As a computer-animation student at a for-profit college Mike DiGiacomo was told he would have an internship at a television studio. Instead, he ended up carrying laundry and other belongings for a wedding photographer.
Barack Obama cracks down on for-profit colleges
This from Politico:
The Obama administration on Friday took an aggressive step to crack down on for-profit career training colleges, proposing a regulatory regimen that could shut down hundreds of degree programs — enrolling a million students in fields ranging from accounting to air-conditioning repair — for failing to place graduates in well-paying jobs.
The administration framed the move as a bold step to protect Americans from predatory institutions that leave students with high debt and few marketable skills. For-profit colleges, however, rejected the regulation as an unacceptable — and possibly illegal — federal intrusion into the private sector. Some Republicans in Congress weren’t happy, either.
James Kvaal, deputy director of the Domestic Policy Council at the White House, described the regulation as part of President Barack Obama’s campaign to make 2014 “a year of action,” with or without congressional support.In fact, the administration has been working on the rule, known as the “gainful employment” regulation, for five years. A previous version was blocked by the courts. Analysts who have been tracking the issue closely said another lawsuit over the latest draft is all but inevitable. And the latest draft contains a clause that indicates the administration is anticipating legal complications.
Education Secretary Arne Duncan said the complex regulation has a simple goal: “We want to protect students from enrolling in poorly performing programs that leave them with debt they cannot pay and a degree they cannot use.”
Duncan noted that most of the programs in question receive nearly all their revenue from the public treasury, in the form of federal loans and grants that students use to pay tuition. The colleges, he said, are therefore “failing both students and taxpayers.”
But Steve Gunderson, president of the Association of Private Sector Colleges and Universities, warned that the regulation would deny millions of students the chance to enroll in career training programs of their choice. “The government should be in the business of protecting opportunity, not restricting it,” he said.
Even before the draft was released, Gunderson made clear he would fight back. He sent Duncan a five-page letter outlining his concerns — and copied in two top presidential advisers, Valerie Jarrett and John Podesta.
The regulation would apply to about 8,000 career training programs at all types of institutions — community colleges, state universities and for-profit colleges. But for-profit colleges would bear the brunt of the sanctions because they offer the vast majority of the degree programs that would be rated as poor-performing under the administration’s formula. The federal government annually extends about $22 billion in federal loans and $7 billion in grants to students attending those programs.
The for-profit industry includes giants such as the University of Phoenix, DeVry University, Corinthian Colleges and Education Management Corporation. Their programs, offered both online and in-person, train students for a wide range of careers, including crime-scene investigator, graphic artist, physician’s assistant, IT specialist, business administrator, hair stylist and many more.
The draft rule ties data to specific programs. For example, the Los Angeles Film School’s certification in film and video has the worst debt to earnings ratio in the country at almost 55 percent of $17,411.
Barmak Nassirian, director of Federal Relations and Policy Analysis for the American Association of State Colleges and Universities, found the administration’s high hopes for the proposal overblown. “This regulation falls way short of coming anything close to that … It does nothing to clean up waste, fraud and abuse.”
“It’s a feel-good press release opportunity,” he added.
The Senate Committee on Health, Education, Labor and Pensions spent two years investigating the industry and released a scathing report in 2012 that concluded taxpayers were wasting tens of billions annually because so many students took out huge loans through federal aid programs, yet failed to earn degrees. The investigation, spearheaded by Sen. Tom Harkin (D-Iowa), found that the schools spent millions on marketing and employed armies of recruiters, yet had few support staff to help students stay in school; many who enrolled left after just a few months.
Harkin said he would review the new regulation closely, but based on an initial review, he expressed “serious concerns with this proposed rule’s ability to protect students and taxpayers from costly programs that consistently overpromise and underdeliver.” He called for strengthening the regulation before it is finalized.
Ben Miller, senior policy analyst at the New America Foundation, said the removal of two provisions might weaken the rule.
For programs that lose their eligibility for financial aid under the administration’s proposal, a provision that would have required those programs to repay students is now gone. The administration’s new rule essentially says it’s open to ideas on that front.
And a previous section that requiree capping growth of programs that were about to fail is gone, too.
Overseeing and enforcing this version of the rule will pose a challenge, Miller said, particularly in discerning whether senior officials at institutions are telling the truth about their program certifications.
