Checks and Balances Help Protect Us from Betsy DeVos

Sam Tanenhaus, the former editor of the NY Times Book Review, is quite a writer, and it is fascinating to contrast the Betsy DeVos we’ve come to know in the months since she became U.S. Secretary of Education with the Betsy DeVos we meet in Tanenhaus’s Vanity Fair profile of the western Michigan DeVos Empire.  Tanenhaus writes: “In the solar system of elite Republican contributors, Richard DeVos Sr., who died Thursday at age 92—one of the two founders of Amway, the direct-sale colossus—occupied an exalted place, and his offspring did too. Since the 1970s, members of the DeVos family had given as much as $200 million to the G.O.P. and been tireless promoters of the modern conservative movement—its ideas, its policies, and its crusades combining free-market economics, a push for privatization of many government functions, and Christian social values. While other far-right mega-donors may have become better known over the years (the Coorses and the Kochs, Sheldon Adelson and the Mercers), Michigan’s DeVos dynasty stands apart—for the duration, range, and depth of its influence.”

Tanenhaus suggests that, “Trump was a useful vehicle for advancing nationally the revolution the DeVoses had already enacted in Michigan. There was, for instance, Betsy DeVos’s campaign to undo the state’s public education system and replace it with for-profit and charter schools that, as she had put it two decades earlier, shared her mission of ‘defending the Judeo-Christian values that made us what we are, but which are under attack from the liberal elite.’  There was also the campaign she and her husband had waged to weaken Michigan’s unions… Other lessons can be found in the pulp-fiction career of Betsy DeVos’s younger brother, Erik Prince, the former navy SEAL, who started Blackwater—the mammoth security company…. Behind all this is the story of a family dynasty that has been a driving force on the far right—the Michigan Medicis of Donald Trump’s America.”

So… how’s it going for Betsy after nearly 20 months on the job?

Last week a House and Senate conference committee approved a compromise education appropriations bill for FY 2019.  It must still be voted on by both houses of Congress and signed by the President, but Education Week‘s federal education policy reporter Andrew Ujifusa draws the following conclusions: “(T)hrough this agreement, members of Congress who oversee spending are sending the Trump administration a pretty clear signal about what they want to pay for and how much they want to pay… In their fiscal 2019 blueprint, the Trump team wanted to shrink or eliminate several programs.  Big-ticket items the administration wanted to eliminate include the Title IV Part A block grant (for student support and academic achievement), Title II aid for educator preparation, and 21st Century Community Learning Centers (a program that supports after-school programs).  They also wanted to shrink the budget for Impact Aid (for school districts that encompass Indian Reservations or federal military installations).  All of these programs are not only preserved in the spending deal—they get raises. The spending increases they would get aren’t huge by percentage. But Congress is sending a clear message that it sees value in those programs.”

Ujifusa continues: “It’s not fair to say that Trump and DeVos have whiffed completely on their priorities. A $40 million increase for charter school grants fits with DeVos’ general push to direct more money to school choice programs. However, that increase is $60 million less than what the president wanted for charters. He and DeVos had a lot less luck on other fronts. Lawmakers completely ignored the administration’s signature school choice proposal for next year, a $1 billion ‘opportunity grants’ program to promote choice. And more broadly Capitol Hill is so far refusing to cut spending like the Trump team wants.” The Department’s two largest and most essential grant programs—Title I to assist school districts where child poverty is concentrated—and funding for programming mandated by the Individuals with Disabilities Education Act—receive modest increases in the appropriations agreement just reached in the House-Senate conference committee.

Unable to move her school choice agenda through Congress, DeVos’s department has taken several steps to reduce Obama-era regulations intended to protect students from unscrupulous for-profit colleges that depend on students’ borrowing from the federal government to pay tuition.  The Washington Post’s Laura Meckler and Danielle Douglas-Gabriel explain that DeVos has taken steps to cancel federal Borrowers’ Defense to Repayment rules which, during the Obama Administration, allowed students to file claims for loan forgiveness if they could prove they had been defrauded or their college had been shut down. In July, DeVos proposed new rules to “require students to prove schools knowingly deceived them if they want their federal loans canceled. And it scuttled an Obama administration provision that allowed similar claims to be processed as a group.  Instead, students will have to prove their claims individually.”

