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California Association of Private Postsecondary Schools

Passing the Baton

05/16/2014

Inside Higher Ed. May 16, 2014.

For-profit colleges won’t need to worry about one of their most persistent and powerful critics after next year, when Sen. Tom Harkin retires. But as the Iowa Democrat said Thursday, there are other Democrats in the Senate who will continue his pursuit of the sector.

Harkin spoke at a media event held by the Young Invincibles, a student advocacy group, in the U.S. Capitol building. He was joined by several former students who said they racked up big debts trying to earn “worthless” degrees from for-profits.

For example, Dymond Blackmon, 28, said he holds $90,000 in debt for an associate degree he received from a campus of the International Academy of Design and Technology, which is owned by Career Education Corp., a for-profit chain.

Blackmon said he has been able to use his degree for a limited amount of work in photography. But he said he works 50 to 60 hours per week in retail and as a restaurant server to pay off the $90,000, which doesn’t include private loans his mother took out to help fund his education. (The academy's annual tuition and fees are currently $14,400.)

“This is not the future I envisioned,” he said.

Sen. Dick Durbin, an Illinois Democrat, also spoke at the event. Harkin introduced Durbin as the senator who has pushed the hardest on the for-profit issue. Fittingly, Durbin didn’t pull his punches.

“This sector of higher education is disgraceful and scandalous,” he said.

Yet Congress has failed to act to rein in for-profits, Durbin said, because the industry has “friends in high places,” including Republicans who control the U.S. House of Representatives and can block legislation in the Senate. As a result, Senate Democrats have been relegated to watching from the sidelines as the Obama administration takes the lead with its proposed “gainful employment” regulations.

Those rules would apply to programs at for-profits and to non-degree, vocational programs at community colleges and at nonprofit, four-year institutions. They would require an average, annual debt-to-earnings ratio for graduates of less than 12 percent (a ratio between 8 and 12 percent would land a program in a warning "zone"), or less than 30 percent for discretionary income. And programs would need to have loan-default rates of less than 30 percent.

The department estimates that 16 percent of covered programs would fail the metrics. Durbin said 94 percent of failing programs would be at for-profits.

The White House is collecting comments on the regulations for two more weeks. The department will then tweak the rules and issue a final version later this year.

Push for Stronger Rules

The debate over for-profits has reached a fever pitch during the public comment period. This week proponents of gainful employment have been campaigning hard for aggressive rules, releasing analyses, circulating petitions and trotting out students who claim to have been victimized by for-profits.

For example, The Institute for College Access and Success (TICAS), a consumer group, released an analysis of federal data showing that 114 academic programs at for-profits had more students who are in default than graduates.

Robert Shireman, a former department official who created TICAS and led the first attempt by the administration to create gainful employment regulations, weighed in on the analysis in a tweet. He asked, rhetorically, why he hadn’t pushed to shut down the University of Phoenix when he was at the department. (Federal investigators are looking into whether Shireman may have violated conflict-of-interest rules during the previous debate over gainful employment.)

Advocates for the for-profit sector have had a lower profile this week. But they, too, are submitting comments and lobbying for changes to the rules.

Steve Gunderson is president and CEO of the Association of Private Sector Colleges and Universities, the primary trade group for the industry. He said his group has been focused on developing in-depth research on the metrics, which it will release soon.

“We’re setting the emotion aside,” said Gunderson.

A few Democrats are philosophically opposed to the existence of for-profits in higher education, Gunderson said. But not most. And he said the association was continuing to work with Congressional Democrats and the White House to push for a collaborative, fair framework to hold all colleges accountable.

The most important question about gainful employment is its potential impact on students, said Gunderson. “This is going to close down access to millions of students.”

However, Rory O’Sullivan, deputy director of the Young Invincibles, said during the event that the proposed regulations are “shot through with loopholes.” He called on the White House to tighten the rules in their final version.

Fight Goes On

Harkin and Durbin made a similar request Thursday with a letter they sent to Arne Duncan, the education secretary. Four other Democratic Senators signed the letter – Chris Murphy from Connecticut, Brian Schatz from Hawaii, Elizabeth Warren from Massachusetts and Delaware’s Tom Carper.

Specifically, the six Democrats asked the department to add a loan repayment rate metric to the default standards, which they said are easy to manipulate. They also called for enrollment caps on underperforming programs and borrower relief from for-profits for students in those programs.

Besides Durbin, Harkin was joined at the event by Murphy and Schatz, the two youngest senators. The four lawmakers acknowledged that passing legislation on for-profits was unlikely in the deeply divided Congress.

Even so, Murphy and Schatz introduced a bill in January that would tie federal financial aid to certain performance standards. The legislation is aimed in part at for-profits, the two lawmakers said Thursday.

In his comments, Harkin cited the voluminous report on for-profits his staff released two years ago. That document was the culmination of a lengthy investigation into the industry’s shortcomings, and critics of for-profits view it as definitive.

However, Harkin was somewhat conciliatory at the report’s unveiling. He said at the time that the success of high-quality for-profits, which serve low-income and first-generation college students, is in the “national interest.”

That tone was not on display Thursday.

Harkin said for-profits have been able to “scam the system.” He called for a return to the approach by former Sen. Sam Nunn, a Georgia Democrat who led an inquiry into for-profits 24 years ago, revealing widespread fraud and leading to changes in federal law.

As he wrapped up the event, Harkin pointed to his colleagues and promised that Democrats are not done with for-profits.

“As someone who’s retiring,” Harkin said, “I’m sure glad these guys are going to be here.”