Reuters: The Postsecondary Education Investment

By Steve Gunderson

September 27, 2013

 

Any examination of postsecondary education begins with the students. What careers do they seek? What kind of education and skills will enable them to pursue their dreams? How do we design and deliver education in a way that meets them where they are in their personal lives and careers? While students determine their own futures, institutions have a responsibility to deliver education in the most effective, efficient way possible — especially considering the federal government’s investment in making college available to all Americans. Today that investment is over $175 billion, including student loans, grants and tax benefits.

 

Our country continues to slog through a multi-year jobless economic recovery, while employers increasingly demand mid-level skills in their employees. As a result, we have entered a period where postsecondary education is imperative for global competitiveness and economic growth, but it needs to be an education that prepares students for success in the workplace.

Despite the sluggish jobs recovery, employment projections for the future give us hope. By 2020, there will be 55 million new job openings in the United States. Twenty-three million of these openings will be for jobs that don’t even exist today, while 32 million will replace retiring baby boomers. Sixty-five percent of all jobs will require some level of postsecondary education and training.

Part of the postsecondary education conversation concerns what role the federal government should play in where students decide to enroll, how much the student should spend on tuition and what degree or certificate (everything from a B.A. in Healthcare Administration, to an associate degree in Network Systems Administration) the student can pursue. Federal financial aid has increasingly become a key component in any discussion on education affordability, access and opportunity. This is due to the rising cost of education at private nonprofit institutions, and selective admissions and recruiting policies at public institutions that direct states’ higher education funding to upper-middle class students.

Reuters recently ran a lengthy story that captures the ins and outs of this evolution and the disinterest by public and private nonprofit universities in educating the “new traditional” students. New traditional students work full-time while attending school, don’t live on campus because they have a family, pay for education with money they personally saved, and/or are enrolled in a certificate program. The schools I work with are addressing a critical gap that exists in American education, by providing access and opportunity to these students.

The Reuters article states that our institutions should be a liberal cause because of the students we serve and their potential for upward mobility. It also notes that if there was a more productive political environment in Washington, D.C. our institutions would sit at the nexus of a bipartisan compromise on postsecondary education.

Since that political environment does not exist, we are left with an Education Department proposing regulations that would determine if a postsecondary degree or certificate program is eligible for federal financial aid on the basis of a single metric — the debt-to-earnings ratio of students who used federal loans and complete their program. The regulation is mostly targeted at private-sector colleges and community colleges. If the regulation goes into effect, it will cut off access to thousands of programs for hundreds of thousands of students, while leaving almost all the rest of postsecondary education and their upper-middle class students immune from regulatory overreach.

The Education Department is busy creating new regulations focused on a select number of schools, while President Obama has proposed reforming how the federal government evaluates all higher education institutions and distributes financial aid. The president’s approach would use multiple factors and outcomes and apply them to all schools (not just private-sector colleges and community colleges), compared to the Education Department’s singular focus on the debt-to-earnings ratio.
Within the president’s own administration there are two different forces at work: Individuals who want to reform all of postsecondary education by changing how we evaluate institutions, and anti-business ideologues who want to regulate out of existence institutions that provide the only pathway to postsecondary education for certain students.

Our country needs a policy environment that supports forward-looking institutions focused on three areas: creating sustainable, yet affordable programs; improving student outcomes; and creating academic delivery that meets students where they are physically and financially in their lives. Instead, we have a proposed regulation that will use earnings data from current graduates to determine if future students may use federal financial aid in certain academic programs.

If our nation allows a single earnings metric to become the arbiter of what is and what is not a successful program, all institutions — even private sector ones — will then be forced to limit access to students with a lower possibility for success. Many of these students are the first in their family to attend college, work full-time or are unable to self-finance their education. In other words, if you are deemed to have lower possibility of completion and employment, America no longer has an interest in giving you a chance to obtain an education. The private sector, along with our partners at community colleges, has long sought to build this bridge, by enrolling a high percentage of new traditional students, who happen to be most reliant on federal financial aid.

