Why the Delay in For-profit College Crack Down?

The Department of Education is facing a political firestorm as it attempts to crack down on for-profit colleges that allegedly saddle graduates with billions of dollars in federal loans and little hope of finding a job lucrative enough to ever pay them back.

A bevy of regulations that would prevent for-profit colleges from misrepresenting their graduate employment rates and from paying admissions officers based on how many new students they sign up are set to go into effect this July.

But the toughest of the regulations, called the "gainful employment" rule, has languished as the department sifts through more than 90,000 letters from the public about it. The rule would withdraw federal funds from programs whose students have high debt to income ratios and who default on their loans in large numbers.

A coalition of civil rights groups wrote to Secretary Arne Duncan urging him to make the gainful employment rule even tougher, while the for-profit college industry has spent millions on lobbying lawmakers to oppose the regulation, arguing it will deny minority and low-income students a chance at a higher education. (NAACP President Ben Jealous, however, writes that this claim is "like arguing that because mortgage lenders targeted minorities with their most exploitative products and practices, we should not have stopped them.")

The Department of Education says it’s on track to begin enforcing the not-yet-released rule in 2012.

"When we publish the final regulations, it will be clear that we’ve listened carefully and incorporated meaningful improvements from people on all sides of the issue," Sara Gast, a spokeswoman for the department, wrote in an e-mail. She added they will publish the final regulation in the next few months, after they’ve read all 90,000 public comments, and that the rule will go into effect July 2012.

Terry Hartle, a lobbyist for mostly traditional universities, says he thinks the department may significantly change the original rule.

"I think they’ve read through the 90,000 comments at this point," said Hartle, a senior vice president at the American Council on Education. "There’s obviously a great deal of political pressure for the department to rethink where it’s going."

Hartle says the department’s main problem is it can’t calculate the debt to income ratio of a program’s graduates in advance without the help of the IRS, which is often reluctant to share income information with other agencies. (The draft version of the rule asks colleges to supply income and job placement data.) It could be risky to put the regulation in place only to discover it’s disqualifying more students for federal loans than intended, Hartle says. The New York Times writes that the department has no idea how many colleges would lose federal funds under the proposed rule.

"Put aside for a minute the political pressure, there’s the question of whether it’s good public policy to put something in place when you don’t have the data. Without the income data they can’t simulate either the repayment rate or the debt to income ratio. That’s a pretty big step to take to threaten to eliminate schools’ eligibility when you don’t know in advance what the results will look like," Hartle says.

The chief lobbyist for the for-profit college industry Harris Miller tells The Lookout he’s not against increased accountability, but thinks the gainful employment rule expects students to be able to pay back loans more quickly than is possible. His group has sued the department and Duncan to block three of the rules that have already been finalized, and he says they are keeping their legal options open if the gainful employment rule also goes through.

The for-profit industry argues its schools are indispensable to President Obama’s goal of having the highest proportion of college graduates in the world by 2020.
However, many for-profit programs are available at community colleges for a fraction of the price. But community college students say they are having trouble finding seats in their desired classes due to overcrowding, The Wall Street Journal’s Kevin Helliker reports. Due to budget cuts, the nation’s biggest community college system in California may have to turn away 350,000 students next year, and one report found only 12 percent of community college students in 2004 had a four-year degree by 2009.

It’s undeniable that many for-profit schools are riddled with problems, deceiving students about employment prospects and hiring salespeople to aggressively sell their colleges by tapping into people’s "pain" and insecurity about not having a college education.

Several students at Everest College, an arm of Corinthian Colleges, told Frontline they graduated from a $30,000 nursing program without ever having set foot inside a hospital, and were effectively unhireable. (Their "pediatric rounds" was a trip to a daycare.) Employees at the University of Phoenix and other for-profits actively recruited people from homeless shelters, signing them up for taxpayer-funded loans they couldn’t repay.

Many for-profit schools get as much as 80 percent of their total revenue from federal loans, much of which goes right back into the schools’ aggressive advertising campaigns. While only teaching about 12 percent of all college students, for-profit students take up a quarter of all federal grants and represent 43 percent of all defaults, according to federal data.

"Those who would prefer no accountability are spending millions of dollars on lobbying and national ad campaigns to distract from the fundamental issue, which is that students and taxpayers need and deserve better protection from unscrupulous and wasteful higher ed programs, regardless of sector," said Lauren Asher, president of the non-profit Institute for College Access and Success.


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