However, on September 12, a federal judge blocked DeVos’s action on Borrowers’ Defense to Repayment in a decision following a lawsuit brought by 19 states and the District of Columbia. For POLITICO, Michael Stratford reports: “A federal judge on Wednesday ruled that Education Secretary Betsy DeVos’s various delays of Obama-era regulations governing loan forgiveness for defrauding borrowers were illegal.  U.S. District Court Judge Randolph Moss sided with consumer advocates and Democratic attorneys general from 19 states and the District of Columbia who had challenged the Trump administration’s postponement of the regulations, which are known as ‘borrower defense to repayment.’ DeVos had taken action to delay those rules until July 1, 2019, in order to give the Education Department enough time to rewrite them. But in a sweeping 58 page decision, the judge ruled that DeVos’ actions were ‘unlawful,’ ‘procedurally invalid,’ and ‘arbitrary and capricious.’ ”

Washington state’s Attorney General, Bob Ferguson commented on the importance of Judge Moss’s decision to block cancellation of Obama-era Borrowers’ Defense to Repayment rules: “These protections prevent predatory for-profit colleges from taking advantage of student loan borrowers. Thousands of Washingtonians are shouldering crippling debt as a result of these predatory practices, and these rules offer real relief from their financial struggles. This Administration can’t arbitrarily block rules simply because it doesn’t like them.”

It is also becoming evident that the battle pitting consumer advocates and state attorneys general against the DeVos Department of Education over student borrowing will not end with Judge Moss’s recent decision. Controversy is growing around the Department’s failure to oversee the huge companies the Department of Education hires as contractors to process student loans. POLITICO‘s Michael Stratford reports: “The department, led by Secretary Betsy DeVos, has thrown roadblocks in front of state law enforcement officials and federal regulators who are pursing legal action against the companies, which include student loan giant Navient…. The interference with state investigations comes as consumer advocates and Democrats blast the Trump administration for dismantling a broad range of protections for students who take out federal loans to attend college… Navient, one of the largest loan servicers, is defending itself against six separate lawsuits brought by state attorneys general in Illinois, Washington, Pennsylvania, California and Mississippi as well as the Consumer Financial Protection Bureau. The company is accused of overcharging borrowers and steering them into more expensive repayment plans, allegations that it denies. But the Trump administration has instructed Navient and other companies that collect federal loans to refuse demands for information by state attorneys general and others….”

Stratford continues: “DeVos told Congress in March that student loan servicers face ‘appropriate federal oversight’ by her agency.  But a July report submitted to the White House by Treasury Secretary Steven Mnuchin criticized the Education Department’s oversight of the companies… Those concerns were also reinforced by a GAO report last month that department officials had carried out only two of six recommendations meant to address weaknesses in how the agency monitored and evaluated the student loan servicers.”

In a September 4, Washington Post column, Laura Meckler considers DeVos’s record on her lifelong purpose—the expansion of school choice. Meckler credits the check and balance of Congress for blocking the federal expansion of school privatization: “Congress already has said no to her budget proposals. A proposed tax credit supporting voucherlike scholarships has died. A new spending bill again offers little for school choice enthusiasts. And if Democrats gain power after this fall’s midterm elections, chances for action would fall even further. For all practical purposes, the fight is over and she lost.”

It has become apparent that the third branch of government, the judiciary, is now stepping in to block DeVos’s efforts to ease regulation of the for-profit colleges and student loan processors which have been ripping off vulnerable students.

All this is a sign that, at least to some degree, the checks and balances of our federal government are working to keep bad things from happening.

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DeVos Cancels Gainful Employment Rule, Deregulates For-Profit Colleges and Trade Schools

In late July, the NY Times Erica Green reported that her newspaper had obtained a plan by the U.S. Department of Education to cancel the Obama Department of Education’s “gainful employment rule,” which has denied federal loans and grants to for-profit colleges and trade schools whose graduates were so poorly prepared they were unable to secure jobs by which they could pay off their sizeable student loan debts.

On Friday, Green followed up.  Now two weeks later Green documents that Education Secretary Betsy DeVos has now formally implemented her plan to eliminate the Obama-era rule designed to protect student borrowers from for-profit colleges that had made inflated claims about job preparation: “Education Secretary Betsy DeVos formally moved Friday to scrap a regulation that would have forced for-profit colleges to prove that the students they enroll are able to attain decent-paying jobs, the most drastic in a series of policy shifts that will free the scandal-scarred, for-profit sector from safeguards put in effect during the Obama era.  In a written announcement posted on its website, the Education Department laid out its plans to eliminate the so-called gainful employment rule, which sought to hold for-profit and career college programs accountable for graduating students with poor job prospects and overwhelming debt.”