The Education Department’s efforts contradict the administration’s goal of closing the skills gap by increasing the number of Americans with postsecondary credentials. Continuing down this regulatory path will hamper Obama’s attempt to create a new middle class in America. We need the administration to engage in a conversation focused on prospective students who need opportunity the most. If it doesn’t, the very students it intends to help will ultimately be the ones denied access and opportunity.

In the end, the government must be agile enough to meet multiple goals at the same time. We must address the impending skills gap or America’s economy will suffer. We must also ensure that in times of limited resources, accountability and outcomes matter. But we must also design and deliver a higher education system that provides opportunity for education, skills, and real economic growth for all Americans. If we fail to do so, we’ll ignore the promise of the American Dream for all our citizens. And a nation divided between rich and poor cannot last.

Reuters: Weeds amidst the ivy

Weeds amidst the ivy

By Chadwick Matlin|September 19, 2013

On the first day of the Association of Private Sector Colleges and Universities annual convention, a storm worked its way towards the convention center. More than a thousand people milled inside Rosen Shingle Creek, one of the golf resort/convention centers that are endemic to central Florida. The attendees had come for the annual congress of for-profit colleges, hosted by the sector’s trade association and central lobbyist. Its theme: “Opportunity for all.”
That night, a self-described “futurist and demographer” took the stage to deliver the keynote address. Kenneth Gronbach is a big man with a bigger voice, going after laughs more than longitudinal studies. Gronbach calls himself a “generational marketing expert,” and has written a book called The Age Curve. Subtitle: “How to Profit from the Coming Demographic Storm.”

Gronbach’s presentation began with a joke: “How many people are really excited to listen to a demographer for an hour?” A little manic, Gronbach paced the stage, taking audible sniffs as he caught his breath and delivered the next slide. “We’re going to concentrate not on money and stuff, but on people,” he said. But for Gronbach people are opportunity, and opportunity is money.

Gronbach spoke for nearly an hour, touching on everything from Honda motorcycles to how Generation Y requires “transparency, integrity, sense of green, humanitarian, fairness, cyber, and empathy” in the workplace. At one point he said, “I don’t think we could invent a better immigrant than a Latino.”

APSCU had brought Gronbach to the convention to try and help its member schools — all for-profit colleges that cater to 13 percent of American higher education students — better understand their target audience. Who were these students that needed vocational certificates and degrees? How best to get them to enroll, and how best to get them to graduate? As Gronbach promised, “Generation Y is going to change everything. They are going to change your lives.”

For the people in charge of for-profit schools, they already have. They’ve made them very rich. Between 1998 and 2008, for-profit enrollment increased 225 percent by one count, nearly eight times the rate of the rest of higher education. During the bleakest days of the Great Recession, stock prices soared as students went back to school in a bad job market. In 2009, publicly traded for-profits were $3.2 billion in the black, before taxes. But now for various reasons — a rebounding economy, harsh media coverage of the sector’s abuses, and tighter federal regulation — enrollment is down across the sector. A talk like Gronbach’s was meant to pep up morale.

“The antiquated college system is a rotary phone,” Gronbach said before lauding the private sector schools for being more nimble than traditional schools. That’s where their advantage lay, he said. “If you do it right, you’ll be wearing diamonds as big as radishes.”

Soon, a loud hiss started to drown him out, working its way across the room. It was the rain, moving across the thin roof, pounding, hissing, pleading to be let in. The storm had come.

If you care about understanding the country’s student loan situation, the best place to start is with for-profit colleges. For the past ten years there has been no sector that’s relied on student loans more than for-profit schools, and no sector that’s used them more to its advantage.

For-profits include brands you’ve heard of — University of Phoenix, Kaplan, DeVry — and small mom-and-pop outfits you haven’t — Fountainhead College of Technology, National Tractor Trailer School, and Spartan College of Aeronautics and Technology. Overall, it’s estimated over 4 million students attend for-profits annually.

In a more innocent time we called these schools career colleges; their express purpose is to prepare people to take on a job they wouldn’t have been able to get otherwise. They offer certificates, associate’s, bachelor’s and grad degrees, like any other school, just with more of a focus on the outcome than the process. It is all about school equating to a job. In that sense for-profits are the rare party in higher education that acknowledge what college has become: a commodity.

