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California Association of Private Postsecondary Schools

For-profit colleges, student advocates lobby Obama

05/16/2014

USA TODAY. May 14, 2014.

As the Obama administration prepares to establish new rules governing for-profit colleges later this year, student advocates and the career college industry are waging a fierce battle to shape the coming regulations.

Stakeholders on both sides of the debate are ramping up their push on the administration just as the public comment period on a proposed "gainful employment" regulation is set to close May 26.

Under the proposal that the administration unveiled in March, colleges would have to demonstrate that graduates' debt load on average does not exceed 30% of their discretionary earnings or 12% of their total earnings.

In addition, the new rules would put programs whose graduates have debt-to-income ratios of 8% to 12% or debt-to-discretionary-income ratios of 20% to 30% in a danger zone, which would require the schools to warn students that they might become ineligible for federal aid.

The administration pointed to the fact that students at for-profit colleges represent about 13% of the total higher-education population but are responsible for nearly half of all college loan defaults in justifying their call for the rule.

On one side, student advocates are arguing that the proposal laid out by the administration does not go far enough.

Student advocates from groups such as Young Invincibles and CREDO Mobile are calling on the new regulations to include financial relief for students at institutions that lose eligibility to federal aid, enrollment limits on poorly performing schools and stricter standards.

"I think the new rules would slow what's going on," said Mike DiGiacomo, 33, of Randolph, Mass., who racked up more than $85,000 in debt and lent his story to a CREDO online petition that has garnered more than 100,000 signatures. "But they are really just putting a Band-Aid on the problem."

The for-profits, meanwhile, counter that the proposed regulations would cut off access to a college education for millions of students, disproportionately affect programs serving minorities and veterans and conflict with Obama's call for increasing access to post-secondary education.

"The net result ... is that it's going to eliminate the bridge to education, skills and opportunity," said Steve Gunderson, president of the Association of Private Sector Colleges and Universities, the leading group representing for-profits.

APSCU also maintains that the Education Department doesn't have the authority to regulate colleges in this matter and that under the proposed rules, 3.4 million students could be affected by 2020.

At the same time, the APSCU appears to be bracing for the inevitability of new regulations and is calling on the administration to modify the metric for what it considers a failing program.

The group warns that the debt-to-earning metric doesn't always tell the whole story, noting that Education Department data show that students in certain professions may exceed the 12% debt-to-earning metric in their early years out of school but have relatively low loan default rates.

This isn't the first time that the Obama administration has attempted to tighten regulations on the for-profit industry. In 2010, the Education Department unveiled its first gainful employment rule that offered the multiple paths for for-profit programs to maintain eligibility.

Proponents of tougher rules said that the administration's first attempt was watered down under intense lobbying by the for-profits, which enlisted influential Democrats and Republicans including former Obama communications director Anita Dunn and former Senate majority leader Trent Lott, R-Miss.

The rule was eventually thrown out by a federal judge who called the requirements "arbitrary and capricious" because they weren't based on any economic studies.

Rory O'Sullivan, deputy director of the Young Invincibles, said another court challenge may be inevitable.

"I do think this rule will stand up to a court challenge," O'Sullivan said. He added, "The institutions' voices have been heard in this debate, but I think what we haven't heard enough about is the students who have gone to these schools, taken astronomical amounts of debt, but weren't prepared at all for the job market."