In her important 2014 book, Degrees of Inequality, Cornell University political scientist Suzanne Mettler explains that private, for-profit colleges and trade schools aren’t really so private after all: “Ironically, despite being regarded as part of the private sector, the for-profits are financed almost entirely by American taxpayers. They enroll about one in ten college students today, but utilize one in four dollars allocated through Title IV of the Higher Education Act of 1965, the predominant source of federal student aid.  A 1998 law permits the for-profits to gain up to 90 percent of their total revenues from this single source. Other government funds do not count against this threshold, so the for-profits also receive 37 percent of all Post-9/11 GI Bill benefits and 50 percent of Department of Defense tuition assistance benefits. In recent years, this combination of public funds has provided the for-profit schools with 86 percent of their total revenue, to the tune of roughly $32 billion annually. So, we have substandard educational institutions producing many students who can’t get good jobs, costing taxpayers billions. Question: who is actually benefiting from this arrangement?  Answer: the businesspersons who own them and their corporate shareholders. The largest for-profits, though subsidized almost entirely by government, are now publicly traded on Wall Street… Even in the midst of the financial downturn in 2008, the top companies enjoyed a 4 percent growth in their stocks, while the S&P 500 declined by 39 percent.” (Degrees of Inequality, pp. 2-3).

Arne Duncan cracked down. Corinthian Colleges and ITT Technical Institute were put out of business.

Now Betsy DeVos has announced she is rolling back the regulation that sought to stop the for-profit college rip-off. She published the Department’s new proposal late last week. A period will follow when the Department will accept comments.  The final regulation must be published by November 1, 2018, reports Michael Stratford of POLITICO. The new rule will go into effect on July 1, 2019.

Erica Green reports that DeVos plans to publish employment data about the graduates of all American institutions of higher learning—not just the for-profit career and technical institutes.  She quotes DeVos: “Students deserve useful and relevant data when making important decisions about their education post-high school. That’s why instead of targeting schools simply by their tax status, this administration is working to ensure students have transparent, meaningful information about all colleges and all programs. Our new approach will aid students across all sectors of higher education and improve accountability.”

Green adds: “The Obama administration encouraged the expansion of public community colleges as it forgave at least $540 million in taxpayer-funded student debt for for-profit graduates who could not find decent jobs with the degrees or certificates they had earned..”

The gainful employment rule had been only partly implemented prior to the time DeVos took over the Department of Education. Green reports: “The 2014 rule required for-profit institutions to measure how much debt their students incurred against their post-graduation earnings and ordered them to disclose their failing marks in advertisements.  A year ago, Ms. DeVos delayed those parts of the regulations from taking effect.  But one part of the rule that had already been put into place has identified hundreds of failing programs, many of which went on to shut their doors after they were measured against the new standards according to an analysis by New America Foundation. That regulation will also be eliminated.  In the first assessment of college graduates’ debt-to-earnings ratios, about 800 programs, or 10 percent of those examined, had failed to meet the requirements laid out in the gainful employment rule, the department announced; of those, 98 percent were for-profits.”

Green quotes Steve Gunderson, president of a for-profit college trade association—a lobbyist for the for-profit colleges—admitting that the Gainful Employment Rule has made an important contribution: “The reality is every school that has a program that was failing gainful employment metrics—and they knew it couldn’t be fixed—they’ve already closed. The sector today is so much better.”

Consumer protection advocates have been very supportive of efforts to crack down on the for-profit career and tech-training institutes.  Eighteen state attorneys general have sued the Department of Education under DeVos’s leadership for failing to enforce the rule against predatory for-profit institutions.  Green quotes New York Attorney General Barbara D. Underwood: “Rescinding the rule is a derogation of the department’s duty to protect students from exploitation and taxpayers from the waste of federal funds.”

Responses from members of the U.S. Senate Health, Education, Labor and Pensions Committee to DeVos’s action to cancel the gainful employment rule follow party lines.  Senator Lamar Alexander, the Tennessee Republican and chair of the committee, said: “Secretary DeVos’s regulation proposes to end a clumsy rule that consumed 945 pages to define two words in the higher education law and targeted just one segment of our 6,000 colleges and universities.”