The new regulation, which would take effect in 2016, would flag programs as weak if their graduates’ average loan payments ate up 8 percent or more of their total earnings or 20 percent or more of their discretionary earnings. They would also be flagged if the default rate for former students exceeded 30 percent.
Any program that failed those tests two out of three consecutive years would face a crippling penalty: The Education Department would refuse to extend financial aid to its students. That would choke off the colleges’ primary source of revenue — and effectively force them to close the targeted programs.
Duncan stressed that programs would have a few years to improve before facing sanctions. “The goal is not program elimination,” he said. “The goal is program improvement.”
But the administration has shown little patience with programs it regards as bad actors. Obama’s new Consumer Financial Protection Bureau is suing one for-profit institution, ITT Education Services, for predatory lending practices.
The administration claims authority to regulate for-profit universities based on a line in the 846-page Higher Education Act of 1965. It permits the federal government to extend financial aid to students attending post-secondary programs that “lead to gainful employment in a recognized occupation.”
This from Caitlin Emma at Politico (via email):Shortly after Obama took office, the Education Department decided it was high time to define the term “gainful employment.”
The Obama administration is moving forward with a bold regulatory proposal that could shutter hundreds of degree programs that fail to place their graduates in well-paying jobs, leaving them bogged down by debt and few marketable skills. As many as 1 million students could be affected by the much-anticipated "gainful employment" regulation, which builds on President Barack Obama's "year of action." But Education Secretary Arne Duncan stressed that programs would have a few years to improve before facing sanctions. "The goal is not program elimination," he said. "The goal is program improvement." A previous version of the regulation was shot down by the courts, but analysts like New America Foundation's Ben Miller say another lawsuit over the latest draft is all but inevitable.
This from the Hechinger Report:
The details: The regulation would apply to all types of institutions, but for-profit colleges would bear the brunt of the sanctions. They offer the most degree programs considered poor-performing under the administration's formula. Starting in 2016, programs would be targeted if their graduates' average loan payments eat up 8 percent or more of their total earnings or 20 percent or more of discretionary earnings. They would also be flagged if the default rate for former students exceeds 30 percent. If a program fails to clear those bars two out of three consecutive years, the federal government would refuse to extend financial aid to any student in the program. That would choke off the colleges' primary spigot of revenue - and effectively force them to close shop. Even more details will arrive when the official language of the rule goes public today.
Sen. Tom Harkin wants a stronger proposal. "I am grateful the secretary moved forward with the re-regulation of this important rule," he said. "However, based on what I've seen so far, I once again have serious concerns with this proposed rule's ability to protect students and taxpayers from costly programs that consistently overpromise and underdeliver.
"A sham," was what Steve Gunderson, president of the Association of Private Sector Colleges and Universities, called the proposal. "If the regulation were applied to all of higher education, programs like a bachelor's degree in journalism from Northwestern University, a law degree from George Washington University Law School and a bachelor's degree in social work from Virginia Commonwealth University, would all be penalized."
At least 32 states are working together to investigate for-profit colleges, and 14 of those have already filed subpoenas for information and several more are working independently on similar cases.
States crack down on for-profit universities
When Hannah Benbow ran into problems with the for-profit college she attended, she turned to the federal government for help.Benbow, 24, wrote to the U.S. Department of Education when the Art Institute of Washington in Arlington, Va.—one of more than 50 for-profit Art Institute campuses across the country—told her unexpectedly that she would need to apply for yet another student loan, on top of the nearly $120,000 she’d already borrowed, to cover $7,000 in fees she said were not disclosed to her before she signed up.
“Since my parents and family have already co-signed my other ridiculous amount of loans, they were denied on this one,” Benbow wrote in her letter to the agency, whose responsibilities include regulating higher education.
She never got an answer.
Oversight of for-profit colleges and universities by the U.S. Department of Education has been mired in political quicksand and thwarted by the colleges’ effective lobbying and legal challenges. But now, states and other federal agencies are stepping in and cracking down.
Attorneys general across the country are investigating for-profit colleges accused of leaving students with overwhelming loan debt and without marketable job skills. At least 32 states are working together to investigate the schools, and 14 of those have already filed subpoenas for information, while several more are working independently on similar cases.
In cooperation with several of these states, the new federal Consumer Financial Protection Bureau—the agency set up after the financial downturn to regulate financial institutions—has sued ITT Education Services for predatory lending practices, the CFPB’s first such lawsuit.
