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For-Profit Colleges Evade Stricter Rules By Courting Powerful Allies In Washington

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Cass Sunstein, President Obama's top regulatory czar, said a parade of for-profit college lobbyists and executives who marched through his office last spring had nothing to do with the administration's eventual weakening of regulations on the industry.

"The haranguing had zero effect," Sunstein told The New York Times, referring to the year-long lobbying blitz by the for-profit college industry, which fought a relentless campaign to stave off consumer protection regulations and maintain access to billions of dollars in federal subsidies.

But it's difficult to swallow Sunstein's message, given the all-star cast of lobbyists and advisers hired to pressure the administration to weaken the rules. Among those brought to bear in the fight this spring were Anita Dunn, a former White House communications director for Obama who helped craft messaging for Kaplan University, a subsidiary of the Washington Post Co., and Jamie Rubin, a major fundraising organizer for Obama's re-election campaign, who met with the administration about ATI, a Dallas-based college corporation.

Other Democratic power brokers who got involved included former House Leader Dick Gephardt and Tony Podesta, the brother of Obama administration transition leader John Podesta. In a piece this weekend, the Times built on and lent credence to a series of in-depth reports done by The Huffington Post over the course of the past year that tracked how for-profit colleges have cultivated relationships in Washington by spending liberally on lobbyists and campaign contributions on both sides of the aisle, in an effort to evade stricter government oversight.

The regulations crafted by the Obama administration intended to answer a central question: Are students who attend for-profit or vocational college programs being adequately set up for careers that will allow them to pay off student debts? As originally drafted in 2010, the rules would have quickly cut off federal student aid going to programs that leave students with outsized debts and meager wages after leaving the institution.

The final package, released in June, contained a three-year grace period before severe sanctions for the institutions could kick in, and added a three-strike rule before programs could be cut off from the stream of government grants and loans. The for-profit college industry encompasses a wide array of institutions, from the massive University of Phoenix to smaller beauty and mechanic schools.

The administration began scrutinizing the industry in 2009, after evidence that those attending for-profit colleges were defaulting on federal student loans at a much higher rate than students at public or nonprofit institutions.

Robert Shireman, a former Department of Education official who helped craft the original regulations governing the industry, told the Times that lobbying by the industry played a role in "watering down" the final regulations.

The comments mirrored an assessment he gave to The Huffington Post in June: "It's absolutely accurate to say they caved in to the industry."

Well-connected industry officials had a series of meetings with Sunstein's office in the month before the final regulations were released. Among them were Washington Post Co. chairman and chief executive Donald Graham and John R. "Jock" McKernan Jr., the chairman of Education Management Corp. who is a former congressman and is married to Sen. Olympia Snowe (R-Maine).

Both Graham, who was representing the Washington Post Co.'s Kaplan University, and McKernan brought along detailed white papers with suggestions for how to modify the rules to the industry's liking.

As HuffPost noted in a June article:

The memo from the Kaplan meeting included several bullet points entitled "Minimum modifications needed to the gainful employment rule." The letter outlined suggestions for a three-year phase-in period to allow colleges to adjust to the rule and a "cure period" to allow schools that don't meet the minimum standards on student debt to come back into compliance.

Both of those suggestions made it into the final rule released by the Department of Education.

The Times noted how Dunn, the former Obama communications director, worked to "refute media reports casting the abuse problems as industrywide and to show they were limited to 'a few bad actors.'"

Just as lobbyists from the Democratic side of the aisle were employed to pressure the administration, many Democratic members of Congress -- who received the lion's share of campaign contributions from the industry -- also played a role in the pushback, according to a HuffPost analysis of campaign finance data.

In a largely symbolic House vote on the issue in February, prominent Democrats including House Minority Leader Nancy Pelosi (D-Calif.) and Democratic National Committee chairwoman Debbie Wasserman Schultz (D-Fla.) voted on an amendment that would have blocked the administration from implementing rules on for-profit colleges.

During the 2010 election cycle, political action committees and executives for for-profit colleges directed two-thirds of their campaign cash to Democrats, according to the HuffPost analysis.

From an earlier HuffPost article:

The Democratic Senatorial Campaign Committee, the Democratic National Committee and the Democratic Congressional Campaign Committee all received nearly $100,000 each in donations from the industry, more than double the amount received by Republican fundraising committees.

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