House Republicans Release Proposal for Reauthorization of the Higher Education Act

Last Friday, as the U.S. Senate was debating and passing its version of the tax overhaul, House Republicans introduced a major bill—a proposal for reauthorization of the 1965 Higher Education Act.  Just as it took longer than the recommended five years to reauthorize the K-12, Elementary and Secondary Education Act (from  passage of No Child Left Behind in 2001 to passage of the Every Student Succeeds Act in 2015), Congress has delayed updating the Higher Education Act, which was supposed to expire in 2013. Everyone predicts months of debate on the issues proposed in the new House bill.

The bill is 542 pages long, which makes it impossible to summarize comprehensively.  Recent reports from Benjamin Wermund at POLITICO Morning Education, from Daniele Douglas-Gabriel at the Washington Post, from Andrew Ujifusa at Education Week, and from Douglas Belkin, Josh Mitchell and Melissa Korn at the Wall Street Journal do, however, indicate the bill’s overall direction—rejecting regulation of for-profit colleges established in the Obama Department of Education—changing the federal student loan program—and emphasizing the connection of higher education to the needs of employers. The liberal arts are underappreciated in this bill, named by its sponsors “The Promoting Real Opportunity, Success, and Prosperity through Education Reform Act”—the PROSPER Act.

Easing Regulations on For-Profit Colleges

It is clear that for-profit colleges would once again prosper under the PROSPER Act. The bill would eliminate regulations instituted during the Obama Administration to regulate these institutions, particularly those whose career training programs are so weak that graduates are not qualified for subsequent employment.  Here is POLITICO‘s Wermund: “Much of the proposal is aimed at scrapping Obama-era regulations—and making sure they stay gone.  Those regulations include ‘gainful employment’ and ‘borrorower’s defense to repayment’ rules, which cut off federal funding to career college programs that produce graduates with large debt loads and provide debt relief to defrauded student loan borrowers, respectively.”  Colleges like Corinthian and ITT Technical Institute were put out of business through Obama-era regulation. The PROSPER Act would prohibit the Education Secretary from creating such rules in the future.

The PROSPER Act also eliminates the 90-10 Rule, which sets an already very liberal 90 percent cap on the amount of revenue any higher education institution may receive from Title IV federal student aid.  The 90-10 rule has been used to try to regulate the for-profit colleges which depend for virtually all of their revenue on federal student loans—with a high default rate when students discover their subsequent income is so meager they cannot repay their loans.

Student Loans

With a hold-harmless to protect students already in the program, The PROSPER Act would eliminate the opportunity for graduates to have student loans forgiven after ten years if they have made payments for 10 years and worked in jobs that benefit the public sector.  Here is the Washington Post‘s Douglas-Gabriel: “The plan, much like the White House budget (proposed but never as yet enacted), would do away with the Public Service Loan Forgiveness, a program that wipes away federal student debt for people in the public sector who have reliably made payments for ten years. The program, enacted in 2007 under President George W. Bush, was designed to encourage college graduates to pursue careers as social workers, teachers, public defenders, or doctors in rural areas.”

The PROSPER Act would collapse eight current federal loan programs into two and set limits on federal borrowing: $39,000 for undergraduates (up from $31,000 today), $150,000 for graduate students, and $56,250 for parents.  According to Douglas-Gabriel, “As it stands, people can opt to have their monthly loan payments capped to a percentage of their earnings, with the remaining balance of the debt forgiven after 20 or 25 years. The House plan would eliminate that loan forgiveness, but cap the interest payments on the loan after 10 years.”

Emphasizing Career Prep

Without explicitly castigating the liberal arts and the sciences, rhetoric about the PROSPER Act emphasizes career preparation—even as the bill eases regulations on for-profit colleges with shoddy programs that have left graduates ill-prepared for the jobs the colleges promise.  The Wall Street Journal reporters describe, “Rep. Virginia Foxx (R., N.C.), chairwoman of the House Committee on Education and the Workforce which drafted the proposal, (who) lamented that so much of higher education was considered ‘irrelevant’ by employers.  She hopes to better harness technology by pushing accreditors to lean on schools to accept more creative alternatives to higher education: ‘Since the last bill came out, we had a big recession and tremendous technological changes,’ she said. ‘We have a shortage of 6 million skilled workers. What we want to do is help colleges provide students with the skills they need to succeed in the workplace.’  The PROSPER Act aims to expand apprenticeships and competency-based education along with more ‘learn and earn’ opportunities, said Rep. Foxx, a former community college president.”

