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For-Profit College Group Fights To Keep Students In Dark On Debt

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President Barack Obama appears with Education Secretary Arne Duncan. (AP Photo/Pablo Martinez Monsivais)
President Barack Obama appears with Education Secretary Arne Duncan. (AP Photo/Pablo Martinez Monsivais)

For-profit college representatives are fighting in federal court for the right to avoid telling students if they are likely to afford their debts after attending school.

In a court filing last week, a key industry trade group pushed back against the Department of Education's attempts to make for-profit colleges disclose statistics that would indicate whether students are likely to take on huge debts they cannot repay. Preliminary data released by the department earlier this year indicates that many of the for-profit programs would be cast in a negative light by making the disclosures, which would reveal that students are shouldering massive debt burdens and are often unable to repay student loans.

The student debt measurements have been at the center of the Obama administration's attempts to rein in abuses at for-profit institutions, which charge much higher tuition than public institutions and have a track record of leaving students deep in debt and without improved job prospects. For-profit schools derive the vast majority of revenues from the federal government, in the form of student loans and grants, and the reforms were intended to track whether such schools are delivering on promises of career training.

"The for-profits want the American people to just hand them over millions of dollars worth of federal financial aid, and we have no means to assess the return on that investment," said Jose Cruz, vice president for higher education policy at the Education Trust, a student advocacy group. "It is important for the students to have the information that will allow them to gauge whether or not it's a good investment for them."

Under the regulations released last summer, for-profit programs could eventually be cut off from federal student aid dollars if too many students were unable to repay loans or had excessive debt burdens compared to their income.

Industry representatives sued last year, and U.S. District Judge Rudolph Contreras struck down key parts of the regulation in June, ruling that the Department of Education hadn't cited studies to justify them. But after the judge's decision, the department asked Contreras to reinstate parts of the rule that would require schools to at least collect data showing how many students are repaying loans and how their loan debts will compare to earnings after graduation.

The department argued in a July court filing that the goal was for schools to provide the debt information "so that students can make an informed decision about whether to enroll in a program."

The Association of Private Sector Colleges and Universities, the industry's trade group, responded in a filing last week that the "contrived" debt measurements from the Department of Education would not provide "any meaningful information to prospective students about whether a program prepares students for gainful employment." The group characterized the rules as a "sweeping, punitive regulatory regime."

Representatives for the association and their lawyers did not respond to requests for comment on the lawsuit.

A spokesman for the Department of Education, Justin Hamilton, said in a statement: "We think this is information that parents and students want and need. Transparency is key and we think it's the right thing to do."

The batch of trial data released before the judge's ruling showed poor results at many for-profit programs. Nearly two-thirds of all programs analyzed failed at least one of three student debt metrics. In order to fail all three, more than 65 percent of students in a program would have to be delinquent in repaying their loans, and graduates would need to have loan debts that comprise more than 30 percent of their discretionary income, or more than 12 percent of total earnings.

The for-profit college association has mounted federal court challenges to nearly every new regulation the Obama administration has proposed regarding the industry. That includes rules to crack down on schools that make misleading promises to students in advertisements, and guidelines to prevent schools from handing out bonuses and raises to recruiters based on the number of students enrolled. The courts have upheld most parts of the administration's other regulations, aside from the "gainful employment" rules.

The Association of Private Sector Colleges and Universities, whose members include ITT Technical Institute and the Art Institutes chain, has also exerted its force in Washington. Since the Department of Education began crafting stricter regulations for the industry in 2009, the association has significantly increased its lobbying efforts, spending more than $4 million on lobbyists since President Obama took office, according to disclosure forms.

Dianne Piche, who directs the education program for the Leadership Conference on Civil and Human Rights, said the industry's newest push to avoid transparency on the student debt measures was "appalling, but not surprising."

"Every single attempt that this administration has made to regulate the for-profit industry, they have opposed with all the weapons in their arsenal," Piche said. "If they hadn't before, they've really laid bare their true motives in this, which is their profit, their bottom line. And it's really disappointing."

More than 30 student advocacy and civil rights groups sent a letter to Education Secretary Arne Duncan this week, requesting a meeting to discuss how the department will move forward with new regulations after the judge struck down the gainful employment rules.

The for-profit college association last month urged Duncan to "put this debate behind us and find ways to work together," but the court filings have continued.

For-profit colleges got a scathing critique last month, following a two-year investigation by Senate Democratic staff that revealed abysmal student outcomes across many of the schools: more than half of those enrolled dropped out within a year, and nearly a quarter defaulted on student loans within three years.

It's now up to Contreras, the federal judge, to decide whether to reinstate parts of the regulation that would require schools to collect and disclose the debt-to-income ratios and loan repayment rates for students to see prior to enrollment.

Programs must still disclose some information, such as graduation rates and tuition costs, but advocacy groups argue that the debt metrics give students a clearer picture of the potential risks from poor-quality programs.

"It really is just common sense, and good consumer disclosure to provide this very basic and important data," said Piche, of the Leadership Conference on Civil and Human Rights. "Given that most of their operating costs are derived from federally subsidized loans and federal grants, it's especially appropriate for the government to at the very least collect information on the impact of its spending."

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