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Second Opinions: An Obama Plan to Grade U.S. Colleges


The Wall Street Journal. December 11, 2013.  Jeffrey T. Leeds co-authored a recent Journal op-ed opposing the Obama Administration's plan to measure the performance of colleges and then restrict federal aid to those schools the government claims are not providing adequate value. Today Mr. Leeds is participating in an online debate with Ben Miller of the New America Foundation, a former senior policy advisor at the U.S. Department of Education. This page will be updated with the most recent post at the top of the page.

Jeffrey T. Leeds: Mr. Miller suggests we need to "triage." More than 85% of the post secondary students in this country attend public and private nonprofit institutions. If you are trying to help the most students, and you are dealing with finite resources, it doesn't seem obvious why you would address challenges in the smallest sector. I simply do not agree that the "most concerning instances of debt and other issues" occur in private sector colleges. The sector has had, for sure, the most scrutiny and there is no doubt that some of the attacks have been ideological and political. Challenges, albeit different ones, are, most likely, distributed pretty equally across subsectors. If we need to make hard calls about the allocation of resources – and I'm not sure we do – let's also have a grown up conversation about how to do so. With respect to the position that the Department should act now on private sector colleges because it can, without Congressional action, this has, and will continue to be, litigated. But it seems clear that policy changes of such magnitude belong in Congress, as a number of legislators are increasingly suggesting. There should be hearings, and a bill and public, transparent debate. Data should be provided by the Department so that impacts can be understood and assessed. Simply because Congress is not performing at its most efficient – a point I am sure Mr. Miller and I agree on – it doesn't mean it can or should be bypassed.

Let me answer directly Mr. Miller's questions. I believe there are issues in higher education – including the private sector – that should be addressed in order to improve quality and help students. They should be addressed not only "as quickly as possible" but also thoughtfully. The view expressed by Bob Kerrey and me is that the Gainful Employment reg – while relatively quickly proposed – is not thoughtful at all. A bad rule is not better than no rule, and as Bob Kerrey has said repeatedly, the Gainful Employment fix is a cure worse than the disease. Our substantive points, I would observe, remain unanswered. In terms of alternatives, I agree that we do need to have a threshold of quality for all institutions before they are eligible for Title IV. We tend to overlook the work that accrediting bodies do in this area, but it is real and substantive and the law of the land. Beyond that, another form of regulation, and one that fits more comfortably, in my view, within the American political tradition, even the progressive political tradition, is to provide significant and real disclosure and allow people to make their own choices. Why does this administration believe that it gets to make the hard choices about how much debt is too much, how much risk is too great? Give people more control over their lives. Don't take it away.

Ben Miller: First off, I just want to acknowledge and say I appreciate Mr. Leeds taking the time to read and respond to my entry and say I'd be open to continued discussions after this forum is over. And since we are almost done, I just wanted to provide a few final points. It's clear to me that we need greater accountability across all of higher education. But some of the most concerning instances of debt and other issues identified by other agencies like the Department of Justice, the Federal Trade Commission, and others keep cropping up in the same area. In a world of finite resources, triaging the problem and starting with the biggest concerns immediately, rather than waiting potentially a decade for reauthorization is acting responsibly to help students where feasible.

Over the long run (a time period dictated by Congress because of its lack of speed in passing bills), it is completely reasonable to be asking more of all colleges. But doing so will need to deal with the fact that higher education does not have a one-size-fits-all set of policy issues. For example, the issue with elite private colleges with large endowments is less cost and completion and more socioeconomic diversity. The problem with public community colleges is around completion. Designing an accountability system should be based on targeting the problems that need to get fixed. For the lowest performing private colleges (which to be clear are a subset and not the majority) we are faced with issues of high debt, low completion, and low return. Does Mr. Leeds believe there are issues in the private college sector that are worth trying to address as quickly as possible in the name of improving quality and helping students? And if there are, how should we go about doing that? The gainful employment rules suggest it should be done by setting minimum performance expectations in terms of debt-to-earnings, default, and repayment success. But that's one set of ideas. Putting concrete alternatives with clear measures on the table will do a lot to help the debate.


Jeffrey T. Leeds: For nearly five years, the Department of Education – for which Mr. Miller worked -- has aimed radically to restructure the regulatory framework that applies to private sector colleges. The debate around these proposed rules has too often been acrimonious and, as a result, generally unproductive. The Department has by and large chosen not to talk, not to collaborate. The first set of rules proposed by the Secretary were ultimately challenged in court and were struck down by a federal judge (appointed by President Obama) as arbitrary and capricious.

I agreed to "debate" Mr. Miller in the hope that he and I might change the tone; my hope was that we might begin by seeing whether and where there was common ground – which I believe there is -- and then going after the areas of disagreement and seeing if we could narrow that gap. The country needs, and is entitled to, a better and smarter higher education policy.

Unfortunately, Mr. Miller, rather than engage constructively and speak to the issues raised by Senator Bob Kerrey and my op-ed, has instead chosen to fight. This has been the posture and the approach of the department and its allies. It needs to end. The country is going to need moderate and reasonable Democrats and Republicans to work together regardless of the efforts of the Millers and Co. to hijack the discussion.