The WSJ reporters predict that The PROSPER Act will be extremely unpopular with leaders of traditional colleges and universities.  Belkin explains: “The act focuses on ensuring students don’t just enroll in school, but actually graduate with skills that the labor market is seeking.” They quote Judith Eaton, president of the Council for Higher Education Accreditation: “You will get nontraditional actors like companies that provide coursework for apprenticeships.”

Surely it is advantageous for graduates of any program to be employable, but higher education has additional important goals. Mike Rose, the UCLA professor who has explored the role of education in general and of community colleges in particular, recently suggested in his personal blog that the debate about college vs. vocational education rests on how we define the purpose of education: “Both the college-for-all advocates and the skeptics justify their positions on economic grounds, but another element in the college-for-all argument is that in addition to enhancing economic mobility, going to college has important intellectual, cultural, and civic benefits as well. These different perspectives on the purpose of college play into—and are shaped by—a long standing tension in American higher education: a conflict between the goal of cultivating intellectual growth and liberal culture versus the goal of preparing students for occupation and practical life.”

I urge you to read Rose’s reflection on the many purposes of college, graduate school, and post-secondary career training.  The debate about the role of  higher education is complex. It will be much debated in what will likely be months or maybe years of wrangling before the Higher Education Act is eventually reauthorized.


Trump Administration—Supporting Oversight of For-Profit Colleges?

It is too early in the four-year term of President Donald Trump to be sure of anything or to take a deep breath of relief.  But last month there was one encouraging sign from the Trump Justice Department.  Contrary to what can only be described as excited anticipation by the operators of for-profit colleges of the rollback by Trump’s people of Obama’s regulations, attorneys at the Department of Justice filed a legal brief supporting one of the Obama administration’s most effective rules to reign in the for-profits—a rule that is unpopular across the for-profit sector.

The Trump administration’s legal brief defends what’s known as the gainful employment rule, which has penalized some of the very worst for-profit colleges and trade schools that depend on federal Pell Grants and federally backed loans for the bulk of their revenue but that fail to provide adequate training to enable their graduates to land jobs or pay off their debts. The gainful employment rule is intended to protect student-borrowers from debts they will never be able to pay off and to to prevent a massive loss of tax dollars when borrowers with untenable debts eventually default.

Here is Suzanne Mettler in Degrees of Inequality, her book (published in 2014) on the problems of for-profit colleges.  Mettler describes the gainful employment rule as perhaps the most highly contested of the Obama administration’s efforts to crack down: “In what turned out to be their most controversial proposal, the so-called gainful employment rule, they set out to limit federal student aid to schools that failed to establish a record of positive outcomes for their students, as indicated by measures of their subsequent earnings relative to their student loan debt and by their loan repayment rates… Defenders of for-profit universities champion them as belonging to the private sector, but in recent years as in the past, they receive nearly all of their revenues from the U.S. federal government.”  Mettler documents the percentage of federal funding at fifteen of the largest for-profits: “Notably, these institutions, with only one exception earned between 60.8 and 85.9 percent of their total revenues in 2010 from Title IV of the Higher Education Act, meaning predominantly student loans and Pell grants… Most received an additional 2 to 5 percent from military educational programs, including the post-9/11 GI Bill.  The sum of these federal government funds added up, as a portion of all revenues collected, to a minimum of 65.8 percent for ITT and a maximum of 93.7 percent for Bridgepoint.  In short, the for-profit schools are almost entirely subsidized by government.” (pp. 165-169)  Two of the institutions Mettler describes, Corinthian Colleges and ITT, have been shut down since her book was published.

