For-profit college companies are indignant. They are outraged that the U.S. Department of Education is developing standards to define what it means to "prepare students for gainful employment in a recognized occupation," the key term of a long-standing prerequisite enabling those companies to qualify for federal Title IV student financial aid, which includes Pell Grants and Stafford loans.
And the for-profits are spending millions in a marketing campaign to let their indignation be heard, aided by a very diverse team of well-compensated, newfound friends -- all of it to distract from the dubious quality of some of the academic programs they offer.
Interestingly, their anti-regulation argument is not the typical claim that regulations hamper innovation and increase transaction costs. No -- they tell us their real concern is that the proposed gainful employment regulations represent an indiscriminate assault on the educational "choices" and "opportunities" available to non-traditional and low-income students.
Say what?
In fact, the Education Department's proposed regulations are actually just a timid attempt at accountability, ensuring that the students' and taxpayers' investment actually supports education leading to job earnings that are reasonably well-matched to the cost of that education.
Currently, for-profit colleges need only check a box certifying that they prepare their students for gainful employment. That's right -- enforcement relies on the honor system. And the honor system has worked very well for the for-profits. During the past decade, their enrollments have grown by 236 percent. In one year, the sector captured over $24 billion in federal subsidies. But that honor system has not worked so well for students: The few who actually graduate from a for-profit institution with a bachelor's degree have a median debt four times higher than that of bachelor's degree holders from public colleges.
The for-profits also rake in a high level of federal dollars relative to the number of students they serve. While they enroll only 12 percent of the nation's college students, they consume 24 percent of all federal student loan dollars. And their proportion of loan defaults is even higher: for-profits produce 43 percent of all defaults on federal loans.
So how draconian are the proposed "gainful employment" regulations?
Not very, as it turns out. To be declared ineligible to receive federal student aid, programs must produce student debt burdens above 12 percent of students' total income and above 30 percent of their discretionary income, and they must have loan repayment rates below 35 percent. Yes, the government is willing to live with 65 percent of loans not being repaid by students who have enrolled in very expensive academic programs. What about the programs that are just shy of meeting this toxicity test? In this case, the institutions would simply be required to limit enrollment growth until they get their risks under control.
Clearly, the proposed standards do not threaten legitimate choice and opportunity. What they may do, however, is to stop legitimizing -- through the availability of federal subsidies - academic "choices" that are so toxic they only constitute an illusion of "opportunity."
Unless the Education Department gives in to the toxic rhetoric of the for-profits and debilitates the already timid regulations.
It is important for the Education Department to remember that oftentimes when corporations and trade organizations spend millions articulating their concern for the public, it is a strategy to reduce the risk of regulation by selling the idea that they can self-regulate. British Petroleum presents itself as aiming "for no accidents, no harm to people, and no damage to the environment." Halliburton claims as a core value the aim "to be welcomed as a good corporate neighbor in our communities... to validate our progress through transparency and reporting." McDonald's touts commitment to "Nutrition and Well Being."
So it's no surprise that the Association of Private Sector Colleges and Universities -- the Washington group representing the for-profit industry -- stresses a "passionate commitment to our members and the students they serve" and a "dedication to integrity, accountability and excellence in career and professional higher education."
For-profit colleges that earn their profits through innovation in educational delivery, rather than through under-investment in student success, have nothing to worry about. These companies should welcome the proposed regulations, since removing the worst actors will protect the sector's reputation and provide an opportunity for market growth.
The last time a powerful corporate sector gained rapid growth by aggressively targeting the underserved with high-risk products -- benefiting from lax government regulations and a lack of appetite for enforcement -- the result was the subprime mortgage crisis. The banks' arguments were eerily similar to those of the for-profit colleges: Beware of unintended consequences that will limit "choice and opportunity."
The truth is that the bankers were asking us to protect toxic assets -- and now the for-profit colleges are asking us to do the same.
Inaction is not an option. We have to rein in those that abuse our social investment and prey on our underserved population.
Choice and opportunity -- as concepts, as values, as concrete manifestations of the American Dream -- deserve more respect.
Mr. Cruz works for a “think tank,” but offers opinions rather than facts. Perhaps most importantly, the fact that millions of PSCU students acquire valuable skills and meaningful employment afterwards goes unrecognized and unreported. A couple of points:
• PSCUs enrollment rates have grown in the double digits because the economy has changed, Americans need new skills, and they need them quickly. Often these are “non-traditional” students, individuals who were not on the high school college track but need a college credential to move up in life.
