Critics of the nonprofit Maine Educational Services, the state’s largest provider of student loans, have homed in on MES’ relationship with the for-profit, Internet-based Portland College.
According to top officials of both MES and Intelligent Learning Corp., the MES spinoff that is the parent company of Portland College, MES holds a 10 percent stake in Intelligent Learning.
The nascent cybercollege is owned entirely by Intelligent Learning, which is also a for-profit corporation.
What bothers MES’ detractors is that the organization could be using the profits from student lending made with public money for private purposes.
Tim Sabo, MES vice president for operations, said that his organization has kept the share in Intelligent Learning to recover investments it made in distance-learning research.
This was confirmed by Richard Pushard, now president and chief executive officer of Intelligent Learning, but formerly vice president of MES.
“We’re trying to compensate them for their time and effort to date,” Pushard said.
Portland College is seeking to become the first entirely Internet-based institute of higher learning to be given degree-granting authority by the Legislature.
Two years ago, Pushard said, he began to explore the possibilities for MES to become involved in Internet-based distance learning. This was part of MES efforts that reach beyond higher-education financing and into “higher-education advocacy and economic opportunity,” he said.
MES decided last summer to spin off Intelligent Learning, which focuses on developing and copyrighting software to deliver online courses, according to Pushard. He joined the new venture.
Ten out of Intelligent Learning’s 13 employees worked for MES.
The MES’ stake in Intelligent Learning will allow it to recoup its investment and to earn “a modest royalty in the future,” Pushard said. The 10 percent stake MES holds does not have a dollar value yet, because Intelligent Learning is still just a start-up company.
However, Rep. Michael Brennan, D-Portland, co-chairman of the Legislature’s Education Committee, said about the stake, “Clearly this clouds the issue a little bit for me.”
Brennan is the sponsor of legislation that would give Portland College degree-granting authority. Brennan said that he was aware there was some connection between MES and Intelligent Learning but was not sure of the specifics.
“I’d like to evaluate the merits of Portland College on the merits of Portland College,” Brennan said Tuesday. “But as a result of this interest, it will make the discussions surround both Portland College and MES.”
The 10 percent stake raises questions about whether MES ought to be involved in a for-profit, online college at all, he said.
At the same time the Education Committee will look at Portland College during the legislative session that begins Jan. 5, the Legislature’s Committee on Business and Economic Development will be looking at MES and its access to tax-exempt bonds.
MES is the largest student-loan provider in the state, controlling about 62 percent of the market. While MES is a private, nonprofit organization, it administers a quasi-state agency, the Maine Educational Loan Authority, and a private, nonprofit setup at the behest of the state known as the Maine Educational Loan Marketing Authority. These are the two agencies that raise the money that MES lends to students and parents.
Both MELA and MELMAC receive a portion of $150 million in tax-exempt bonds the federal government permits the state to issue each year. These tax-exempt bonds allow the agencies to raise money cheaply. The purpose of providing them with these bonds is so that they can pass the savings on to student loan borrowers.
What makes some leery of the relationship among the three organizations is that MELA and MELMAC were established with state purposes in mind, while MES is a private, nonprofit organization.
“The public subsidy is transferred to a private entity and thus loses public accountability,” said state Treasurer Dale McCormick about the relationship. “There’s way too much murkiness.”
A special commission appointed by lawmakers to look into the use of tax-exempt bonds recommended last week that MELA and MELMAC be merged and be brought under closer legislative scrutiny.
MES counters that it puts the money it earns from the student loan business to public purposes, such as investing in educational programs. For example, MES bought Sylvan Learning Systems.
“We’re still in the hole,” Sabo said about MES’ investment in Sylvan.
Pushard emphasized the purpose of Portland College is to help those already in the work force to gain more knowledge and skills, as well as to retrain workers who have lost jobs.
“Portland College’s online training and retooling of skills can be an incentive to draw new businesses to Maine,” he said.
However, Pushard also said it would compete with other virtual universities for students across the country, not just in Maine.
Sen. Mary Small, R-Bath, a member of the Education Committee, said that since May she has worked off and on as a consultant for MES on the Portland College initiative.
“I looked at what other states and countries were doing,” she said. “This [Internet education] is going gangbusters worldwide. New England, and particularly Maine, is so far behind.”