Last month, the NY Times‘ Dana Goldstein described the explosive growth of the for-profits that has made this such an important issue: “Some two million Americans are enrolled in for-profit colleges, up from 400,000 in 2000. Those students, most of them working adults getting short-term certificates, are disproportionately nonwhite and female. They graduate with more debt than students who have attended public and nonprofit institutions, and are more likely to default on their loans. It is taxpayers who are financing the expensive and often academically inferior education that for-profit colleges provide. Ninety-four percent of for-profit students pay tuition with federal student loans.”

Everybody predicted that the Trump administration would relax oversight and allow the invisible hand of the market (subsidized substantially, of course, by the federal government’s grants and loans) to work in the for-profit college sector.

But early this week Shahien Nasiripour of Bloomberg reported a surprise: “In late March, the Trump administration offered a forceful defense of the so-called gainful employment rule, the 2015 regulation that threatens to shut off the spigot of normally free-flowing federal funds that sustain career programs if the typical graduate’s annual loan payments exceed 20 percent of her discretionary income or 8 percent of total earnings.”

The Justice Department filed a legal brief, according to Nasiripour, “on behalf of Education Secretary Betsy DeVos,” to respond to a lawsuit by the American Association of Cosmetology Schools, who allege that the gainful employment rule should not apply to graduates of beauty schools because beauticians earn cash tips that they tend to under-report.

Nasiripour quotes from the Trump Justice Department’s brief: “The regulations are intended to protect students and taxpayers by providing warnings about programs with relatively high loan debt compared to the earnings their students could hope to achieve after graduating from those programs.”  The brief says the gainful employment rule protects students, “because it would prevent them from taking on debt that they will not be able to repay, and they could more reasonably evaluate whether they would prefer to enroll in programs that have been more successful in enabling their students to find employment that would allow them to repay their loans.”

It is too early in the four-year Trump administration to know whether federal regulators will continue to enforce the oversight rules put in place by the Obama administration to regulate the for-profit colleges.  In Degrees of Inequality, Mettler explains that of all the rules for for-profit colleges, “the gainful employment rule proved most divisive.” (p. 173)  Mettler describes the extensive and lavish lobbying and months of receiving public comments and re-writing that eventually weakened the rule as it had been originally proposed.

We will need to watch whether the Trump administration maintains its support for federal oversight of the for-profit college sector over time or whether the power of money, marketplace ideology, and intense lobbying will once again prevail. Here is Mettler summarizing the situation: “Their names have changed over time—from proprietary or trade schools to career colleges, and then to for-profit universities—but these schools have, consistently, emerged and grown in pursuit of student aid funds from the federal government… A recent study by economists Stephanie Riegg Cellini and Claudia Goldin confirmed that for-profit institutions that were eligible for Title IV funds charged significantly more in tuition—on average 75 percent more—than those that offered similar programs but were not eligible… Not only has the number of dollars invested in campaigns and lobbying escalated sharply, but also—in the case of the for-profits—industry leaders have learned how to use money strategically to construct winning coalitions.”  (pp 186-187)

And the coalition blocking regulation of for-profit colleges has never been entirely partisan.  It has included powerful members of Congress from both political parties.

For-Profit Colleges: Marketing to the Desperate, Supported by Our Taxes

In the summer issue of The American Prospect, Mark Huelsman profiles the for-profit colleges he calls Betrayers of the Dream.  “The students targeted and affected most by fraudulent operators are disproportionately black, “explains Huelsman.  “The story of predatory for-profit colleges is not unlike that of subprime lending or the proliferation of payday loans.  Wider economic unease was used by the cynical to bring further distress to people of color.”

Huelsman lists the trail of  investigations that finally resulted in the closure of Corinthian Colleges—a for-profit that had “enrolled more students than the Ohio State University and the University of Texas combined.” Corinthian had been flagged by attorneys general in several states, Tom Harkin and the U.S. Senate,  lawsuits from the federal government, and an investigation by the SEC: “These found a broad pattern of deception in recruiting students, bogus reporting of job placement data, and a strategy of combining high tuition and debt levels with a substandard educational product.”  “Corinthian’s story,” writes Huelsman, “is a microcosm of the for-profit college sector….”

