The Obama administration isn’t backing away from its crackdown on for-profit colleges.
A federal panel will tackle one of most controversial college regulations in Education Department history next month. The rule was meant to ensure that graduates of for-profit colleges are getting jobs and repaying their loans, but it was struck down last summer after a court challenge — so the department is going back to the drawing board.
The 15-member panel picked this week to rewrite the rule includes some prominent critics of for-profit colleges, who are already accusing the Education Department of bias against the industry.
The department’s 2011 “gainful employment” rule was a federal response to allegations that for-profit colleges were graduating students who wound up deeply in debt for useless degrees. It required those colleges to meet one of three standards to participate in federal financial aid programs.
Programs had to meet one of three benchmarks: At least 35 percent of graduates had to be repaying federal student loans, or have total loan debt of less than 30 percent of their discretionary income or 12 percent of their overall income. They would lose eligibility if they couldn’t meet any benchmark for three out of four years. The rule also applied to vocational and certificate programs at nonprofit and public colleges.
Many consumer advocates thought the rule was too soft. But for-profit colleges sued, arguing the department had overreached. Last summer, a federal judge threw out the 35 percent repayment rate requirement, saying it was arbitrary. That made enforcing the rule all but impossible.
But the regulation, as well as Senate hearings on the industry, stoked national concern about for-profit colleges. State attorneys general launched investigations in 30 states. Veterans’ groups and student organizations joined the fray and began pushing for tougher regulations. The panel writing the rules includes many more representatives from those groups, and fewer from higher education, than it did the first time around.
It also includes many more attorneys—perhaps because the Education Department is acutely aware of the legal challenges new regulations will almost certainly face.
The Education Department also included two for-profit colleges that in some ways resemble traditional colleges. Both would have no trouble meeting the regulation’s requirements if repayment rates—the measure the court threw out—were excluded. Strayer University, whose general counsel was selected, has argued that it shouldn’t be subject to the regulation at all because it has more in common with a nonprofit university than a typical vocational college.
“Repeating the biased and tainted process of the past, the committee has multiple representatives who are on-the-record or work for entities that are blatant, vocal opponents of the existence of our institutions,” Steve Gunderson, president and CEO of the Association of Private Sector Colleges and Universities, said in a statement. “If the past is any indication of what may follow, a committee with this make-up will create regulations that stifle education innovation, cost jobs and displace the students who benefit most from career and job-focused training.”
The key question will be whether the panel can come close to agreeing on a new version of the regulations. The Education Department brings stakeholders together to deal with the details of regulations. If the stakeholders agree, that agreement forms the base for new regulation. If they can’t reach a consensus, the department writes the rule itself. The latter is what happened the last time around.
Congress has also tackled the subject: The House has marked up a bill that would stop the regulatory process and throw out the old regulation, and the chamber might vote on it as negotiations begin in September.