Town For-Profit Schools Not the Problem

May 16, 2014

Written by:Linda Chavez 

Give the Obama administration credit for consistency if nothing else when it comes to targeting the for-profit education sector. In March, the Department of Education proposed new rules (whose public comment period ends May 27) that may put some for-profit schools out of business for no good reason. A federal judge struck down similar rules in 2012, but that didn't stop the department from trying again. The question is: Why?

Not everyone benefits from being born to wealthy parents who can afford to pay for college. Increasingly, middle-income students must borrow if they want to further their education after high school. And the problems are even more severe for nontraditional students who are older, poorer and often the first in their family to receive post-secondary education. Those in the latter group seek opportunity in the for-profit education sector because it meets their needs better than traditional universities or colleges. But they may soon find this avenue blocked, as well.

At issue are rules that seek to impose a "gainful employment" requirement on for-profit schools and non-degree programs in community colleges. The rule is more than 70 pages long, but the essence is that these institutions would be prohibited from participating in federally guaranteed loan programs if their graduates fail to meet the arbitrary criteria the department has developed for payback on the loans.

Once the rule goes into effect in 2015, the average loan payment of graduates of these institutions won't be able to exceed 8 percent of their individual income or 20 percent of their discretionary income. The idea behind the rule supposedly is not to burden graduates with mountains of debt they can never repay. But the percentages are arbitrary and don't take into account that the graduates themselves are in a better position to know how much they can afford to repay than some government bureaucrat is.

Driving this rule is a belief by Secretary of Education Arne Duncan and others in the Obama administration that for-profit schools are a rip-off. When he announced the new rules, Duncan alleged that nearly three-quarters of those who attend for-profit programs earn less than the average high school dropout. But even The Washington Post took issue with Duncan's claim. The Post pointed out in its Fact Checker column that the data the feds used was "bogus."

Academic studies comparing before and after earnings of graduates of for-profit schools show modest increases in pay after completion of training. Will the graduate who earns a technical degree from a for-profit school make as much as a graduate of a four-year public or private college? Not likely -- but to say, as the education secretary has repeatedly, that they will make less than someone who drops out of high school is dishonest and suggests an agenda other than protecting future students of such institutions.

For-profit schools serve an important niche in our post-secondary education system. Despite President Obama's oft-stated goal of making college accessible for all young people, attending a four-year institution does not make sense for everyone. The students most likely to pick a for-profit program tend to be older, and many of them are already parents and are either working at low-skilled jobs or out of work. They want skills that will help them find jobs, but they can't necessarily afford to pay out of pocket or to attend programs full time. Without loans, they cannot get the training they need.

No doubt there are unscrupulous players in the for-profit sector who offer more than they can deliver. But, as in the rest of the for-profit economy, companies that don't deliver what they claim run out of customers fast.

The default rate on student loans is notoriously high -- but it is actually higher among former students of community colleges, 15 percent, than among those who attended for-profit programs, 13.6 percent. Both groups have high default rates because they include disproportionate numbers of relatively low-paid workers stuck in an economy that is no longer producing enough jobs. The administration hasn't served this population well to date, and its proposed rules will simply penalize them further.

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USA Today: For-profit colleges, student advocates lobby Obama Aamer Madhani, USA TODAY 8:54 p.m. EDT May 14, 2014

May 14, 2014

Written by: Aamer Madhani

WASHINGTON — As the Obama administration prepares to establish new rules governing for-profit colleges later this year, student advocates and the career college industry are waging a fierce battle to shape the coming regulations.

Stakeholders on both sides of the debate are ramping up their push on the administration just as the public comment period on a proposed "gainful employment" regulation is set to close May 26.
Under the proposal that the administration unveiled in March, colleges would have to demonstrate that graduates' debt load on average does not exceed 30% of their discretionary earnings or 12% of their total earnings.

In addition, the new rules would put programs whose graduates have debt-to-income ratios of 8% to 12% or debt-to-discretionary-income ratios of 20% to 30% in a danger zone, which would require the schools to warn students that they might become ineligible for federal aid.

The administration pointed to the fact that students at for-profit colleges represent about 13% of the total higher-education population but are responsible for nearly half of all college loan defaults in justifying their call for the rule.

On one side, student advocates are arguing that the proposal laid out by the administration does not go far enough.

Student advocates from groups such as Young Invincibles and CREDO Mobile are calling on the new regulations to include financial relief for students at institutions that lose eligibility to federal aid, enrollment limits on poorly performing schools and stricter standards.