Huelsman reports that what finally brought down Corinthian was a relatively simple action by the Obama Department of Education—a  decision to force Corinthian to fulfill the Department’s reporting requirements by withholding federal funds—student loans, Pell Grants, and G.I Bill Benefits—until the college submitted reports. Corinthian was unable to comply with regulations before its cash flow ran out. Like other publicly-traded, for-profit colleges that depend on federal financial aid for 86 percent of their funding, Corinthian was unable to survive the freeze on access to federal dollars.  (Holding the college, not its vulnerable students accountable, U.S. Secretary of Education, Arne Duncan later announced debt relief for 40,000 of Corinthian’s former students and a chance for 300,000 others to apply for relief for student loans that had paid for their Corinthian tuition.)

Huelsman describes explosive enrollment growth at for-profit colleges—an increase of 225 percent from 1998-2008 compared to growth during the same period of only 31 percent in the total college-going population.  “This enrollment growth included a massive targeting of students of color.  The University of Phoenix, for example, was spending as much as $400,000 a day on advertising.  Ads for these colleges were ubiquitous in communities of color, on commercials for day-time television programs, at bus stops and subways…. They enlisted leaders in the black community to advertise on their behalf…”  Recruiters for a St. Louis for-profit, Vatterott College, told recruiters to ‘target the welfare mom with kids’ and ‘pregnant ladies,’ as well as those with records of ‘recent incarceration’ and ‘drug rehabilitation.’  Other colleges had recruiters drop off information at Section 8 housing and and unemployment offices….”

Huelsman quotes Johns Hopkins sociologist, Stefanie DeLuca  describing the young people targeted with such advertising: “These are students often without the benefit of college counselors, making what appear to be logical decisions based on the signals and available information.”  The resulting average debt load, especially for students eventually dropping out without a credential is alarming—“$40,000, nearly $15,000 more than graduates at public four-year colleges, and over $6,000 more than graduates at historically black colleges and universities.” And 53 percent of borrowers in four-year, for-profit programs eventually drop out without a credential that will lead to a job.

Huelsman summarizes the lobbying and political contributions that have led to a bipartisan failure in Congress to regulate the for-profit, higher education sector.  “Phoenix alone contributed $11 million to candidates in the 2008 election cycle.”  And political contributions have been directed to Congressional leaders from both parties.

In very recent years enrollments at the for-profits have fallen—at the U. of Phoenix from 470,000 at its highest point to 214,000 in 2015.  “There are plenty of reasons for the massive retrenchment, but perhaps the most important has been the belated attention on the part of the Obama administration, a handful of Democrats, and even state regulatory officials.”  And a Senate report, “spearheaded by Tom Harkin, the now-retired chair of the Senate Health, Education Labor, and Pensions Committee, pulled back the curtain on an array of recruiting abuses, shoddy academic offerings, and low graduation rates.”

In an in-depth, book-length study of growing inequality in higher education, Degrees of Inequality, Suzanne Mettler summarizes the plight of the typical student at a for-profit college:  “(W)hile the for-profits appear to give struggling Americans a shot at improving their life circumstances, in reality, these schools leave many worse off, to the point of financial ruin.  Simultaneously, they lavish abundant profits on owners and corporate shareholders—at taxpayer expense—effectively benefiting the affluent even as they destroy the lives of the less advantaged.  Most egregiously, the U.S. government not only condones these circumstances but actively facilitates and sponsors them through nearly full subsidization of such schools—paired with, at present, only minimal regulation of how they conduct themselves.” (p. 4)

Degrees of Inequality would be a fine addition to your summer reading list.  But in the meantime, Mark Huelsman’s report is short and pithy, and it documents many of the most serious injustices in the for-profit colleges. I urge you to read it.

