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Exposed: For-Profit Colleges' Blueprint for Blocking Obama Regulations

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Posted on the website of an accounting firm in Puerto Rico is a revealing PowerPoint presentation dated February 20, 2014, and credited to Steve Gunderson, the CEO of APSCU, the trade association of for-profit colleges. It outlines APSCU's plan for defeating the Obama administration's key regulation aimed at holding for-profit colleges accountable for leaving students with insurmountable debt.

Gunderson's presentation was in fact one of several apparently delivered by for-profit college representatives and advisors at a February APSCU meeting in Puerto Rico.  Collectively, these documents provide some valuable insights into the troubled for-profit college industry.

The Gunderson PowerPoint document lays out the industry's strategy for blocking the Obama administration's gainful employment rule, which would cut off federal aid to career college programs that consistently bury their students in debt they cannot repay. The Powerpoint specifically notes the following points as APSCU's strategy as of December 6, 2013:

• Amend through the regulatory process

• Delay promulgation

• Defund, via legislation, enforcement

• Stop implementation through HEA [the federal Higher Education Act]

• If necessary, litigation

• Use "change the conversation" about the role and mission of postsecondary career education

That December 6 date is significant because the Department of Education's negotiated rulemaking sessions on the regulation, which included negotiators from the for-profit college industry, were still going on, with a final negotiating session that was scheduled for, and did occur on, December 13, 2013.  Justin Berkowitz, Vice President of Operations at Daytona College, an APSCU member school, served as an alternate negotiator on the panel. Nevertheless APSCU had been publicly complaining for months that the rulemaking effort was prejudged against it; for example, Gunderson complained in an August 2013 letter to Secretary of Education Arne Duncan that "the composition of the rulemaking committee is so biased and one-sided as to call into question the department's intent to fulfill its obligations under the Higher Education Act and the Administrative Procedure Act to engage in a fair process and to adopt well-reasoned regulations that are consistent with its statutory authority." While the group complained that its members deserved a better process, APSCU apparently already had devised a plan to block whatever rule that came out of the session.  

APSCU's strategy appears similar to the one that it and the industry employed successfully with respect to the previous version of the gainful employment rule, issued by the administration in 2011. That version of the rule was heavily watered down from previous drafts after intensive lobbying by the industry. Then APSCU went to court and convinced a federal judge to strike the rule down on procedural grounds, necessitating a new round of rulemaking and prompting this new APSCU offensive.

The Gunderson PowerPoint calls for modifications to the current draft gainful employment rule that would make it easier for poorly performing programs to pass and remain eligible for federal aid.  To get there, it talks about the need to "Solidify Republican Opposition" to the rule and to "Seek Democrat Support (targeting)." It previews the strategy we have seen the for-profit college industry execute since Gunderson presented his Powerpoint  -- with a range of lobbying meetings, op-eds, media outreach, and supportive statements by friendly Members of Congress who receive industry campaign contributions and outside groups recruited by the industry to lend their voices.

The PowerPoint also declares that a component of the APSCU strategy will be "Constructive Improvements (Sector survivability)" -- a formulation that might imply that the aim of improving quality among for-profit colleges would be motivated not by the desire to better serve students but rather to keep the industry from collapsing, in an environment where the government demands better performance to retain eligibility for federal student grants and loans. 

Also notable in Gunderson's PowerPoint is this enthusiastic presentation of industry talking points against the gainful employment rule, under the title "Defining the Reality in Stark Terms":

• Good Intentions Gone Bad!

• Limiting College Access to the Wealthy and Elite!

• Eliminating Access, Choice and Opportunity!

• Impact on Veterans!

• Impact on Minority Students!

• Impact on Women!

• Impact on Low-­‐income Students!

• Impact on Skilled Workers for America's Employers!

• Academic Redlining!

This slightly manic (!) presentation is typical of misleading for-profit college industry rhetoric. In truth, the purpose of the gainful employment rule is not to end career training programs generally for all of these types of students.  Rather, the purpose is to stop giving federal money to those career training programs that, through a toxic combination of sky-high prices and low quality, have been proven to leave such students financially worse off than when they started.  If successfully implemented, the rule would free up more federal money to send those students to programs that actually help them build careers.