Take, for instance, Corinthian Colleges, Inc., a network of over 100 for-profit schools across the country. Founded in 1995 and IPO’d in 1999, Corinthian has grown by purchasing other schools and creating its own campuses where it sees demand. Unlike many for-profits, Corinthian focuses on campus-based learning, with three main brands spread across the country: WyoTech, Heald, and Everest, each with its own specialties. WyoTech has a host of automotive repair courses. Heald offers associate’s degrees in business administration. Everest’s medical assistant certificates are very popular, at around $16,000 a pop. About 90,000 students attend one of the Corinthian schools.
The people signing up for the courses are, by and large, the ones for whom a traditional college setting isn’t ideal. They’re usually older, poorer, busier, or some combination of the three. And yet they’re spending more money on college. By some counts, 96 percent of for-profit students take out loans, and nearly all of them are drawing from federal financial aid. In comparison, only 13 percent of students going to community college take out loans, because community colleges are a fraction of the cost.

So why go to for-profits? Because they offer the luxuries of convenience and efficiency. Matthew Mastrogiovanni, a 44-year-old logistics administrator went to an Everest campus in South Plainfield, New Jersey to change his career and get certified in its 9-month electrician program.

Mastrogiovanni’s whole family had been to Everest — his wife completed the Medical Insurance Billing and Coding program, and she only went because she was so impressed with the sales pitch when she brought their son in to register for a pharmacy technician program. For Mastrogiovanni, who works night shifts but wanted a career change, it was their testimonial plus Everest’s “very flexible schedule,” that appealed. He said Everest had told him the electrician field was booming with jobs — “and it is booming if you’re 18 and you’re living at home with mom and dad,” he said. He faults Everest for not specifying that the jobs wouldn’t pay him what he needed as a middle-aged guy with a family. Since graduating almost a year ago, he’s had only one job interview, and he found it on his own. He still works in logistics for a stock room company. His electrician program cost more than $19,000. He’s had to put his loans in deferral as he pays off the Everest loans for the rest of his family.

The schools justify their extra cost by offering accelerated programs and more robust distance-learning options that can accommodate a more demanding lifestyle. This, they’ve determined, is what the rest of higher education isn’t offering — and it’s what’s worth at least an extra $10,000.
This is all made possible because the federal government has made it possible with its financial aid program. For-profits long ago realized that the most sustainable business model is the one that feeds off of the government’s largesse. Going up against community colleges is a lot easier than going up against Harvard, especially when the federal government can foot a large part of the bill. The market has confirmed their suspicions. By one count, the sector burned through $32 billion of federal funds in 2009-2010, a quarter of the DOE’s student aid allotment. In 2010, the federal government spent $509.3 million in Pell grants just for Corinthian’s 113,818 students. But Pell grants don’t have to be paid back; the sector’s $32 billion is comprised largely of loans. Ultimately, it’s students who are on the hook.

The readily available funding from student grants and loans has created an entire industry — and one that many now consider a predator against the very population that the loans were meant to empower. It’s an unintended consequence of legislation: our ideals demanded we provide loans so people can afford to go to school before they can actually afford to go to school, but the market’s demands created an opportunity to profit.

Without federal financing, the for-profit sector would be a fraction of the size and its students would be much less in debt. But far fewer Americans would have diplomas. It’s a trade-off: If we as a country want to ensure there’s a path to upward mobility, we have to help finance the way. But financing comes with risk, and some students are going to be left behind rather than thrust ahead.
This is what makes the political debate over for-profits’ role in higher education so warped. Here’s a sector that should be a liberal cause. It serves America’s neediest population, and uses tens of billions in public funds to do it. But its emphasis on the private over the public sector and its unabashed interest in pursuing profit aligns it with Republican orthodoxy. In a different Washington this would lead to bipartisanship. In our Washington it leads to scorched earth campaigns.

As a case study, take Senator Tom Harkin’s crusade against for-profit colleges. For two years he and his staff worked on a report on for-profit colleges’ questionable practices and heavily indebted students. It is the most comprehensive third-party report available on the sector, and much of the preceding data comes out of their work.


