For-profit schools lash out at administration
http://thehill.com/regulation/295531-for-profit-schools-lash-out-at-administration
By Lydia Wheeler - 09/13/16 06:00 AM EDT
The Obama administration’s aggressive handling of for-profit colleges has some accusing it of unfairly targeting the industry.
The Department of Education has taken action against at least six for-profit schools in the last two years.
One of those schools, Corinthian Colleges, filed for bankruptcy in May 2015 after the department issued a $30 million fine. A second school, ITT Technical Institute, last week announced it was closing all 130 of its campuses due to federal sanctions.
Advocates of for-profit education say the administration is trying to put the industry out of business.
“I think there are simply some people within this administration who are opposed to the concept of the private sector being involved in the delivery of education at any level and they want to dramatically reduce or eliminate the sector’s existence,” said Steve Gunderson, CEO of Career Education Colleges and Universities, which represents the for-profit education industry.
“I think they have a vendetta against this sector’s very existence, and to prove that, take a look at what this sector has faced.”
In an interview with The Hill, Under Secretary of Education Ted Mitchell denied that the administration is unfairly attacking the for-profit sector.
“I wouldn’t call it a crack down,” Mitchell said. “We are focused more and more on student outcomes, and when one does that, one finds some troubling statistics.”
Mitchell said students at community colleges are typically borrowing from private lenders to attend — 80 percent compared to half of all students at public and private schools.
The for-profit sector has received around 42 percent of GI Bill benefits since the 9/11 attacks and took in about 20 percent of Pell Grants and subsidized and unsubsidized federal direct student loans during the 2013–2014 school year, according to a College Board report.
Students at for-profit schools are also defaulting at a disproportionally higher rate. Despite enrolling just 12 percent of students, for-profit colleges account for 44 percent of all student loan defaults.
“The administration cares far less about tax status than it does outcomes for students,” Mitchell said.
Gunderson pointed to two regulations that he said target for-profit schools — one on gainful employment, and a second on defense to repayment.
The gainful employment rule, which took effect in July 2015, requires for-profit programs and nondegree programs at nonprofit and public schools to help students find work. If a graduate’s annual loan payment exceeds 20 percent of his or her discretionary income, the school risks losing federal student aid.
By the Education Department’s own estimate, the rule will eliminate 14 to 24 programs, Gunderson said.
The defense to repayment rule, which the department is expected to finish in November, creates a process for students who feel they have been defrauded by their school to apply for loan forgiveness.
While Gunderson’s group supports the initiative, he said the rule as written is punitive. It requires schools to provide a letter of credit every time a lawsuit is filed against it; it also requires for-profit schools to notify prospective students that it has cash on hand to make repayments if forced to close.
“There are good and bad schools in every sector of education, including ours, but they have gone far beyond getting to the bad actors to the point they are putting survival of the entire sector at risk,” he said.
Richard Vedder, director of the Center for College Affordability and Productivity, agreed that the for-profit sector is being singled out unfairly for problems that are widespread in higher education.
“The one thing that has bothered me is I see a lack of fair play and level playing field,” he said. “I think there is a problem of poor performance in the for-profit segment of the industry, but I see the same thing elsewhere.”
Vedder argues that flawed financial aid programs are the root of the problem. In an op-ed in The Wall Street Journal, he said readily available funds have allowed for-profit schools to grow exponentially, with that growth contributing to tuition increases across the industry.
“The money doesn’t go to the kids,” he said. “It goes to the colleges.”
While the administration’s regulations have drawn criticism, some education advocates argue the department could be doing more.
State colleges and universities, which compete for students with for-profit colleges, warned of the cost to taxpayers when schools fail.
“We need good gatekeeping on the front end so you don’t have billion-dollar collapses either the victims or the taxpayers have to pay off,” said Barmak Nassirian, director of federal policy analysis for the American Association of State Colleges and Universities.
“You don’t blame the undertaker for the fact that your relative is deceased — you need to understand why the dead body was there in the first place.”