The Chronicle of Higher Education: Public-College Leaders Rail Against Education Dept.’s ‘Regulatory Culture’

October 20, 2014

Ted Mitchell, under secretary of education, began his speech to a roomful of higher-education leaders on Monday with a conciliatory tone, stressing that the U.S. Department of Education shared a goal with them of serving the public good.

After laying out some details of the department’s major policy proposals, Mr. Mitchell invited the audience to tell him how the federal government was impeding new and more-effective approaches in higher education.

He got an earful from the attendees, mostly college presidents from members of the American Association of State Colleges and Universities, which is holding its annual meeting here this week.
The Education Department’s own regulatory actions—its "regulatory culture"—are the principal impediments to innovation, said George A. Pruitt, president of Thomas Edison State College, in New Jersey.

Mr. Pruitt and others cited, in particular, several rules meant to crack down on perceived abuses by for-profit colleges that rely primarily on distance learning. Those regulations include one strictly tying the credit hour to time spent in class, another requiring colleges to be authorized in every state where they enroll students, and one that evaluates the earnings of a college’s graduates in proportion to their amount of student debt.

Those rules may have been meant primarily for proprietary colleges, but they are having a negative impact on all sectors of higher education, Mr. Pruitt argued, and they reflect a view that makes compliance a priority over quality assurance.

"I understand that you get upset if your dog soils the carpet," he said, "but you don't go out and shoot your horse for that."

Eduardo M. Ochoa, president of California State University-Monterey Bay, said the problem lay with the department’s Office of Inspector General, which has pushed the department to adopt such rules in the face of negative scrutiny for both colleges and accreditors.

"When will the department see fit to overrule the inspector general?," asked Mr. Ochoa, who served as assistant secretary for postsecondary education from 2010 to 2012.

Several college presidents also raised questions about the department's proposed ratings system for colleges.

Ricardo Azziz, president of Georgia Regents University, asked Mr. Mitchell how the department would prevent the ratings from being misused as a rankings system.

Mr. Mitchell said he couldn't answer "precisely," but he promised that the department was considering several ways to guard against that possibility.

A broader concern from college presidents at the meeting was that the metrics in the ratings system would put at a disadvantage colleges that enroll many low-income, minority, or first-generation students.

For his part, Mr. Mitchell tried to reassure the college leaders that the department was working to be more cooperative, citing experimental programs to test approaches like competency-based education and credit for prior learning.

"We're helping to create space for innovation," Mr. Mitchell said.

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Federal Regulations Advisor: Monday Morning Regulatory Review – 10/20/14: Management by Executive Order; Gainful Employment Meetings; OMB Meetings; & Record Completion and Privilege Management by Executive Order; Gainful Employment Meetings; OMB Meetings; & Record Completion and Privilege

Posted in Executive - OMB Review, Judicial Review & Remedies, Regulatory Process
A holiday-shortened workweek and a pre-midterm election pause provide the opportunity to review a few miscellaneous topics.  President Obama (POTUS) issued a new Executive Order seeking to improve the security of federal government credit and debit cards, and improve the anti-fraud environment, but with limited effect.  The Office of Management and Budget (OMB) Office of Information and Regulatory Affairs (OIRA) continued an extensive series of meetings with private parties on the Department of Education (ED)’s attempts to limit government student loan defaults in for-profit colleges and universities, and some key points about OMB meetings are worth reiterating.  Finally, the United States District Court for the District of Columbia granted in part and denied in part motions to supplement an agency administrative record, posing again a problem of when an agency will be called to account.

Management by Executive Order:  Several press sources noted the fact that President Obama signed an Executive Order mandating that government credit cards and benefit cards use a digital chip in addition to the standard magnetic strip (sometimes called “chip-and-PIN technology”) – a security feature that has been available for some time, but has not yet been widely adopted because of increased cost of card manufacture.  Some in the general press have overstated the potential effect of the executive order / management directive.  The key point may be leadership by example, with the increased cost apparently absorbed by the government (or perhaps the government employees).  Much of the order simply requires planning and communication.