"I think the new rules would slow what's going on," said Mike DiGiacomo, 33, of Randolph, Mass., who racked up more than $85,000 in debt and lent his story to a CREDO online petition that has garnered more than 100,000 signatures. "But they are really just putting a Band-Aid on the problem."
The for-profits, meanwhile, counter that the proposed regulations would cut off access to a college education for millions of students, disproportionately affect programs serving minorities and veterans and conflict with Obama's call for increasing access to post-secondary education.

"The net result ... is that it's going to eliminate the bridge to education, skills and opportunity," said Steve Gunderson, president of the Association of Private Sector Colleges and Universities, the leading group representing for-profits.

APSCU also maintains that the Education Department doesn't have the authority to regulate colleges in this matter and that under the proposed rules, 3.4 million students could be affected by 2020.
At the same time, the APSCU appears to be bracing for the inevitability of new regulations and is calling on the administration to modify the metric for what it considers a failing program.
The group warns that the debt-to-earning metric doesn't always tell the whole story, noting that Education Department data show that students in certain professions may exceed the 12% debt-to-earning metric in their early years out of school but have relatively low loan default rates.

This isn't the first time that the Obama administration has attempted to tighten regulations on the for-profit industry. In 2010, the Education Department unveiled its first gainful employment rule that offered the multiple paths for for-profit programs to maintain eligibility.

Proponents of tougher rules said that the administration's first attempt was watered down under intense lobbying by the for-profits, which enlisted influential Democrats and Republicans including former Obama communications director Anita Dunn and former Senate majority leader Trent Lott, R-Miss.

The rule was eventually thrown out by a federal judge who called the requirements "arbitrary and capricious" because they weren't based on any economic studies.
Rory O'Sullivan, deputy director of the Young Invincibles, said another court challenge may be inevitable.

"I do think this rule will stand up to a court challenge," O'Sullivan said. He added, "The institutions' voices have been heard in this debate, but I think what we haven't heard enough about is the students who have gone to these schools, taken astronomical amounts of debt, but weren't prepared at all for the job market."

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The Chronicle of Higher Education: Advocates for a Tougher ‘Gainful Employment’ Rule Step Into the Fray

May 14, 2014

Student groups, veterans organizations, and others who want the federal government to put more teeth into its newest proposed “gainful employment” regulation are launching a visible lobbying and public-relations effort over the measure this week. There’s a Twitter campaign set for Wednesday—complete with its own hashtag, #studentsdemand—and a Capitol Hill news conference on Thursday featuring students at for-profit colleges and several U.S. senators.

“We’re going to be raising the voices of students this week,” said Rory O’Sullivan, deputy director of Young Invincibles, the nonprofit group that is spearheading the effort.

Organizers from Young Invincibles spent Tuesday visiting with dozens of students at four for-profit colleges in the Washington, D.C., area. “There’s a lot of frustration out there” among students who want more protection from high-cost programs that don’t prepare graduates for jobs in their field, said Mr. O’Sullivan. The U.S. Department of Education’s draft rule, he said, “is not strong enough to do that.”

The proposed rule would cut off student aid to career-focused programs at for-profit and nonprofit colleges if the program’s student-loan default rate reached 30 percent or if half of its graduates failed two student-loan debt standards. (The complicated particulars of the rule are explained in this chart.)
With just two weeks to go before the May 27 deadline for the public to submit comments to the department about the rule, Young Invincibles wants to be sure its concerns and those of its allies aren’t drowned out by the messages of opposition to the rule from the for-profit-college industry. “The for-profit colleges, they’re very good at this,” Mr. O’Sullivan said.

The industry’s campaign against the rule has been less vituperative than its lobbying in 2010, but spirited nonetheless. Several of the biggest companies, including the University of Phoenix, Corinthian Colleges Inc., and the Education Management Corporation, have been holding meetings with students and employees to encourage them to weigh in against the rule.

And to facilitate that, some, including Corinthian and EDMC, as Education Management is known, created websites to automate the comment submissions.

A Corinthian spokesman said more than 4,000 comments had been generated through its site, which contends that the proposed rule “denies as many as two million future students the ability to attend the program of their choice.”

