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California Association of Private Postsecondary Schools

Napolitano's Perplexing Letter

05/23/2014

Inside Higher Ed. May 22, 2014.

University of California officials on Wednesday sought to clarify recent comments by President Janet Napolitano that some critics of for-profit colleges interpreted as urging her former Obama administration colleagues to back off their regulatory proposal aimed at cracking down on the industry.

In a letter to administration officials last week, Napolitano called for the formation of a working group of several federal agencies that would find “ways to increase accountability for the federal student aid dollars received by all participating institutions, including public and private universities, and for-profit and nonprofit colleges.”

“Instead of a broad ‘gainful employment’ rule, an interagency working group could propose actions under existing authority without new rules and/or legislation that would allow the federal government to take more immediate and effective steps to preserve and protect our nation’s student financial aid system,” Napolitano wrote.

Napolitano’s letter left some advocates for tighter rules on for-profit colleges concerned that the leader of one of the country’s largest public university systems was lobbying the Obama administration to abandon its current plan to publish final “gainful employment” rules by this fall.

A former governor of Arizona, Napolitano until last year served as President Obama’s secretary of homeland security before leaving to lead the University of California’s 10 campuses.

Two organizations that are pushing the Education Department to tighten its grip on for-profit colleges said Wednesday that they were “alarmed” by Napolitano’s letter because it appeared to call on the administration to drop its gainful employment proposal.

Young Invincibles, an advocacy group, and the United States Student Association, a membership organization representing students, wrote in a joint letter that Napolitano’s suggestion to create a working group of various federal agencies “would delay action” on holding for-profit colleges more accountable. By contrast, they said, the gainful employment rule making process already under way provides an “immediate and necessary opportunity” to crack down on the sector.   

Officials at the UC system on Wednesday said that Napolitano’s letter was not, in fact, suggesting that the administration form an interagency working group instead of pursing its gainful employment rules.

Rather, she is calling for such a working group in addition to the administration’s regulatory efforts on for-profit colleges, according to Gary Falle, associate vice president for federal relations.

“It’s not an either-or" proposition, he said. “We are fighting for and will continue to fight for the strongest gainful employment rule, and our comments on the proposed rule will show that next week.”

“This whole interagency group was for the administration to take immediate executive action right now,” he added.

The University of California had a representative on the negotiated rule making committee that met last fall to draft the new gainful employment rule. Barbara Hoblitzell, the university system’s associate director for student financial support, served as an alternate member of the panel, representing four-year public institutions.

Napolitano’s letter -- which was sent just two weeks before the May 27 public comment deadline on the administration’s proposed gainful employment rule -- was addressed to the heads of the White House Domestic Policy Council; the Departments of Education, Justice, and Veterans Affairs; and the Consumer Financial Protection Bureau. The administration has said it wants to publish a final gainful employment rule before Nov. 1 so that it can take effect by next July. 

The administration’s proposal would cut off federal aid to programs that produce graduates with debt loads that exceed 12 percent of their income (or more than 30 percent of their discretionary earnings), as well as to programs with student loan default rates higher than 30 percent.

“I don’t think she’s saying or we’re saying that they should abandon that approach,” Falle said. “If that rule can be produced in a way that would get at these accountability goals, that would be great, but the point here is that you don’t have to wait for that rule or wait for legislation.”

The letter clearly criticized for-profit colleges for having low graduation rates and high student loan default rates. It also praised California’s efforts in recent years to cut off state aid to programs -- mostly at for-profit colleges -- that have high default rates.

In spite of the confusion some of the wording sparked, Debbie Cochrane, who directs research at the Institute for College Access and Success, on Wednesday praised the overall sentiment of Napolitano’s letter.

“The spin has certainly been that she’s calling for alternative approaches [to regulating for-profit colleges], but I think it’s also possible that she’s calling for a more immediate approach,” Cochrane said, adding that “gainful employment has been in the works for years and we still don’t yet have a rule that’s in effect to protect students and taxpayers.”

Cochrane also noted that California’s eligibility standards for colleges to participate in the state need-based aid program, which Napolitano’s letter endorses, are far tougher than the administration’s current gainful employment proposal.