ECMC Group Response to The Century Foundation Article
September 29, 2016
In response to a report by The Century Foundation, ECMC Group released the following statement:
While ECMC Group fully cooperated with the authors of the latest The Century Foundation report and provided them with extensive information, they portrayed what we believe is an unbalanced and erroneous view of our organization.
Falsehoods about IRS Form 1023
Most troubling is their blatant falsehood about our Form 1023 filing in relation to Zenith Education Group’s request for tax-exempt status. The authors of The Century Foundation report improvidently chose to ignore our extensive efforts on behalf of low- and moderate-income students and chose instead to make false claims about our filing. The authors also intentionally excluded, both in the text of their report and in the footnotes, the explanation ECMC Group provided to them including detailed information about our Form 1023 filing. ECMC Group and Zenith Education Group worked closely with expert outside counsel Arnold and Porter LLP to ensure the accuracy of our filing and that it was completed in accordance with IRS procedures and instructions.
Failure to Address ECMC Group Charitable Activities
The Century Foundation report authors ignored the extensive charitable activities undertaken by ECMC Group—information that was previously supplied to the authors and should have been dispositive of their flawed conclusion that ECMC has lost focus on its charitable mission. Since its inception in 1994, ECMC has worked tirelessly to fulfill our mission of “helping students succeed.” As a network of affiliated organizations that include nonprofit student loan guaranty agency ECMC, nonprofit education provider Zenith Education Group and nonprofit ECMC Foundation, we provide financial aid, tools and services, nonprofit career education, and job placement services to help students achieve their academic and professional goals.
From day one, we have been strongly committed to effectively and efficiently serving our constituencies, including students, parents, communities and taxpayers:
- We created Zenith Education Group—a nonprofit career educational institution. We have invested approximately $300 million in Zenith to cut tuition 20 percent at our Everest campuses, to provide $36 million in scholarships, and to facilitate the discharge of approximately $480 million in private student loans owed by former students of Corinthian.
- Across Zenith schools, we’ve implemented a new financial aid process with pre-enrollment financial literacy counseling, reducing the percentage of students taking out maximum available student loans by one-third according to initial data.
- We created our philanthropic arm, ECMC Foundation, and provided it with more than $600 million in funding, including $250 million to help support Zenith grants and initiatives geared toward promoting student success.
- We contributed $345 million to the state of California’s Cal Grant program to help low-income students pursue their higher-education goals.
- We provided approximately $16.7 million in scholarships to 2,800 low-income students who became ECMC Scholars.
- We have provided more than $30 million to support ECMC college access centers and financial literacy outreach activities.
- Since 2011, ECMC’s Default Prevention Services have assisted 2.8 million borrowers in resolving their delinquent loans, preventing $42.6 billion in defaults.
Specifically, ECMC provides financial literacy services to empower students to make informed choices about their futures and oversees student loan repayments to ensure taxpayer funds are replenished so future generations of students have access to federal education funding. ECMC has returned in excess of $12 billion to date to the U.S. Treasury—and to U.S. taxpayers—in connection with services performed under our charter.
Our financial literacy services include:
- Believing the College Dream, Realizing the College Dream and PERSIST college access and college retention curricula for low-income, first-generation students
- College Abacus, College Ábaco, Pell Abacus and Pell Ábaco free online English- and Spanish-language tools to help families and students make informed decisions regarding the real cost of college
- The College Place drop-in college access centers in California, Connecticut, Oregon and Virginia
- ECMC Scholars high school mentoring and college scholarship program serving 250 students annually in 25 high schools across three states
- Opportunities booklets providing comprehensive college admission and financial aid information
- Financial Awareness Basics money management tips and tools
- College Nights college planning events
- Grace counseling, delinquency counseling and forbearance counseling to help student loan holders repay their debt
- Default rate management and LoanTracker software to help higher education institutions improve their default rates and facilitate student loan repayments.
ECMC Foundation funds innovative programs to advance college and career readiness among low-income and first-generation students, and teacher development initiatives to promote a more effective and diverse educational profession. ECMC Foundation also funds Zenith Education Group grants for innovations on the Everest and WyoTech campuses.
Our Zenith Education Group affiliate helps students in its Everest and WyoTech schools plan for college, attend, graduate and land a good job. Zenith offers affordable, high-quality programs that are regularly updated to teach the skills employers are looking for today, so students gain the real-life career skills they need to graduate well-trained and ready to work on day one in a fulfilling career.
Omissions Related to Operating Funds
Also absent from The Century Foundation report is any reference to the 1998 Higher Education Act (HEA) amendments that allowed the creation of an Operating Fund for guarantors. The Operating Fund enables greater flexibility for guarantors to address the specific needs of the student populations in the states served by each guarantor. For example, students in California, given the state’s demographics, have very different needs from students in Vermont. In addition, guaranty agencies themselves are different: Some state agencies have statutory state-specific responsibilities (such as grantmaking) while ECMC is a national multi-state guarantor. The HEA amendments enable guarantors to determine the programs that best suit the unique needs of their constituencies.
Inaccuracies Concerning Director Compensation
The Century Foundation report additionally makes erroneous statements about director compensation, failing to take into account that the amount of time and effort devoted to their duties has a meaningful relation to compensation received. Included in the information provided by ECMC Group to the authors was the fact that the documented time commitment to ECMC Group and its affiliates by its directors is at or near the very top of the peer group of for-profit and not-for-profit entities.
ECMC Group and its affiliated entities have grown from $48.5 million in revenues in 2005 to $783 million in revenues in 2015. As the organization has grown, the level of experience, expertise and engagement needed from our board of directors also has increased and continues to grow as we work to fulfill our mission. ECMC Group board compensation has been reviewed annually for compliance with federal and state laws by an expert independent firm as well as by expert outside legal counsel to evaluate payments for reasonableness under prevailing law and regulations, taking into account the organizational complexity, prevailing rates of compensation for comparable positions in comparable organizations as well as time and effort expended by directors. The report also failed to note that compensation paid to ECMC directors is not funded by either the ECMC Foundation or Zenith Education Group, rather director compensation is funded solely from ECMC’s Operating Fund and its for-profit subsidiary.
The Century Foundation’s publication of false and misleading information is highly regrettable and does a disservice to enhancing the public’s understanding of the critical contributions ECMC has made since its inception. Further, we stand behind the transparency, accuracy and compliance of our IRS filing. We are as committed now as ever to fulfilling our mission of helping students succeed.