Harkin’s team found that for-profit students carry a lot of debt, and aren’t good at paying it off. An executive summary:

• “Independent students,” the report says, “leave for-profit schools with a median debt of $32,700, but leave public colleges with median debt of $20,000, and private non-profit colleges with a median debt of $24,600.”
• The “Department [of Education] estimates that 46.3 percent of all dollars lent to for-profit students who entered repayment in 2008 will default. The comparable number for 2-year public and non-profit colleges is 31.1 percent.”
• To cap it off, the report found that somewhere between 50 and 70 percent of students left school without getting a diploma. Going into debt but not getting a degree is probably the worst outcome for any college student — the student assumes much of the cost without attaining most of the benefit.

Since 2012, that Harkin report has been a scarlet letter for the industry, which is why for-profits treat it like it’s Nathaniel Hawthorne’s Scarlet Letter and think it ought to be banned. Steve Gunderson, APSCU’s chief executive and thus the industry’s chief promoter, described it as “ideology drives reality.”

Gunderson and others I spoke with think Harkin and his team are opposed to the very idea of for-profit higher education, and so trying to change their minds is futile. They think Harkin’s report manipulates data, composes an incomplete snapshot, and uses select cases of malfeasance to build an overly-broad narrative about the industry. Chief among the criticisms is that opponents don’t take into account that for-profits are serving students far more likely to drop out of school or have trouble repaying debts, because they come from disadvantaged backgrounds. It is difficult for high schools to educate the students society has left behind, so why should it be any different for for-profit colleges?
Before wading through education statistics — and there’s a swamp of them — it’s best to pack a machete.

For-profits make easy targets. They’re more expensive than community colleges, less established than storied elites, and less glamorous than mid-tier schools with gleaming athletic facilities. They’re also some of the few schools that still explicitly traffic in an increasingly outdated American Dream: come from adversity, go to school, get a job, become financially stable. And then of course there’s that emphasis on profit, something that’s anathema to the platonic ideal of American education, if not the modern reality.

For-profits, in other words, are weeds amidst the ivy, thriving in the cracks and growing faster than they can be cut down. They keep growing for a reason — they’ve adapted to modern higher education better, and sooner, than nearly any other bloc of schools. They may not be pretty, but they’re here to stay.

But poor results and abuses throughout the sector have forced the Obama administration to try and regulate the colleges. For the past few years the Department of Education has tried to ensure for-profits don’t manipulate students into enrolling, and then leave them unable to make their loan payments after graduation.

The regulations have already changed for-profits, and even they admit it’s largely been for the better. But now there’s a new debate taking place, and it’s one that demonstrates just how hard it is to force colleges to be accountable for how much debt their students have after they leave. The rise and regulation of for-profits can help explain how, for some, college went from being a gateway to the middle class to being an obstacle along the way; and what we can, or should, do about it.

The Chronicle of Higher Education: Reauthorization of Higher Education Act to Begin Next Week

September 13, 2013

Reauthorization of Higher Education Act to Begin Next Week

By Andy Thomason

Washington

 

The Senate's education committee will begin the process of reauthorizing the Higher Education Act next Thursday, the committee's chairman, Sen. Tom Harkin, an Iowa Democrat, announced on Friday.

The law, which governs most aspects of federal student aid, was viewed at the time of its last reauthorization, in 2008, as a landmark step toward reining in college costs and increasing accountability among the nation's colleges and universities. But critics charge that the most recent authorization has had little affect on affordability while creating more red tape for colleges.

Over the past five years, the U.S. Department of Education has stepped in with new policies outside of the Higher Education Act, including defining the credit hour, and Congress has altered the way student-loan interest rates are set.

Congress has held several committee hearings on college affordability in recent months. And in August, President Obama proposed a comprehensive college-ratings system tied to access to federal aid, as part of his own attempts to halt skyrocketing tuition and levels of student-loan debt.

Also in August lawmakers asked colleges to suggest changes in the act in preparation for the reauthorization, which by law is supposed to happen every five years but often is delayed. The suggestions have included reinstating year-round Pell Grants, requiring private loans to be certified by colleges, and accounting for risk factors among students when judging the quality of institutions.

Thursday's hearing of the Senate Committee on Health, Education, Labor, and Pensions is scheduled to begin at 10 a.m. It will be Webcast live at http://help.senate.gov.