A spokesman for EDMC said “several thousand” students, faculty members, and staff members had filed comments through its site. As first reported by the blogger and for-profit-college critic David Halperin in The Huffington Post, the Fort Lauderdale campus of EDMC’s Art Institutes recruited some of those commenters through a posting on FaceBook that offered free pizza to students who would stop by the library during the week of April 21 and sign on, via its website.

EDMC has also highlighted the issues in posters. Cristina Calvillo-Rivera, a Young Invincibles state-outreach coordinator who visited students at an Art Institutes campus in Washington on Tuesday, said she saw four such “Tell Your Story” posters per floor during her visit. There and on the other campuses the organizers visited (a campus of DeVry University, one of ECPI, and a center that trains nurses assistants called VMT Education Center), she said the sentiment was similar.
“There is a lot of concern about how they were going to pay off their loans,” especially among those closer to completing, she said. The organizers also found students who were satisfied with their programs.

Young Invincibles, along with other groups that plan to take to Twitter on Wednesday to press for a tougher rule, are seeking four changes. They want changes in the rule to:
  • Provide financial relief for students in programs that lose eligibility.
  • Limit enrollment in poorly performing programs until they improve.
  • Protect low-cost programs where most graduates don’t borrow (most of which are at community colleges).
  • Close other “loopholes” (for example, programs can satisfy the rule even if most of their graduates drop out).
“These four changes are essential to adequately protect both students and taxpayers,” said the Education Trust, another organization that has mounted its own online petition drive enlisting advocates for a tougher rule. It, too, will be part of the PR campaign this week, with plans to tweet out four illustrated infographics that highlight changes the groups are seeking in the rule. “We can’t allow more students to come aboard a sinking ship,” says one of the graphics, about limiting enrollment.

Several of the groups also expect to take part in a news conference on Thursday, with four Democratic senators: Richard Durbin of Illinois, Tom Harkin of Iowa, Chris Murphy of Connecticut, and Brian Schatz of Hawaii. They, along with a few students, will call for a tougher rule.

But that will hardly be the last word. As it did the last time a gainful-employment rule was proposed, the for-profit-college industry’s main trade group, the Association of Private Sector Colleges and Universities, is also gearing up to present an economic argument against the measure, based on an analysis by Charles River Associates and its consultant, Jonathan Guryan. Before the May 27 deadline, Mr. Guryan, who is an associate professor of human development and social policy at Northwestern University, and the association will also propose some alternative approaches to the rule.

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U.S. Chamber of Commerce: ‘Gainful Employment’ Rule Stifles Opportunity

May 12, 2014

Written by Thomas J. Donohue

 Understanding that education and training can be a big competitive advantage in a tough job market, many laid-off workers and young adults have taken steps to skill up. Widely accessible institutions that equip students with a specific skill or trade—such as online universities, community colleges, and vocational schools—have played an increasingly important role in providing the stepping-stones to do so. 

Despite the opportunities that these schools are putting within reach of aspiring individuals, the administration is considering a misguided federal rule that singles out for-profit institutions and could threaten students’ access to education. The so-called gainful employment rule—almost exclusively targeting for-profit institutions—would rate them based on debt-to-income ratios and loan repayment rates for former students. Under the proposal, if the schools don’t meet a federally imposed standard (which many nonprofit colleges could not meet if the rule applied to them), they would see their federal student aid slashed.

Students would be hurt the most. Enrollment numbers in private sector educational institutions reflect a growing demand from students who come from low-income backgrounds and underserved communities. By throwing down additional financial obstacles, the federal government could prevent them from pursuing a life-changing opportunity.

The Department of Education admits that without the aid tens of thousands of students could be forced out of programs without immediately enrolling somewhere else. Independent studies project that one in five schools wouldn’t meet the standard, and that as many as a third of all students at for-profit institutions would be displaced.

What happens to their job prospects and earning potential then? And where will employers find workers for jobs requiring specific skills? For a nation facing the twin challenges of a skills gap and an income gap, the rule is a pretty dumb idea!

What makes the proposal even more foolish is that it won’t actually accomplish what it sets out to do. Proponents of the rule argue that it would help rein in education costs. They may be right on the goal, but they’re wrong on the approach. If regulators truly believed that the gainful employment rule would make postsecondary education more affordable, they’d apply it to all institutions.

Rather than an arbitrary rule applied only to private sector colleges that would deny federal aid to lower income students, a better approach would be to encourage greater transparency across the system. That would naturally drive institutions to offer a better value—and it would equip consumers with the necessary facts to make an informed decision based on what they need, not on what the government says they should have. 

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