  The Executive Order certainly makes sense, but needs to be understood in context.  The new cards may have little effect outside government operations and protects federal employees and the government from loss more than anyone else, including the beneficiaries of Social Security and welfare benefits through a debit card (the potential amounts often are not substantial enough for a third party to divert).  The Executive Order is merely a management tool that does not directly affect private parties, though it may encourage some behavioral changes.

Gainful Employment Meetings:  Over the past several weeks, OMB has held more than a dozen meetings with interested organizations on the ED’s Gainful Employment final rule to better regulate for-profit colleges and universities to reduce federally-guaranteed loan default rates, a series of regulations that have been beset with difficulty, including multiple remands (and not enough vacatur) discussed previously from the United States Court of Appeals for the District of Columbia Circuit and from the district court.  OMB has been considering other economically significant final rule provisions for a month and everyone appears to have a view and be seeking an OMB audience.
  The Gainful Employment regulations need a careful review before any further action is taken – sadly, OMB (from the executive review perspective) and the Department of Justice (DOJ) (from the litigation / compliance perspective) need to oversee and coordinate that review to end ED’s continued inability to comply with the Administrative Procedure Act (APA) and court interpretations.  Otherwise, the parties will continue to write new episodes (and we will continue to criticize them) in this wasteful epic.

OMB Meetings:  Last April, OMB revised the way they publicly report public meetings under Executive Order 12866 and has held 232 meetings since then, although this number reflects only the commonality of the process.  Some points should be reiterated about OMB meetings and the place those meetings fit within the regulatory process.
  1. OMB meetings are “listening sessions”:  OMB attorneys, analysts, and examiners, agency officials, and even other Administration officials treat OMB meetings as a formal opportunity for interested parties to clarify issues and present data – requesters should not expect any response; OMB and the agency may ask questions but will rarely answer questions.  The key is presentation of persuasive data.
  2. Data and substance are critical:  OMB looks for substantive analysis, whether refreshing prior public comments or providing new insight.  Professionals look for ways to make a decision and pressure does not add substance.
  3. Some have decried these ex parte meetings, but such cries are more often a political statement meaning “Don’t listen to them, listen to us.”  Those complaining may not have substantive information to present.
  4. An interested party must request a meeting:  although often freely permitted, OMB may refuse to meet if they do not perceive that the meeting will be productive.  Thus, a record of “us, not them” may result in OMB seeing a requested meeting as a waste of their time.
Record Completion and Privilege:  The United States District Court for the District of Columbia last week granted in part a motion to supplement the administrative record in judicial review of a Department of the Interior (DOI) decision, but then declined to require DOI to file an index of the documents that it claimed were privileged and, therefore, not part of the administrative record, in Stand Up for California v. U.S. Department of the Interior (DOI).  Although technically an adjudication rather than a rulemaking, the same principles apply and pose a continuing problem.  The district court granted in part and denied in part the plaintiffs’ motion to supplement (actually complete) the administrative record of the agency decision, finding that certain documents were in the possession of the agency and formed part of the agency’s consideration of the decision.  On the other hand, the district court denied the plaintiffs’ motion to compel the agency to produce an index of all privileged documents that were not included within the administrative record.  The court relied on the presumption of regularity – that the agency has properly constructed the administrative record – in denying the motion to compel DOI to produce a privilege index.

  The decision on the motions is not particularly new or surprising, but together raise a question:  once the plaintiff has pierced the presumption of regularity to compel additions to the administrative record, why is the presumption still permitted to the agency to protect what may be other failures?  This issue has been raised in the past and will be raised again – and needs to be carefully considered on appellate review.
*  So that you are not surprised, there may not be a Monday Morning Regulatory Review next Monday.

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Forbes:Obama Is Deploying 'Gainful Employment' Regulations To Threaten For-Profit Colleges

October 07, 2014 

Vicki E. Alger
Vicki E. Alger, Ph.D., is a research fellow at the Independent Institute in Oakland, California.

The Obama administration claims its latest college crusade will help students. On the contrary, its “gainful employment” regulations amount to a hostile takeover attempt by government of the fastest growing higher education sector in the country that will hurt students, taxpayers, and the economy.
Education Secretary Arne Duncan acknowledges that most career colleges make a vital contribution to American global competitiveness. The few that don’t leave students with crushing debt and no degree to show for it; however, that outcome is hardly unique to the private or for-profit sector.