Press Release:APSCU Comments on Conclusion of First Gainful Employment Negotiated Rulemaking Session

For Immediate Release
September 11, 2013

Contact
Noah Black, noah.black@apscu.org

APSCU Comments on Conclusion of
First Gainful Employment
Negotiated Rulemaking Session

U.S. Department of Education continues
bad public policy process

Washington, DC—Following the conclusion of the U.S. Department of Education's first session of gainful employment negotiated rulemaking, APSCU Vice President of Communications Noah Black released the following statement:

"The diverse views expressed by the negotiating committee as to what is a quality program, demonstrates why this matter should be left to the Congress and addressed during reauthorization of the Higher Education Act.

"As noted by several negotiators, institutions cannot control the economy, the availability of jobs, where students choose to live and work, yet the proposed regulation would determine program quality on those metrics.

"The Department's actions are out of step with the Congress, risk denying hundreds of thousands of students the opportunity for education, skills and jobs, and will hamper the ability of our country to meet the Administration's goal of closing the skills gap by increasing the number of Americans with postsecondary credentials."
###

Career College Central: Gainful Employment Negotiations: Day 2

Article Overview: 

Editor Kevin Kuzma was in Washington, DC to cover the second day of negotiated rulemaking sessions focused on gainful employment.

Career College Central summary:

• Editor Kevin Kuzma was in Washington, DC to cover the second day of negotiated rulemaking sessions focused on gainful employment. The sessions are being held at the Department of Education's offices on K Street.
• After spending the initial day approving a revised agenda and beginning to touch on gainful employment metrics, the committee of negotiators spent the second day of the sessions belabored by concerns about student loan repayment time frames, the ability for schools to respond to and address failing programs, and several participants continued a mammoth wrestling match with the concept of the gainful employment rule itself.
• Marc Jerome of Monroe College dominated the morning with his concerns about loan repayment calculations and the limited response times colleges are allowed to make corrections to struggling programs. He asserted that the Department's timing -- notifying the school of failing programs midway through their first year -- does not allow them enough room for correction. "If you fail for one year and the transition period, you fail."
• Concern also came from Brian Jones of Strayer who said the repayment timeline suggested by the Department were inconsistent with the direction of President Obama education policy. He said repayment periods beyond 10 years should be dropped if the Department found them to be bad policy.
• The Department handed out its loan repayment calculations to the committee, drawing what might have been the most humorous comment of the sessions from Belle Wheelan of the Southern Association of Colleges and Schools Commission on Colleges. She said the calculations and what data it used -- from various years -- was "clear as mud."
• Unable to get beyond extensive comments and concerns about the general draft language of the rule, John Kolotos of the Department of Education stopped the committee before breaking for lunch to voice his concerns that, at its current pace, the group would not be able to cover all the items on the agenda.
   
• Below are some additional comments and observations from Tuesday's session:
• Della Justice, of the Kentucky Attorney General's office, asked why job placement rates aren't metrics? She later suggested these rates should be 70%.
• Whitney Barley, of the Mississippi Center for Justice posed that schools should offer a line of credit to students in failing programs.
• Marc Jerome mentioned needing to look at repayment rates according to demographics.

Politico: What DeBlasio’s victory could mean for education - Public colleges directing aid away from poor - Some teachers left behind?