• PSCU students do graduate with more debt than do public school students. Public colleges and universities receive generous public subsidies. The cost to taxpayers for educating public school students is much higher on a per capita basis.
• In terms of graduation rates, when comparing institutions with similar students, PSCU graduation rates actually exceed those of other types of institutions.
• PSCU students are simply less affluent, older and more independent than traditional college students.
• An independent analysis shows the Education Department’s so-called “gainful employment” proposal would put over two million students out of higher education over the next ten years.
Harris Miller
APSCU CEO
By arresting the regulations process this amendment blocks any real accountability for career education programs that routinely engage in deceptive and dishonest recruitment practices, provide false or inflated job placement rates to students and have dismal completion rates. We must ensure that our students are able attend programs that prepare them for jobs, and that those jobs enable them to repay their students loans. Career education programs that receive federal student aid funds must be held accountable for training students for good jobs without saddling them with unmanageable debt financed by billions in federal student loan resources.
My sentiments exactly.
For-profit colleges have the same problem as private K-12 schools; they are specialized, more expensive ways of providing what's already available at cheaper cost with some guarantee (or accountability) for quality.
And this in a nutshell is what its all about. I do not know if these business are run by Republicans or not but they sure share a some business ethics with the right wingers. Primarily Government is there to be exploited for profit. Move it out of control of Government, shift it to the private sector and reap a ton of guaranteed money from the wait for it,,,,,,,,,,, the government !
Their operations also have some similarities to big healthcare. Big healthcares only motivation is to make obscene profits for its executives. I bet you thought they were there to make sick people well and preserve life? Well it’s much the same for these shady for profit colleges. They note the opportunity to make some big money derived from government guarantees and they exploit it. So you thought that they were there to reeducate people and give them better jobs? Bwehahahahahaha! Well things have changed since the late 70’s and 80’s sorry to say.
Mr. Cruz says "...and they must have loan repayment rates below 35 percent. Yes, the government is willing to live with 65 percent of loans not being repaid by students who have enrolled in very expensive academic programs."
In fact, the DOE's Gainful Employment rule requires 35% of borrowers to be paying down the balance of their loan. That's a very significant distinction. An enormous portion of graduates from ALL types of institutions receive deferments or other types of forbearance that allows them to delay full repayment of student loans. In fact, the Obama administration has given borrowers a brand new kind of reprieve that allows them to delay repayment of their loans simply because their incomes are low.
If Mr. Cruz will lie to us about the core issue of his article, why should we believe anything he says?
People love to complain about what happens to "taxpayer dollars" these days. I don't want mine going to subsidize loans for spurious "educations" that are just slightly-dressed-up diploma mills. This bill is not to "shut down" these colleges necessarily, it's just saying that people who still wish to attend them will have to get a bank loan or find another means to pay for their education than federally subsidized student loans. When they wind up back at the McD's drive-thru after finding out that their 'degree' is not competitive, and they default on their loans, it's the taxpayers who pick up the bill. Paying for real education is a worthy goal, and if some non-profit colleges are also failing to prepare students in any kind of adequate manner for employment, they too should be held accountable and made to reform.
Higher ed is the biggest investment people make, other than a home. It's important to take it seriously and weed out the crap.
source: http://chronicle.com/article/Pell-Grants-Are-in-Jeopardy/126176
they are to online media what beer commercials are to men’s/sports programming.
And so the natural consequence of the rule as proposed is that schools will be more careful about whom they admit. This has already happened with Ability-To-Benefit students who enroll without a high school diploma. Schools will stop marketing to those students in a category that suggest they could be more likely to default.
The trouble is that no one else will market to these students either. They won't somehow "see the light" and flock to community colleges; rather they simply won't enter the higher educational system at all.
So the net result will be fewer single mothers who fail to complete and end up owing money. But there will also be fewer single mothers that successfully complete and get a job as a medical assistant.
We might decide as a matter of national policy that we now value loan repayment outcomes over access but that is not a discussion we are having honestly right now. The industry rhetoric correctly makes the point that choice will be reduced and access will be reduced as a direct result of the Gainful Employment rule as proposed.