how you can do this best. Were always good to wind up a little bit short of the ideal. I do not think we have the opportunity to sit back and not to anything. Two specific instances. One is the gainful employment regulations. Colleges have been funded with an eligible federal aid they simply on students enrolled. The full employment was to write some regulations. There have been concerns from critics of the rules were written and reflected a bias. The second issue that has garnered a lot of attention is the funds issue which did not permit for profits to apply as principles and their own right. Could you just a couple word about those and how you think about how to strike that balance . We have to recognize that this context is actually about the suspicion of for profit. It is not nearly held. Fo narrowly held. There was a decision not to include for profits. That is the case with almost all of the policy lenders. It is a pretty bipartisan issue. There is a small segment of people that are willing to step out and open up policy and a large funds. This is a bipartisan issue were more people decide to provide a bipartisan approach. Given that is the context, especially talk about things that are going to build the capacity and have the potential to go to scale, we do want the opportunity for for profits to participate. He can have a forprofit join in and receive funds through the application. That is the way in which we have approached trading in context where they can bring what they bring best. This adds value. Does it work the . Can i go to scale. There are more and more opportunities for that. I do not think we will see policy shift until we see a cultural shift. That is the first. The first one, we talked about the importance of driving incentives. What are the outcomes were really shooting for . In particular, peoples ability to get out, get jobs to pay back their loans, at a minimum threshold this seems like a good indicator of whether or not they were provided with good service. People reacted to this for a number of different reasons. One reason was there is that for profits, because of where we were retargeted force. They felt like were going to operate under different rules. That i understand. The general push back on were trying to move the market toward focus outcomes, i do not think i have read a book by a person to participate in the education space, especially on the four prophesied, or they did not say what we really need is outcome ba