By LIBBY A. NELSON | 09/11/13 6:18 AM EDT

With help from Caitlin Emma, Nirvi Shah and Stephanie Simon

WHAT DEBLASIO’S VICTORY COULD MEAN FOR EDUCATION — Bill DeBlasio won the Democratic primary in the New York mayor's race, although he remained on the cusp of the 40 percent threshold necessary to avoid a runoff. DeBlasio has made universal pre-K a centerpiece of his campaign, pushing for a tax increase on the wealthy in order to pay for it. He’s also the foe of charter schools — he’s said several times that the city has enough charter schools and that they should have to pay rent to use public property. GothamSchools has more on DeBlasio’s views on education issues: http://bit.ly/1dDGOjQ
PUBLIC COLLEGES DIRECTING AID AWAY FROM POOR — From a ProPublica story co-published with the Chronicle of Higher Education: "Public colleges and universities were generally founded and funded to give students in their states access to an affordable college education. They have long served as a vital pathway for students from modest means and those who are the first in their families to attend college. But many public universities, faced with their own financial shortfalls, are increasingly leaving low-income students behind ...It’s not just that colleges are continuously pushing up sticker prices. Public universities have also been shifting their aid, giving less to the poorest students and more to the wealthiest." Read the story: http://bit.ly/17Y4SpG
YOUR TUESDAY ‘GAINFUL EMPLOYMENT’ UPDATE — The big idea to come out of Tuesday’s rulemaking session was an Education Department proposal to use loan default rates to judge vocational programs and for-profit colleges. The idea got an audible “Oooh!” from the audience when federal negotiator John Kolotos proposed it, saying that programs would be held to the same standards as colleges. A default rate of 40 percent or higher in one year, or 30 percent or higher for three consecutive years, would cause a program to lose eligibility. The department intended this as a supplement to its proposal on rewriting the “gainful employment” rule, not an alternative. Plenty of questions remain, including whether default rates are still a good metric because more students are making loan payments based on their income, and what would happen to community college vocational programs in which the majority of students don’t borrow.

Another flash point was the transition period before the new, as-yet-unwritten regulations take effect. Several higher education representatives argued that the Education Department shouldn’t use loan data from before the regulations take effect in enforcement. Negotiators also discussed the consequences for programs that fail — should students get a refund? That gets at an issue Barmak Nassirian, who represents public colleges, raised Monday: Judging programs based on debt and outcomes might help future students, but it doesn’t do anything for students who were enrolled before the program failed.

As in Monday’s session, there was little clear agreement on the issues. Negotiations continue this morning, beginning at 8:30 a.m. so that negotiators can pause for a Sept. 11 moment of silence at 8:46 a.m.

—Meanwhile, in Congress — The Education Department’s Inspector General warns that legislation overturning program integrity regulations, including the gainful employment rule, could harm students and taxpayers. Read the letter: http://1.usa.gov/17P3dGW

—More details on the action: The New America Foundation’s Ben Miller, a senior policy analyst, has been keeping a live blog of the proceedings that has helped your Morning Education host stay on track. Read about Tuesday morning: http://bit.ly/15TOXb7 And afternoon: http://bit.ly/15TP4mW

—And a correction: Tuesday’s Morning Education incorrectly stated an action of the Association of Private-Sector Colleges and Universities, the main lobbying group for for-profit schools, on the Education Department panel. The group, which was not represented, did not propose adding negotiators.

Inside Higher Education: Feds Float Idea of Program-Level Loan Default Rate

September 11, 2013

An official with the U.S. Department of Education on Tuesday suggested that a panel of negotiators consider including a program-level cohort default rate as part of proposed gainful employment regulations, which would would measure the employment outcomes of vocational programs at for-profit institutions and community colleges. That metric would be a new addition to an annual debt-to-income ratio and a discretionary income ratio.

John Kolotos, the official, who is a negotiator for the rule-making session that began this week, said the department had not vetted the details on how a loan default rate would work. But the department already has an institution-level rate in place, and he said the feds consider a three-year program-level rate of 30 percent (and one year at 40 percent) to be a "viable addition" to gainful employment. It would be a stand-alone measure, he said, meaning academic programs would lose eligibility for federal aid programs if they crossed the threshold, regardless of how they perform on other measures.

Read more: http://www.insidehighered.com/quicktakes/2013/09/11/feds-float-idea-program-level-loan-default-rate#ixzz2eb8L9sja
Inside Higher Ed

Marketplace Education: University of Phoenix, others face another crackdown

by Amy Scott

Marketplace Morning Report for Monday, September 9, 2013
   
The Obama Administration is taking another crack at reining in for-profit colleges. Some schools have come under fire for saddling students with heavy debt loads and light-weight credentials. After a federal court threw out new regulations last summer, negotiators are back at the table today.

The original “gainful employment” rules would have punished career colleges if more than 35 percent of their former students were not repaying their loans. The idea was to weed out expensive programs that don’t lead to good-paying jobs. A U.S. district judge threw out the 35 percent rule, calling it an arbitrary threshold.

