This morning, in a packed room on the 8th floor of a K Street building, the U.S. Department of Education resumes talks in pursuit of a "gainful employment" rule aimed at penalizing for-profit colleges that leave students deep in debt and without decent paying jobs. It's called a "negotiated rulemaking," bringing together representatives of schools, students, and others, but the parties are too far apart for there to be a successful negotiation. Instead the discussions are sharpening the debate, and have pushed the Department toward articulating its own increasingly solid set of rules that might actually be strong enough to help curb some of the worse actors in this troubled sector.
Indeed, it seems that the powerful for-profit college industry, which has used its taxpayer-provided riches -- up to $33 billion a year -- to buy the most expensive lawyers and lobbyists, and the allegiance of many in Congress to keep the money flowing, is finally on the run. The truth -- that many leading for-profit colleges have been been rife with waste, fraud, and abuse -- has at last caught up with the industry.
The question is whether federal and state authorities will have the strength and determination to get the job done -- to at last drive out the serial offenders, and reform the entire sector so that for-profit colleges can thrive only by actually helping students to build careers, rather than by abusing them. Or, instead will the big for-profit college companies manage to stall for time, prevent major structural changes, and retain their business model based on deceptive practices and poor-quality programs until someone like for-profit college cheerleader / investor Mitt Romney comes to power and reverses the reform effort?
Not all for-profit colleges are bad, and even in some of the most unethical, predatory schools, there are good teachers and programs. But overall the picture is disturbing. For-profit colleges are a huge driver behind the $1 trillion student debt crisis and the countless ruined lives that have resulted; they have about 13 percent of U.S. college students, but 47 percent of all student loan defaults.
State attorneys general have been a powerful force in curbing the abuses in this industry. Led by Kentucky's Jack Conway, a bipartisan group of 32 state AGs has been working together to investigate offenders and take them to court. Notable achievements have been the shutdown of the industry's shamefully misleading GIBill.com website; New York state's settlement to curb Career Education Corporation's relentless deception of students about job placement rates; and California's new lawsuit to address rampant predatory practices by Corinthian Colleges, which is also under investigation by at least five other state attorneys general. At least four state AGs are investigating Kaplan Education, which has high dropout and loan default rates and a history of misleading students.
Meanwhile, students who have been deceived and left with overwhelming debt, as well as whistleblowing former employees, have been taking matters into their own hands, suing predatory schools and starting to win jury verdicts and arbitration awards. And many more prospective students have gotten the message from media reports and government investigations that many of these schools are a bad deal; they are voting with the feet, sending enrollment figures and stock prices sharply downward.
With President Obama setting the tone with his own sharp condemnation of for-profit college abuses, a range of federal agencies also are taking action. The Justice Department in September shut down the unbelievably awful ATI Career Training Center, which recruited students in strip clubs, lied about job placement rates, doctored transcripts, and deceived regulators, all to sign up "anyone with a pulse" and cash their federal aid checks. Justice is also pursuing a lawsuit against the second largest for-profit college company, EDMC, for allegedly misleading the government to hide its violations of a federal law that bars schools from paying its recruiters based on number of students signed up. Justice also has the power, of course, to pursue criminal investigations, which seem entirely appropriate given the evidence of blatant fraud at a number of these institutions.
The Consumer Financial Protection Bureau is also investigating Corinthian Colleges, as is the Securities and Exchange Commission. The SEC also is probing another big for-profit, ITT Tech. The Pentagon and Veterans administration are demanding that colleges stop misleading and mistreating our troops and vets. And at last the Federal Trade Commission is stepping up, which makes sense because that agency's mission is to "prevent fraud, deception, and unfair business practices," and many for-profit colleges have been fueled precisely by such transgressions. The FTC has just issued new guidelines for trade schools and new consumer warnings for students. It recently warned the industry that it would enforce new rules against unwanted robocalls. And it has the power to take the for-profits to court and end deceptive practices.
The agency that has lagged behind is the Department of Education, which has done far too little to enforce its own rules, and has stalled in establishing a gainful employment rule. The previous rule was gutted after powerful Washingtonians like Kaplan / Washington Post head Donald Graham and Obama advisor Anita Dunn pressed the White House, and then struck down by a federal court after the industry's high-priced law firm sued. Even the Department's most recent iteration of the rule, offered after the initial public negotiation sessions, isn't tough enough to halt some of the bad programs, but it's a strong step in the right direction.
Instead of seriously considering the possibility of genuinely reforming their industry and trying to compete by actually serving students, the for-profit college industry seems to be digging in. Its trade association, APSCU, continues to claim their sector is being victimized for ideological reasons, that it should instead be congratulated for enrolling low-income students -- despite the overwhelming evidence that many for-profit colleges are utterly failing to educate those students. The for-profits continue to spend big on lobbying and campaign contributions to buy the obedience of many Republicans and some Democrats on the Hill. Their strategy seems to be to keep protecting the worst actors and worst behavior in the sector, and hope that they can ride out this Obama-era challenge and then return to their predatory ways. They have amassed so much money, and bought so many friends, that the strategy could, in fact work.
That is the why the champions of students, from Senators Tom Harkin and Dick Durbin, to Representatives Keith Ellison and Maxine Waters, to the Leadership Conference on Civil Rights and the Iraq Afghanistan Veterans of America, to the state AGs and courageous whistleblowers, must continue to hang tough and fight for permanent reforms that protect students and taxpayers from for-profit college abuses.