Senator Patty Murray, the Washington Democrat, and ranking member, castigated DeVos’s action: “Her extreme proposal to rescind this rule is further proof that there is no line Secretary DeVos won’t cross to pad the pockets of for-profit colleges—even leaving students and taxpayers to foot the bill.”

In her 2014 book, Suzanne Mettler explains how the Obama-Duncan era gainful employment rule came into being in 2011 and how it was intended to work: “At last, in early June 2011—after three rounds of hearings and discussions and almost one hundred meetings with lobbyists and others, the Department of Education released the final version of the gainful employment rule. The essence of the rule was that for students of any particular school to use Title IV funds, programs had to meet at least one of three criteria indicating that the training they provide genuinely leads to gainful employment.  First, at least 35 percent of a school’s former students, roughly one out of three, must be successfully repaying their loans. As education secretary Arne Duncan put it, ‘We’re asking companies that get up to 90 percent of their profits from taxpayers’ dollars to be at least 35 percent effective.’ Second, as a measure of debt-to-income ratio, the estimated annual payment of the typical former students could not surpass 30 percent of his or her average discretionary income. Third, as an alternate measure of debt-to-income ratio, the annual payment from such borrowers must not be greater than 12 percent of their total earnings. Regulated institutions were required to disclose such information to prospective students, enabling them to make informed choices about attendance. Also, the final rules dictated that programs would not lose eligibility unless they failed to meet these criteria for three out of four years, rather than in one single year. The penalty for schools violating these principles would be the loss of eligibility for federal student aid programs for at least three years.” (Degrees of Inequality, pp. 183-184)

New Rules Proposed by DeVos Would Reduce Student Loan Forgiveness, Favor For-Profit Colleges

Betsy DeVos is busy eliminating regulation of for-profit colleges and reducing protection of the rights of students who use federal loans to attend them. President Obama’s administration had tried to crack down, but DeVos and her Department of Education are cozier with the for-profit college sector.

Last Wednesday, Betsy DeVos’s U.S. Department of Education proposed new rules to set the parameters for loan forgiveness when students file claims alleging their colleges have defrauded them. Under the new “borrowers’ defense to repayment” rules, DeVos expects the Department of Education to save money—approximately $700 million annually. Then on Thursday, the NY Times obtained a copy of draft plans to end what has been called the “gainful employment rule,” which has been used to shut down for-profit trade schools and colleges when their students are so unemployable they cannot pay off their federal loans.

Borrowers Defense to Repayment — Advocates for protecting the rights of student borrowers say the rules released last week will make it much harder for students who believe they have been defrauded to have their student loans cancelled. The very existence of many for-profit colleges depends on a steady revenue stream of federally backed student loans. After Corinthian Colleges and ITT Technical Institute were shut down, thousands of their former students filed claims for cancellation of loans used to pay tuition for programs that had been terminated.

For the Washington Post, Laura Meckler and Danielle Douglas-Gabrielle explain: “Education Secretary Betsy DeVos moved Wednesday to make it harder for students who say they were defrauded by colleges to erase their debts, rolling back Obama-era regulations that for-profit colleges saw as threatening their survival. The proposed rules… require students to prove schools knowingly deceived them if they want their federal loans canceled. And it scuttled an Obama administration provision that allowed similar claims to be processed as a group. Instead, students will have to prove their claims individually. The rules are DeVos’s rewrite of an Obama-era regulation published in 2016 and part of that administration’s crackdown on for-profit colleges that critics say prey on vulnerable students. In ways big and small, the new version makes it harder for students to win debt forgiveness… The department aims to publish a final rule by Nov. 1 so that it can take effect for loans originating after July 1, 2019. The agency will allow 30 days for public comments on the proposal.”

Consumer and borrower advocates believe the standard of proof under the DeVos rules proposed last week favors the for-profit college industry and fails adequately to protect students. The NY Times’ Erica Green reports that DeVos has filled the positions who regulate for-profit colleges with former employees and advocates for the for-profits: “DeVos advisers include her senior counselor, Robert S. Eitel, and Diane Auer Jones, a senior adviser on postsecondary education, both of whom worked for Career Education Corporation, a company that operates for-profit colleges, and reached a $10.25 million settlement with the New York attorney general over charges that it had inflated graduates’ job placement rates. The department’s general counsel, Carlos G. Muñiz, worked as a consultant for the company.”