“The judge has been very clear this entire time that the department has the legal authority to regulate this area if it chooses to do so,” says Ben Miller, a policy analyst with the New America Foundation who worked on the regulation while at the Education Department. “The issue with the courts is really just where you drew the line on one threshold.”

A new, tougher draft proposal would focus instead on the amount of debt graduates have, compared to what they earn.

There are better ways to measure student success, says Steve Gunderson, president of the Association of Private Sector Colleges and Universities. “Do you get placement in the area of your study, and did you actually complete your study? Did you graduate?”

Gunderson’s group wants the Obama Administration to hold off on new rules until Congress takes up the Higher Education Act, which is due for reauthorization this year.

About the author

Amy Scott is Marketplace’s education correspondent covering the K-12 and higher education beats, as well as general business and economic stories.

Bloomberg: For-Profit Colleges Aim to Relax Draft Student Debt Rules

By John Lauerman - Sep 9, 2013 12:01 AM ET

For-profit colleges will join talks today in Washington as they try to soften an Education Department proposal that sets limits on student debt levels.

The regulations, rewritten after a court challenge, threaten the colleges with losing eligibility for U.S. financial aid within two years of going into effect, according to the department’s draft proposal. An earlier version would have given education companies an additional year to comply.

The Education Department revised the regulations, called gainful employment, after a U.S. District Court struck down much of the rules last year. For-profit college negotiators will work to extend timelines for the rules that may go into effect in 2015 and potentially begin cutting off funds to noncompliant programs by 2017, said Jarrel Price, an analyst with Height Analytics in Washington who follows education policy.

“The real job of the industry’s negotiators will be to soften the initial blow,” Price said in a telephone interview. “This is a much more onerous version of the gainful employment regulations than was initially proposed.”

The Education Department, Congress and state and federal prosecutors have investigated for-profit colleges for recruiting students with little chance of academic success and leaving them with excessive debt. Some schools have also been probed for exaggerating the number of students who get jobs after graduating from training programs.

Industry Resistance 

The investigations, combined with slumping enrollment and competition from traditional colleges, have eroded the shares of for-profit college operators. The Bloomberg U.S. For-Profit Education Index of 13 companies has declined 59 percent since reaching a record high in April 2010.

Written to ensure that for-profit college graduates aren’t burdened with debt they can’t repay, the gainful employment rules have been stalled by the legal challenge filed by the Association of Private Sector Colleges and Universities, an industry group. Apollo Group Inc. (APOL), owner of the University of Phoenix, and Education Management Corp. (EDMC), which owns the Art Institutes chain, also fought the rules with lobbying and a letter-writing campaign.

While the industry lawsuit forced the Education Department to remove some features of gainful employment, the agency stiffened other provisions. Under the former rules, schools would lose eligibility for federal student financial aid if they failed to comply with the debt restrictions in three out of four years. Under the revisions, schools that fail to comply in two out of three years would lose eligibility.

Poor Indicator 

The new rules threaten to close programs that serve more than 200,000 students looking for advanced training, said Steve Gunderson, president of the Washington-based APSCU trade group. By pushing the regulations, the Obama administration would close off opportunities for low-income people to gain job skills, he said.

Debt levels, the department’s metric for student-aid eligibility, are a poor indicator of program quality, said Sally Stroup, a former Education Department assistant secretary during the George W. Bush administration who now serves as APSCU’s general counsel.

“Quality is a measure that’s determined through the accreditation process,” she said in a telephone interview. “The department has taken it away from accreditors and made it their decision.”
Along with industry and department officials, the talks will include representatives from student and consumer advocacy groups, state attorneys general offices, and legal aid organizations.

Dropout Measure 

Consumer groups will call for the debt measurements to include data on students who drop out of for-profit colleges before getting a degree, said Pauline Abernathy, a vice president at the Institute for College Access and Success, which is based in Oakland, California.

“Under the current rule, 99 percent of students in a program could drop out with high debt, and the college would still pass the gainful employment test with flying colors,” Abernathy said in a telephone interview. “That’s an omission that we and a coalition of student, civil rights and veterans associations think has to be corrected.”

