For-Profit Colleges Brace for Drop in Enrollment

Americans who had their sights set on attending colleges with online classes, flexible hours and the promise of a job after graduation may be changing their plans come 2011.

The nation’s largest for-profit college, University of Phoenix, announced recently that it is expecting a possible 40 percent drop in enrollment in November. The decrease in demand has been triggered by increased competition, as well as the likelihood that the Department of Education will implement new regulations in January that could change school recruiting practices and reduce the availability of Pell Grants to schools whose job-placement rates don’t meet federal standards.

With the projected drop in enrollment, the company that owns University of Phoenix, Apollo Group Inc., reported a 25 percent drop in the price of its stock, according to Bloomberg News.

Unlike traditional, taxpayer-supported community colleges, online colleges are private, for-profit enterprises. According to a report by the Senate Health, Labor Education and Pensions Committee, more than 95 percent of students use grants or federally-backed loans to attend these for-profit schools. But many students default on them.

Since the regulations were proposed in July, the Education Department has received tens of thousands of public comments — and the House and Senate education committees held hearings to investigate the for-profit college industry.
But the final word will come from the White House, which has the power to dictate to for-profit schools just what percentage of their graduates must land "gainful employment" after graduation before the schools qualify for Pell Grants.

"This is really only the beginning of the entire industry shake-up," said Ted Downey, an education policy analyst at the independent consulting firm, Concept Capitol.

The regulations were due to be enacted in November, but were postponed until January 2011 after bipartisan pushback from the House. Should Congress reach a strong consensus against the regulations, the Department of Education may be forced to hold off longer.

Republicans oppose the proposed regulations on Pell Grants for for-profit schools, while Democrats generally support them.

Harris Miller, CEO of the Association of Private Sector Colleges and Universities, said he received bipartisan support from the House when the regulations were proposed in July. But at the last Senate hearing on the issue, Miller sat silently while Senate Democrats presented negative testimony about the value of free-enterprise, for-profit colleges. The witnesses told tales of over zealous recruiting practices in order to compensate for the schools’ high drop-out rate.

"You feel like you’re in front of a firing squad," Miller said. "Every witness is lined up to shoot at you, rather than witnesses lined up with different views."

But Miller believes Republicans are not true allies of for-profit colleges who depend on federal funding.

While Democrats are more likely to regulate which schools receive federal grants, Republicans are more likely to want to limit taxpayer funding entirely, regardless of the school the student chooses to attend.

President Obama said that the budget cuts proposed in the GOP’s "Pledge to America" — the party’s economic plan for the country — mean a 20 percent cut in all sectors, including education, during a speech at the White House Summit on Community Colleges last week.

But Alexa Marrero, communications director for the Republicans on the House Education and Labor Committee, said the Pledge to America made no such threat to education, and that it is too early to pick which programs will be affected.

"We need to make sure that any school eligible to [receive federal funding] has to be providing disclosure and transparency," Marrero said. "It’s about consumer choice, not arbitrarily limiting funding."

In the end, the Department of Education will allocate federal grants to schools according its own standards regardless of the differing opinions in Congress.

But Miller said the Association of Private Sector Colleges and Universities has not given up, and is starting to campaign against regulations on the state level.

"Anywhere we can get anyone to listen to us, we are willing to make a case."


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