Rather than hold bad actors accountable, both public and for-profit alike, through existing laws, since 2010 Duncan has singled out and tried to use his department to exert more control over the for-profit career college  sector, which has swelled from 200,000 students in the late 1980s to 2 million as of 2010.

Back in 2010 the U.S. Department of Education unveiled a set of proposed gainful employment rules requiring private for-profit colleges to meet mandated loan repayment rates and debt-to-earnings levels before their students could qualify for federal student aid.

The final regulations unveiled in 2011 deemed students’ employment “gainful” only if it was in an occupation recognized by the federal government. They further mandated student repayment and debt load ratios that a federal judge struck down the following year for being “arbitrary and capricious.”
Undeterred last year the Obama administration revived its crusade against what Duncan called “predatory” career colleges with proposed mandates that are no less arbitrary or capricious than their predecessors.

Under the new proposed regulations unveiled earlier this year, for students to qualify for federal aid for-profit career colleges must prove the estimated annual loan payments of graduates do not exceed 20 percent of their discretionary earnings, or 8 percent of their total earnings, and the default rate for former students does not exceed 30 percent.

Duncan justified the move insisting that 72 percent of for-profit career colleges graduated students who earned less than high school dropouts. That claim has since been roundly dismissed. And there’s ample reason to doubt other claims by his department.

Department of Education officials estimate that 90 percent of career college students losing federal financial aid because of gainful employment regulations will find suitable alternatives. Actual figures tell a very different story.

Should the Obama administration succeed and gainful employment regulations take effect next year, more than 4 out of 10 students currently enrolled at for-profit career colleges could lose access to federal financial aid, according to research by the Association of Private Sector Colleges and Universities. Over the next decade as many as 7.5 million students could lose access.
And who are these students?

Most for-profit career college students are older adults, including members of the military. They are also far more likely to be from traditionally underrepresented populations, including minorities and first-generation college-goers.

These students seek out private for-profit career schools precisely because the public and non-profit sectors aren’t the right options for them, including not offering the desired degree programs or flexible schedules that help them balance family and career responsibilities.

Forcing these students into schools and programs the Obama administration (and its union allies) prefer won’t help them or taxpayers.

The net taxpayer cost of a private for-profit college student is $183 compared to more than $13,000 per public college student. If private for-profit options aren’t available, many of these students would have to transfer to public colleges at cost taxpayers nationwide an additional $1.7 billion annually. In the long-run gainful employment regulations could cost students and taxpayers even more.

As many as 23 million skilled and educated workers are needed over the next decade, and private for-profit career colleges specialize in offering degree programs in the highest-growth occupational fields.

At a time when 90 million Americans are undereducated, 12 million are unemployed, and family incomes are down, gainful employment regulations are the last thing American students, taxpayers, or our economy needs.

APSCU Press Release: APSCU Comments on Release of Cohort Default Rates and Adjustment of Calculation

Washington, D.C., September 24, 2014—Following the U.S. Department of Education's release of the official three-year federal student loan cohort default rate (CDR), APSCU Vice President of Public Affairs Noah Black released the following statement:

"It is a positive sign for students and the economy that cohort default rates continue to decline across the board. We are hopeful that as the economy improves and more borrower friendly policies are put in place, defaults can become a thing of the past.

"A comparison of institutions serving similar students—private sector institutions and community colleges—shows our institutions have equal or lower default rates and higher graduation rates than our peers. This is a result of our sector's focus on graduate employment, financial literacy and credentials in high demand fields.

"It is notable and disappointing that the Department continues to be opaque on how three-year CDRs are calculated.

"Now on the cusp of students and institutions losing access to Title IV funds, the Department appears to be admitting to certain flaws in how information is collected and CDRs calculated. As a result, they are making an adjustment for institutions that would have been subject to potential loss of eligibility this year. APSCU, and its members, raised this concern with the Administration repeatedly prior to the change in policy.

"Since the Department now thinks this is such an extraordinary situation, the logical question is, why are they not making the adjustment for all institutions? Doing so would certainly result in a more accurate measure of three-year CDRs—a metric that is used to determine eligibility for state grants, special disbursement rules and serves as the underpinning for the programmatic CDR in the proposed gainful employment regulation."

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