Corinthian Colleges: For-Profit Schools Preying on the Vulnerable While Soaking Up Tax Dollars

To really grasp the significance of what is happening to Corinthian Colleges, I urge you to read Suzanne Mettler’s new book, Degrees of Inequality: How the Politics of Higher Education Sabotaged the American Dream.  The book is a broader exploration of the laws that shape policy for colleges and universities, but one of the topics it explores is the explosive growth of for-profit colleges after 2006, when Congress removed the rule that to qualify their students for federal loans, colleges must provide at least 50 percent of a student’s education in person.  In other words, buried in 2006 federal budget, Congress expanded federally backed student loans for colleges that provide 100 percent of a student’s education on-line.

Mettler describes soaring enrollments: “In the next five years after the demise of the 50 percent rule, enrollments nearly doubled in the for-profit sector, and revenues soared… The Apollo’s University of Phoenix and Kaplan, owned by the Washington Post, doubled their revenues—and the default rates of their students climbed at the same pace.” (p. 107)  The other thing that grew with soaring profits was the investment by the for-profit colleges in Congressional lobbying.  “During the 2007-2008 election season, for example, the Apollo Group played a prominent role.  Not only did it lead the for-profit colleges in campaign contributions, but by donating over $11 million, it ranked twenty-eighth among all organizations and businesses nationwide.  It spent approximately twice as much as Goldman Sachs, JP Jorgan Chase, Bank of America, Time Warner, and Walmart, among others, and three times as much as the US Chamber of Commerce.” (p. 110)

Congress has responded to this massive investment in lobbying.  A good part of the profits for such institutions comes directly from tax dollars in the form of federal student loans, and the default rates have skyrocketed along with the for-profit colleges’ profits.  Hence the story in recent weeks about Corinthian Colleges, which, according to Kevin Carey in the NY Times, recently posted enrollment of 72,000 students at 100 campuses across the United States (and, of course, on-line) .

According to a stunning investigation by Chris Kirkham last week for the Los Angeles Times, “The student loan pipeline fueled the company’s rapid enrollment growth, peaking at more than 110,000 students in 2010.  Corinthian charges students up to 10 times the cost of a comparable community college education.  That requires many of them to take on more debt than they can repay—leaving taxpayers on the hook for mass defaults.”

Corinthian became so dependent on federal student loan dollars that earlier this month when the U.S. Department of Education suspended its access to student financial aid, the company found itself insolvent. Kevin Carey reports that, “The taxpayers will be on the hook for some defaulted loans.  Others were backed by Corinthian itself, which has made expensive private loans to its own students despite knowing ahead of time that most of them would default.  It did this because by law, no more than 90 percent of the company’s revenues may come from federal financial aid.  Every dollar that Corinthian lent directly to students allowed it to receive an additional nine dollars in federal aid…. At its peak, Corinthian received more than half a billion dollars per year from the federal Pell Grant program, more than the entire University of California system.”

As the preface to its dissolution, the company will sell 85 of its Everest, Heald, and WyoTech college buildings and phase out 12 more as students complete programs in which they are currently enrolled.

Corinthian Colleges have been charging, on average, $40,000 for a two year associate’s degree.” According to Kirkham in the LA Times, “Nearly 37% of students who left Corinthian’s schools in 2008 defaulted on their loans within three years…” The LA Times report includes widespread stories of cooking the numbers on program completion and job placement.  One job placement officer at Everest College in Houston, Texas said she was told to place graduates with employers with high turnover rates.  “That allowed Everest to connect many students with the same company in a short period of time… driving up placement rates—a key metric for federal student aid eligibility.”

Reporting for the NY Times last month as the situation worsened for Corinthian, Floyd Norris disclosed that Corinthian’s problems did not begin with the crackdown by the U.S. Department of Education: “A suit filed by the California attorney general last year contended that Corinthian lied about the success of its former students as it focused on single mothers whose income was at or near the poverty line.  The suit quoted internal Corinthian documents as describing its target audience as ‘isolated’ and ‘impatient’ individuals with ‘low self-esteem.’  It said the company used high-pressure sales tactics and advertised on the Jerry Springer television show.”