First, the suggestion that Bob Kerrey and I support "load(ing) students up with debt for low quality training programs" is obviously offensive. No one, let alone Bob Kerrey, is for that. It is also a flat out mischaracterization that helps explain the frustration many people outside of Washington have with the inside-the-beltway partisanship. Bob and I addressed the specifics of the proposed gainful employment regulation—we said and believe the "regulations" are poorly crafted, will result in unintended consequences and are thus a terrible idea. Mr. Miller fails to address any of the substantive points we made.

For example, we highlighted the unfairness of the rule, which is targeted at private sector schools.

Yes, let's do set the record straight. For five years, the Department of Education and its proxies have waged a disinformation campaign, telling members of Congress and other opinion leaders that the proposed regulation applies equally to all colleges, whether private sector or public sector or private non-profit. I spoke personally to a national labor leader who was told by the department, in an effort to win her support, that the rule applied equally to all colleges. Mr. Miller's post continues with this inaccurate and misleading party line. Mr. Miller states today that the proposed regs "do not only target only one set of colleges" but would instead apply to certain programs "at public, private nonprofit and private for-profit" that "provide students with training that would lead them to gainful employment". His implication is clear: the regs would apply fairly across all of higher ed.

But here's the sleight of hand. The regs apply to all programs at all private sector colleges, but only certain non-degree programs at all other colleges. It applies to none of their degree programs. These non-degree (i.e., certificate) programs at traditional colleges are a small percentage of the programs they offer. Let's be clear, the rule is not applied uniformly, or fairly. For example, a BA nursing program at a private sector college would be subject to the rule; the identical program at a nonprofit would not. I assume Mr. Miller knows this.

Moreover, Mr. Miller ducks the question posed by Mr. Kerrey and me. Shouldn't we have one set of rules for all higher ed, regardless of their tax status? Whether it is true that the department can't "change the law"—and it can certainly propose new laws it believes to be in the public interest—a progressive think tank like the New America Foundation can answer a simple question and have a straightforward view: should this gainful employment rule, as drafted, be applied across the board? Would this be good policy?

Mr. Miller isn't quite done. Critics of private sector colleges have made it a practice to present apples to oranges comparisons in order to disparage the sector. Mr. Miller's post claims that private sector colleges make up 13% of the student population and have 47% of the student loan defaults. This is intended to show a terrible performance relative to their peers. But why compare private sector colleges to, for example, elite private schools with endowments, and to public community colleges and state universities that provide massive taxpayer financed subsidies to their students in order to lower tuition? These students, as expected, borrow less. The meaningful comparison to private sector colleges are private nonprofit colleges with similar student populations.

Recently, Mr. Miller argued powerfully that a college ratings system needs to reflect "context" with "well-crafted peer comparisons" that account for, and give institutions "credit for" the "socioeconomic diversity" of its student body so that it doesn't simply measure outputs and ignore inputs. We agree with his point, 100%. Why doesn't the proposed gainful employment rule provide such a context? Would he support amending the rule to do so? This might be the start for some common ground.


Ben Miller: Should colleges receive federal money to load students up with debt for low-quality training programs? That's the question at the heart of the proposed federal regulations that Jeffrey Leeds describes as a "terrible idea" in his November 19 op-ed and refers to as an arbitrary set of rules with unintended consequences that will be bad for poor students.

These rules wouldn't create "arbitrary" and "onerous" tests. They would judge programs on three simple outcomes for students: (1) How many default on their loans? (2) Can they keep up with their interest payments? (3) Are graduates earning enough money to have a little left over after making loan payments? It's a way of checking the return on investment claims that so many of these programs present to prospective students.

Let's set the record straight on a few things. The gainful employment rules do not only target one set of colleges. For decades, the Higher Education Act has required that certain programs at public, private nonprofit, and private for-profit colleges provide students with training that would lead them to gainful employment in a recognized occupation. Who this requirement applies to is in the law and has been for years. Yes, it applies to programs at for-profit colleges run by places like the Education Management Corporation, where Mr. Leeds sits on the board, but it also includes thousands of programs at local community colleges too. The Department of Education can't change the law; it can just help clarify it through regulation.

There is a real debt crisis in this area. For-profit colleges make up about 13% of all students in higher education today. But 47% of students who default on their loans come from this sector. More than one out of every five borrowers at a for-profit college defaults on his or her loans within three years. If I had a business where a division with a 20% failure rate generated half my losses, I'd certainly want to take a closer look at what's going on. Given that Department of Education dollars make up nearly 90% of the revenue at many of these institutions, I think it's earned the right to be concerned about its investments.

Finally, demography is not destiny. That's why education is important. It's the best ticket to the middle class and helps people make better lives for themselves. In fact, the Department of Education looked at just how much of these rules are driven by the percentage of students that are low income or minorities when it did these rules the first time in 2011. The answer? It predicts about one-quarter of the result, leaving 75% due to other factors. Income plays a role, but it is by no means determinative. Programs that fail these measures don't do so because of who they enroll. They fail because the value of what they are providing isn't worth the cost.