Opinion: Career College Lobbyists Twist the Facts in Lawsuit Against the Ed Dept.

As Higher Ed Watch readers likely know already, the group formerly known as the Career College Association filed a lawsuit last week in federal court seeking to block the U.S. Department of Education from putting into effect several regulations it finalized in November that aim to prevent unscrupulous for-profit colleges from taking advantage of financially needy students.

Among those rules that the career college lobbyists are trying to stop is one that would, once and for all, eliminate the "safe harbors" that Bush administration officials put in place in 2002 to help for-profit schools skirt a long-standing federal law that prohibits colleges from compensating recruiters based on their success in enrolling students. They are also taking aim at rules that would strengthen the role that states play in preventing fraud, waste, and abuse in the federal student aid programs and would prohibit colleges from providing misleading information to prospective students and others about their programs.

The lawsuit itself, however, is rife with misleading statements and out-right errors, which is par for the course for an organization that has continually tried to twist the facts in this debate. To help the court out, we’ve decided to identify some of the most egregious misstatements and provide our responses. We believe the following examples show just how misguided this lawsuit is:

The lawsuit: “The regulations are scheduled to go into full effect on July 1, 2011, but they are already harming schools and students by changing the way schools hire, recruit, advertise and deploy their programs and shape their student bodies."

Our response: It’s true that some of the largest chains of for profit colleges have been altering the way that they recruit students and shape their student bodies. Both the University of Phoenix (UOP) and the Washington Post’s Kaplan University, for example, have introduced tuition free orientation programs (see here and here) that are designed to give new students a risk-free opportunity to decide whether these institutions are the right fit for them before they commit to the programs. And UOP has stopped taking enrollment factors into account when compensating its recruiters. Do these companies believe these changes will harm their students? Far from it. In a call with financial analysts in January, Greg Capelli, the co-chief executive of UOP’s parent company, said that the changes are “consistent with our focus on enhancing the student experience, expanding student protections, and ensuring we enroll students who have the greatest likelihood of succeeding in our programs.” As for the company’s fiscal health, he said, “We continue to believe that we’re making the right decisions now to position the company for more stable and higher quality long-term growth.” Now some other companies may be resistant to sacrificing short-term profits for long-term gains by reining in their aggressive enrollment practices, but we suspect that their students would be better off if they did.

The lawsuit: “The Department’s new regulations take aim at private sector schools’ ability to offer their highly effective services to these students.”

Our response: Actually, the regulation’s aim is stop unscrupulous institutions from deliberately recruiting and admitting unqualified students, who end up taking on huge amounts of debt for training from which they are unlikely to benefit. Schools that provide “highly effective services” probably haven’t engaged in these practices and therefore shouldn’t have anything to worry about.

The lawsuit: The Department “employed unlawful proceedings to adopt regulations that are both contrary to law and arbitrary and capricious.”

Our response: Of all the statements in the lawsuit, this may be the most outrageous. The career college group provides absolutely no evidence to back up its claim that the negotiated rulemaking process that the Department of Education conducted to develop these regulations was “unlawful” in any way, and these lobbyists can’t because it wasn’t. In reality, the Department pretty much followed standard procedures — holding public hearings to solicit views and inviting public input from those unable to attend; assembling a neg reg panel that included a wide range of stakeholders, including a number who were sympathetic to the for-profit college industry’s arguments; and convening three week-long sessions in which negotiators debated the Department’s recommendations, and had the opportunity to offer alternatives. When the panelists failed to reach agreement on some of the more contentious items, the Department was free to move forward on its own with its proposals.

The industry’s lobbyists may be unhappy with the results, but to accuse the Department of acting illegally is completely irresponsible. It may not, however, be too surprising coming from an organization whose president once argued that the Education Department should bring only his group’s members to the table when negotiating changes to the "90-10 rule," which requires for-profit colleges to receive at least 10 percent of their revenue from sources other than federal student aid. “Allowing others without a direct connection to this issue to participate [in negotiated rulemaking] is like allowing non-pilots to help fly the plane," Harris Miller stated at a public hearing the Department held in October 2008 on potential rule changes. "They may have a point of view, they may find the proceedings interesting, but giving them a seat at the controls would simply be wrong for the millions of students depending on career education as the ‘flight path’ to a better life."

The lawsuit: The regulations that the Education Department issued in 2002 creating 12 loopholes to a federal law banning colleges from providing incentive payments to their admissions employees “were approved by all negotiators.”

Our response: Not true. The negotiating rule making panel that the Bush administration officials in charge of the Education Department brought together in 2002 to consider their proposal to gut the incentive compensation prohibition disbanded without coming to a consensus. As The Chronicle of Higher Education reported at the time, representatives of student advocacy groups and legal-assistance organizations who sat on the panel opposed the proposal, saying “they could not support changes that would discard protections that have proven effective in limiting fraud and abuse in financial-aid programs.” As in the current case, these leaders moved forward with the rules anyway. [Disclosure: I was one of the authors of the Chronicle article.]

Ironically, almost all of the criticisms that the career college group has raised about the current process were truer of the 2002 negotiated rulemaking sessions. The Department’s then-leaders conducted “a regulatory process that was rushed, unfair, and structured from the beginning to implement a desired result irrespective of the concerns of stakeholders and the public,” as the lawsuit states. They stacked the panel as much as they could with individuals who were sympathetic to their goals and they “reject(ed) without significant discussion the substance of most commenters’ critiques, challenges, and proposed regulatory alternatives.” And “the final regulations that emerged out of the Department’s flawed and rushed process violate[d] HEA,” by making a mockery of the incentive compensation ban. Funny, but we don’t remember the Career College Association of having raised objections then.

The lawsuit: The introduction of “safe harbors” “enabled the Department and courts to quickly and easily distinguish between schools that improperly used commissioned salespeople to drive up enrollment and schools that properly paid their recruiting, admissions, and financial aid employees competitive salaries, appropriately adjusted to reflect their on-the-job performance.”

Our response: Nothing could be further from the truth. In reality, the safe harbors have made the incentive compensation ban much more difficult to enforce – just as they were intended to do. As the Government Accountability Office (GAO) wrote in a report in October entitled “Stronger Federal Oversight Needed to Enforce Ban on Incentive Payments to School Recruiters,” the most problematic is the first safe harbor, which allows colleges to adjust the annual or hourly wages of recruiters up to twice a year, as long as the adjustment is “not based solely on the number of students recruited, admitted, enrolled, or awarded financial aid.” In other words, Bush administration officials allowed colleges to circumvent the law, which bars schools from providing any commission-based compensation to their recruiters. [Emphasis added here and in the previous sentence]

This loophole “has led institutions to establish, on paper, other factors that are purportedly used to evaluate student recruiters other than the sheer numbers of students enrolled. However, in practice, consideration of these factors has been minimal at best, or otherwise indiscernible,” the Department’s current leaders wrote in the preamble of the proposed rules in June. “This has led the Department to expend vast resources evaluating the legitimacy of institutional compensation plans, and considerable time and effort has been lost by both the Department and institutions engaged in litigation.” The career-college group obviously disagrees but hasn’t provided any evidence to back up their claims.

As we’ve said before, the lobbyists at the group formerly known as the Career College Association certainly have a gift for spin and seemingly have no compunction twisting the facts to their advantage. If nothing else, this misguided lawsuit shows the lengths they are willing to go to protect even the worst of the worst of their schools from further government oversight — no matter how much damage these institutions are doing to their students.

We will have more to say on that subject in the coming days. Stay tuned.


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