POLITICO. September 9, 2013. As the Education Department gathers a panel to rewrite controversial for-profit college regulations, the motto might as well be “the more things change, the more they stay the same.”
The quest to regulate those colleges defined most of President Barack Obama’s first term and continues into his second — although the last attempt at a crackdown in 2011 ended with a rule later thrown out in court. The department remains determined to hold for-profits accountable for their graduates’ debt burdens and ability to repay them. And the colleges are equally committed to fighting a process they say unfairly singled them out.
Unlike the last time around, though, the administration has to contend with congressional Republicans who oppose any attempt to regulate the for-profit sector. The Education Department is aware that any new rule is likely to face a legal challenge. But thanks to its earlier regulatory attempts, the department also now commands deeper and more detailed data than ever on for-profit graduates’ debt and job prospects — disclosures that some say have already forced changes at for-profit colleges.
The regulatory fireworks that begin Monday and continue into October will play out against a backdrop of Obama’s newly announced, ambitious plan for higher education. That proposal would apply some of the concepts tested on for-profits to the rest of higher education, such as trying to make sure colleges provide good value to students. And the timing has made some question why the administration is spending political capital on a tough fight with well-financed, well-connected opponents.
In other words: If the last round of writing and later litigating regulations over for-profit students’ debt and job prospects was contentious, just wait for Round Two.
The last attempt was “the most ugly thing I’ve ever experienced,” said David Bergeron, a former Education Department official who managed the negotiations.
The Obama administration picked its fight with for-profit colleges early. By fall 2009, the sector’s enrollment was exploding, accompanied by stories of students who graduated deeply in debt only to find their degrees didn’t advance their career prospects.
The result was a package of new regulations from the administration. One rule held for-profit colleges, and vocational programs at all colleges, responsible for student debt levels and repayment rates after graduation. Programs with graduates whose debt took too big a bite of their income, or where fewer than 35 percent of graduates were repaying their loans, would eventually lose access to the federal financial aid programs that were their lifeblood.
The proposal was softened before it was finalized, angering many advocates who’d pushed for tougher measures. But for-profit colleges challenged it in court and in Congress.
In March, a federal judge ruled that one measure — which required at least 35 percent of students taking out loans to attend for-profits to be paying them back — was too arbitrary. The decision also suggested that the department overreached on collecting for-profit graduates’ earnings data. Federal law prohibits establishing a national database to track graduates through higher education and into the workforce.
The shadow of the court setback hangs over this new effort. The Education Department has appointed a panel of stakeholders who include vocal opponents of for-profit colleges. It’s also stacked with lawyers.
“We want this thing to work,” said Rory O’Sullivan, national policy director for Young Invincibles and a member of the new panel. “We’ll be well prepared to write a rule that obviously meets the court’s test and does something good.”
But opponents of the department’s efforts have also organized. For-profit colleges have donated millions to lawmakers from both parties. And legislation to block the regulations has gained some traction, at least in the House, where a bill to repeal the 2011 regulation and stop the department from writing a new version got some bipartisan support in July.
“The political situation has clearly changed, and one of the things we’ve seen over and over again is a division within the Democrats on this question,” said Andrew Kelly, director of the Center for Higher Education Reform at the American Enterprise Institute.
But in some ways, the last version of the regulation — the one thrown out in court — might have succeeded even in failure. The Education Department now has far more data on the outcomes of students at for-profit colleges, Bergeron said.
In 2009, regulators had to “intuit … that there were a set of programs that were unacceptably performing, but we didn’t have definitive proof,” he said. “And now we do. I think that has to change the conversation.”
For-profit colleges argue that they don’t get enough credit for cleaning up their act themselves. Many have tightened admissions standards for students. Kaplan introduced a 30-day trial period, where students could enroll in a program without having to pay. And as the economy improved, enrollment by adult and part-time learners, the for-profits’ main constituency, dropped precipitously.
“Open access is really not the name of the game anymore,” said Steve Gunderson, president of the Association of Private Sector Colleges and Universities. “We’re responding to all of those changes.”
Some, including Bergeron, argue that this change is a result of the department’s regulations, not a reason to lighten pressure on the sector. The colleges say they took corrective steps on their own in response to market forces.
“If somebody would just time out and try to be engaged in constructive conversations, you would see the incredible change in our sector,” Gunderson said. “Everybody said, ‘Get rid of the programs that are not performing, the schools that are not performing.’ They’re doing that.”
While for-profits are quick to say they’re dismayed about the department’s approach to future regulation, the schools also see a bright future regardless of the regulations. The “skills gap” — the distance between what Americans are educated to do and what jobs are available for them — is a growing issue, Gunderson said, and a winning issue for them. Demographic changes are also expanding the for-profits’ audience.
And some colleges privately say that their top concern now isn’t regulation. Instead, they’re moving to position themselves on the front lines of innovation. Kaplan is diversifying into education technology. Capella University recently won approval to use federal financial aid for its “FlexPath” degree, which is awarded based on students proving what they’ve learned rather than on time spent in the classroom.
While some in Washington might have déjà vu, the landscape for for-profits and their regulators has shifted, observers said.
“I think their world has changed,” Kelly said. “I think the world for all of higher education has changed.”