Pushing back on that approach, the Gunderson PowerPoint advances the thesis that "Debt-­related metrics are not appropriate determination of academic quality" -- an assertion that might trouble the students across the country who have enrolled in career training programs precisely so they can earn a good living and support their families, rather than ending up with crushing debt.  This argument smacks of desperation; Gunderson offered a similar take in an interview this year.

The Gunderson document spans 20 Powerpoint pages, but it's dwarfed by another PowerPoint from the DC law firm Ritzert/Leyton entitled "What Is Going On in Washington DC?" What indeed?  This document is 124 pages long and runs through the range of regulatory challenges facing the for-profit college industry, as well as many of the dozens of law enforcement investigations and lawsuits these companies now face.  One of this Powerpoint's authors, attorney Peter Leyton, served on the APSCU board for much of the last 15 years and still advises the organization.

The Leyton PowerPoint offers a "Crystal Ball" for 2014: "What the Obama Administration (and the federal agencies it leads) cannot achieve in higher education policy reform through a divided Congress, we may see attempted through Executive Order, continued and ramped up agency enforcement of current regulations, additional rulemaking, and collaboration with states and non-governmental partners to advance the Administration's policy priorities." I hope Leyton is right, and that the administration will move ahead with tough policies, because, indeed, "a divided Congress" will not act. Relentless for-profit college lobbying and the industry's torrent of campaign contributions to Capitol Hill, to both Republicans and Democrats, ensures such a stalemate and stands as an obstacle to Congress approving common sense laws that would hold bad actors accountable for waste, fraud, and abuse with taxpayer dollars.

Leyton's PowerPoint also seeks to inform executives about how for-profit college companies are being identified for investigation -- through "[s]tudent and disgruntled former employee complaints to ED, VA/ DOD, CFPB, FTC, other federal agencies, state education agencies, and state attorneys general" and "plaintiff's attorney 'trolling.'" Leyton thus dismisses complaining former employees as "disgruntled," but as someone who frequently communicates with these men and women, people like Rashidah Smallwood and Heidi Weber, I can tell you that they are not some malingerers upset about being passed over for a promotion; they are people with a conscience, upset about the systematic deceptions and abuses perpetrated by their companies against students and taxpayers.

Leyton also notes that state and federal law enforcement agencies are increasing cooperation to investigate the industry, and they are accessing and sharing student complaints via the Federal Trade Commission's Consumer Sentinel Network database. Leyton's paper expresses particular concern about the Consumer Financial Protection Bureau's expanding probes of the sector, as well as the FTC which, "unlike ED [the U.S. Department of Education], specializes in the enforcement of federal marketing and advertising laws... Recent attention on, and resources devoted to, the for-profit college sector indicate that the FTC may be an unusually active presence during the current Administration in policing the sector."

Finally, there is an 85-page PowerPoint from Patricia Edelson, a non-lawyer at the law firm DLA Piper, entitled, "Sail Through a Program Review Be Prepared - Know What to Expect." Edelson, according to her bio, worked for over 20 years at the Department of Education reviewing college programs for compliance with federal rules.  Before that, her bio says, "Edelson was Financial Aid Director and School Manager for a large publicly traded school chain," meaning a for-profit college company.

Edelson's PowerPoint offers guidance on how a for-profit college can handle an examination of its practices by the federal department where she once worked.  It's a mostly straighforward account ("Make sure your entire staff knows that you require 100% compliance and accuracy in the administration of Title IV. No shortcuts!"), but offers some insights, especially as it now appears to Department of Education is getting a bit tougher in reviewing for-profit college practices after decades of relative passivity.  Edelson advises companies to "Prepare your staff. Let them know that the Reviewers may want to interview them, and that they should be comfortable in answering questions. It's also important that everyone understands - if they aren't sure of something - say so - and find out who is the best person to answer any question."

Puerto Rico, where Gunderson and the others presented their papers, is home to a significant number of for-profit colleges, including a campus of the University of Phoenix and at least one school operated by EduK group, which is headquartered in San Juan and whose board members include outspoken private equity man Jeffrey Leeds, also a member of the APSCU board.

This article also appears on RepublicReport