POLITICO‘s Benjamin Wermund adds that the newly proposed rules will reduce loan reimbursements to students whose colleges suddenly close as long as those colleges provide a phase out that allows students to complete some of their coursework: “Under the plan, the Education Department would no longer provide “closed school” discharges to students if the school offers an approved “teach-out” or a wind-down of their program — a move the agency predicts would reduce the amount of closed school discharges by $96.5 million each year.”

The newly proposed rules require students to prove they were intentionally defrauded. Meckler and Douglas-Gabrielle report: “Consumer advocates also said it is unrealistic to expect borrowers to prove that their college intended to mislead them. ‘How are borrowers supposed to prove intent? They don’t have any discovery rights. They don’t have the ability to get testimony from the person who lied to them about what they knew or didn’t know,’ said Abby Shafroth, an attorney at the National Consumer Law Center.”

Advocates for protection of borrower’s rights criticize the proposed rules because they require that students filing complaints submit to arbitration:  Green explains: “The proposal also restores ‘pre-dispute arbitration agreements,’ which allow colleges to force students to sign waivers saying they will settle their disputes with institutions through arbitration. The Obama administration had removed those agreements from its rule because they essentially forced to students to sign away their rights to sue and file federal claims, and shielded student complaints from the public.”

Gainful Employment Rule — The Obama administration began to crack down on trade schools’ unscrupulous recruiting practices and fraudulent promises that students would be prepared for jobs when the colleges’ programs were weak or worthless. Last Thursday, the NY Times Erica Green obtained a draft plan from the U.S. Department of Education to eliminate the Obama “gainful employment rule” altogether.

Green explains: “Education Secretary Betsy DeVos plans to eliminate regulations that forced for-profit colleges to prove that they provide gainful employment to the students they enroll, in what would be the most drastic in a series of moves that she has made to free the for-profit sector from safeguards put in effect during the Obama era. The so-called gainful employment regulations put into force by the Obama administration cut off federally guaranteed student loans to colleges if their graduates did not earn enough money to pay them off. That sent many for-profit colleges and universities into an economic tailspin because so many of their alumni were failing to find decent jobs. The Obama regulations — years in the making and the subject of a bitter fight that pulled in heavy hitters from both parties who backed the for-profit schools — also required such schools to advertise whether or not they met federal standards for job placement in promotional materials and to prospective students.”

Green continues, describing implications of  the Department’s plan to eliminate the “gainful employment rule”: “The move would punctuate a series of decisions to freeze, modify and now eliminate safeguards put in place after hundreds of for-profit colleges were accused of widespread fraud and subsequently collapsed, leaving their enrolled students with huge debts and no degrees. The failure of two mammoth chains, Corinthian Colleges and ITT Technical Institutes, capped years of complaints that some career-training colleges took advantage of veterans and other nontraditional students, using deceptive marketing and illegal recruitment practices.”

Green reports that the department would continue efforts by the Obama administration to make available some information about for-profit colleges, but far less than the Obama administration required, and the Department of Education would no longer enforce the rule by withholding federal loans: “The existing database, created under the Obama administration, includes such data for more than 7,000 institutions, but it does not include program-by-program success rates for such certificates as nursing assistance, cosmetology or auto maintenance, nor does it contain the detailed employment statistics that the gainful employment regulations targeted… (I)t would eliminate the powerful threat to withhold access to guaranteed student loans from colleges whose graduates cannot find the work to pay them back. Few higher-education institutions could survive without federal student aid.”

DeVos’s plans to reduce regulations of for-profit colleges and trade schools should not be surprising. Not only has DeVos continued to hire former administrators from the for-profit college sector as well as lobbyists for the sector, but from the beginning, DeVos has shown her intent to roll back efforts begun by the Obama administration to protect the tax investment in student loans and to protect students from predatory recruiting by for-profit colleges whose programs are so weak that their students have been unemployable.

The Washington Post’s Valerie Strauss quotes Connecticut Senator Chris Murphy, who, when presented with the new rule changes, wondered, “Why would anyone deliberately hurt students who have been screwed over by scam schools?”

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.”