More regulatory battles may be forthcoming later this year, said Price at Height Analytics. A group of for-profit college industry critics are pushing the Education Department to put tighter limits on the proportion of revenue that those colleges receive from federal sources and the percentage of their former students who default on loans, Price said.

Those limits could be addressed this year in the planned reauthorization of the Higher Education Act, according to Stephen Spector, an Education Department spokesman.

To contact the reporter on this story: John Lauerman in Boston at jlauerman@bloomberg.net
 
To contact the editor responsible for this story: Lisa Wolfson at lwolfson@bloomberg.net

The Chronicle of Higher Education: Education Dept. Releases Draft Language for New Gainful-Employment Rule

August 30, 2013

By Goldie Blumenstyk

The U.S. Department of Education released draft language on Friday for a proposed new "gainful employment" rule that in some ways would be stronger than an earlier version that was thrown out by a federal court in June 2012, but in others ways would be weaker.

The draft regulation, which will be subject to three days of formal negotiation beginning on September 9, could cover more than 11,000 programs at for-profit and nonprofit colleges—nearly twice as many as the old rule would have covered. That's because the draft calls for including programs with as few as 10 students; the earlier rule counted only career-focused programs with 30 or more students. (See a comparison of the two versions prepared by the Education Department.)

The old rule also would have cut off federal student aid to programs where too few students were repaying their loans or where graduates' debt-to-earnings ratios, based on two measures, were too high. In blocking the earlier rule, the court said that the thresholds for the student-loan-repayment criteria were "arbitrary and capricious" because the department had not shown a reasoned basis for them.

The new rule would omit the loan-repayment criteria altogether.

That's an omission that consumer advocates like the Institute for College Access and Success have said would create a "loophole for schools to ignore the debt burdens of students who do not complete or create incentives for schools to discourage completion by students with high debts." The group has said the two-pronged test is a better measure of how well a program is serving all of its students because the debt-to-earnings test applies only to those who have made it through.

'Tougher and Leaner'

The draft language for the proposed rule also calls for applying the debt-to-earnings tests in a way that could make it harder for some programs to pass the test. Under the old rule, the calculation would have been based on all students who completed the program, no matter how they had paid for it. The draft regulation proposes basing that calculation only on students who receive federal student loans and Pell Grants. The calculation would exclude students who attend college using federal veterans benefits or military tuition-assistance funds, as well as students who pay their own way.

That approach could be seen by some as excluding from the calculation students who are more likely to succeed, but since the test is designed to ensure that federal student-aid funds are being used effectively, basing the criteria solely on those using federal student aid may be just the point.

The Association of Public Sector Colleges and Universities said the draft language seemed designed to limit access to students who need it the most. The "draft regulation raises doubts on the level of interest at the department for working with all of postsecondary education to create meaningful change that puts the interests and outcomes of students first," said a statement from the group, which advocates for the for-profit-college industry.

Earlier this week, Steve Gunderson, president of the organization, sent a letter to Education Secretary Arne Duncan asking him to abandon the negotiated rule-making process for the gainful-employment rule or to expand the membership on the rule-making panel "to include a fair representation" of private-sector institutions. He said only four of the 28 negotiators represent the interests of for-profit colleges.

Ben Miller, a policy analyst at the New America Foundation and a former senior policy adviser at the Department of Education, called the draft regulation "tougher and leaner" than the original. It would rely on two measures—debt-to-earnings ratio and debt-to-discretionary-income ratio—instead of three and would "remove a lot of unnecessary tweaks and concessions made during the last regulatory process," he noted in a news release from the foundation.

Programs would pass if their students' debt-to-earnings ratio was greater than 12 percent or the students' debt-to-discretionary-income ratio was greater than 30 percent, the same ratios as in the original rule.

A program that failed the measures twice in any three-year period would be ineligible for federal student aid. As the New America Foundation said, "this is faster than the fail-three-out-of-any-four approach taken in the previous rule."

The draft regulation would also add a so-called zone where students would receive warnings about debt if the annual debt-to-earnings ratio was 8 percent to 12 percent or if the debt-to-discretionary-earnings calculation was 20 percent to 30 percent.