Corinthian Colleges, which, like ITT, has been accused of abuses, has also noted in regulatory filings that the CFPB was considering legal action against it.
The efforts by the attorneys general and CFPB follow several years of stymied Department of Education attempts to impose new regulations on the private, for-profit higher-education industry, and decades of relative inaction by state authorities.
“It’s very important that states have stepped up to the plate,” said Martha Kanter, who, as immediate past U.S. undersecretary of education, was the nation’s top higher-education official. “The fact is we need good regulations and good governance in the states.”
The Department of Education declined to answer questions about its oversight of for-profit colleges.
Critics say the industry’s lobbying arm, the Association of Private Sector Colleges and Universities, is a main reason Congress and the White House have not been able to crack down on dubious practices. The group’s president, former Congressman Steve Gunderson, declined through a spokesman to answer questions about its opposition to federal rules, or the wave of state actions.
Some larger states have taken on for-profit universities and colleges without waiting for others—or the federal government—to catch up.
California Attorney General Kamala Harris filed suit against Corinthian in October, and New York announced last summer a $10.25 million settlement with industry giant Career Education Corp. over claims it inflated its graduates’ job-placement rates.
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| Jack Conway |
After all, students rely on public aid, including grants paid from state taxes, to attend colleges that leave them ill-prepared for the work force, said Allison Martin, a spokeswoman for one of the state attorneys general who has led the clampdown on the for-profits, Kentucky’s Jack Conway.
“States are running out of funds to give to students,” Martin said. “There’s a taxpayer-protection issue here.”
But some industry leaders say recent state enforcement has muddied the already murky waters of regulation.
In Massachusetts, for example, Attorney General Martha Coakley, a candidate for governor, has pushed hard for new limits on for-profit colleges’ lending and recruiting practices. Some of the proposed rules would conflict with federal regulations and accreditors’ requirements, said Catherine Flaherty, executive director of the Massachusetts Association of Private Career Schools.
“They’re not the same, and therein lies the frustration,” Flaherty said. “We’d just like one set of rules to live by. We don’t mind rules and we’re happy to abide by them.”
Those in favor of tougher rules have applauded the cohesive approach of the states led by Kentucky, but some also worry that the separate actions by states including California, Massachusetts and New York could fragment enforcement efforts.
“If you look at the New York settlement with Career Education Corp., that really begs the question, what about students in the other 49 states?” said Pauline Abernathy, vice president of The Institute for College Access and Success, a California-based think tank. “It does nothing to help those students.”
New York Attorney General Eric Schneiderman declined to answer questions about the settlement or potential future actions against the for-profits. Several other attorneys general also declined to comment.
Kanter agreed that the fractured enforcement approach may not be the best way to crack down on these institutions. States and federal authorities need to communicate to make sure they’re not duplicating each other’s efforts.
“When you have so many competing interests, it gets messy,” she said. “We want to keep things clear and simple as a nation.”
Students like Benbow are exactly the reason states should be filling the enforcement void left by what he said is an ineffective Congress and gridlocked Department of Education, said David Halperin, a Washington, D.C., lawyer who has urged state and federal policymakers to take stronger action against the industry.
“This is not like selling pomegranate shampoo based on false claims,” he said. “For-profit colleges are a big drag on the economy. The debt is preventing people from spending money.”
A handful of recent actions suggest that some other federal agencies may join the CFPB in scrutinizing for-profit colleges. The Justice Department, Securities and Exchange Commission and Defense Department all have taken various actions against the industry in recent months.
Not all for-profit schools oppose tighter state and federal regulation.
Monroe College, with campuses in the Bronx and Westchester County, N.Y., welcomes the scrutiny, said President Marc Jerome, whose family has run the school for 80 years. Other colleges should accept the regulatory complications that come with their business models, he said.
“Higher education is a highly regulated area and it’s hard enough to operate in one state, much less several,” said Jerome, who has been working with federal regulators to help craft new rules for colleges. “Schools that have chosen that approach need to deal with it.”
Alumni who say they were burned by for-profit colleges want federal and state regulators alike to do a better job monitoring the schools.
As a computer-animation student at for-profit Gibbs College in Boston, Mike DiGiacomo was told he would have an internship at a television studio. Instead, he ended up carrying laundry and other belongings for a wedding photographer.
“I was looking to pursue animation and my mom had seen a commercial,” said DiGiacomo, 33. “I wish I had done more research. I learned the hard way.”
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