December 13, 2013

Obama Team Must Be Fair, but Tough, on For-Profit Colleges

ftstewart-signingThis morning the U.S. Department of Education convenes what may finally be the last session of its negotiated rulemaking on a proposed “gainful employment” rule, a measure aimed at cutting off federal aid to career college programs that fail to train students to earn a decent living.  The latest draft regulation from the Department would be a step in the right direction as compared with the status quo, but as the New America Foundation’s Ben Miller shows, it’s somewhat weaker than the previous draft, in terms of holding predatory career colleges accountable for programs that leave students with incomes too low to repay their expensive student loan bills.  As someone who communicates almost every day with students who have seen their financial futures ruined by the deceptions of for-profit colleges, I can tell you these men and women — veterans, single parents, and others struggling to pay the bills — very much hope the Department will issue a strong final rule, one that channels federal aid to programs that actually help students build careers.

The version of the gainful employment rule that the Obama Administration issued in 2011 was also useful but too weak; just for example, a program could have had two-thirds of its graduates and dropouts unable to pay down their loans, yet remain eligible to share in the torrent of $33 billion in federal aid that now goes to for-profit colleges. The Administration watered down that rule from previous iterations under intense pressure from for-profit college lobbyists. What did the Administration get for listening to those lobbyists?  Nothing.  The for-profits, through their arrogant trade association, APSCU, hired the most expensive lawyers in Washington — courtesy of your tax dollars, since many APSCU members get close to 90 percent of their revenue from federal aid — and convinced a federal judge to strike down the rule.

Given the imperative of having the next version of the rule immune to another courthouse defeat, the Department is understandably cautious. But nothing in the judge’s opinion or other relevant federal law demands that the new rule be weak or ineffective. The district judge directly affirmed the power of the Department to regulate in this area, implementing a congressional mandate that career programs receiving federal aid lead to gainful employment. Instead, to pass judicial muster the process must be fair, and the Administration must articulate a clear explanation as to why the rule is justified by the facts. The enormous damage to students and taxpayers from predatory for-profit colleges has now been heavily documented by a Senate committee and many others, as have the cynical deceptions and manipulations of many of the industry’s big players. The situation fully warrants a strong rule that drives out bad actors.

If you think the for-profit colleges will be inclined to moderate their bad behavior if the new gainful employment rule is somewhat weakened again, consider the propaganda attack the industry has unleashed this week to coincide with the rulemaking session:

  • APSCU held a Washington DC conference at which its CEO, former congressman Steve Gunderson (R-WI), and two congressmen who receive major financial support from for-profit colleges, John Kline (R-MN) and Rob Andrews (D-NJ), held forth piously on the American workforce and the need to train workers for the future, ignoring that APSCU keeps on its membership roster colleges that have engaged in serious abuses of hundreds of thousands of Americans seeking to advance their place in the workforce. Credible speakers were paid or pressed by wealthy patrons to appear and lend an aura of legitimacy to an event sponsored by numerous companies currently charged with fraud and deception.
  • APSCU planted an op-ed in the Wall Street Journal to coincide with last month’s gainful employment meeting — a smoke and mirrors deceptive attack on the draft rule by private equity man Jeffrey Leeds and former Senator Bob Kerrey, a piece that failed to disclose that Leeds sits on the boards of APSCU and the second-largest for-profit college business, EDMC, in which his firm has an ownership stake. This week Leeds engaged in a followup online debate on the issue with New America’s Ben Miller, a former Department of Education official, and Leeds struck an indignant, wounded tone, blaming people like Miller, an outstanding young policy analyst, for sullying the process with pugnaciousness. Perhaps Leeds is unaware of what actually has unfolded in this process, although I doubt it: Early on in the gainful employment fight, advocates for the for-profits engaged in a slew of dirty tricks, for example using letters from fake people, attacks by surrogates who failed to disclose their financial ties to for-profits, and phony claims that advocates for reform of for-profit colleges (disclosure: including me) are actually the paid henchmen of Wall Street short sellers. (We’re not.)
  • Most recently, this week a group of Democratic members of the House of Representatives have been circulating and signing a letter, which may be released today, telling the Administration that “it makes little sense to enact a major GE [gainful employment] rule, just as Congress begins to consider whether to maintain or change current law in this area during the Higher Education Reauthorization process.” The letter in fact is nothing new — its language closely mirrors statements issued by APSCU, virtually all of its signers have defended the for-profit college industry in the past, including, most dismayingly, the otherwise staunch progressive Alan Grayson (FL), and most have taken campaign cash from industry donors. The letter was spearheaded by Representative Alcee Hastings (FL), as well as Rob Andrews. Each has been a steady recipient of for-profit college money. As Lee Fang reports this morning in The Nation, Hastings has taken at least $54,500 in contributions from the industry since 2009, and Andrews has taken at least $78,547. Hastings‘ 2012 donor base included for-profits University of Phoenix, DeVry, Keiser, Bridgepoint, EDMC, Full Sail University, Corinthian, plus APSCU. He also got campaign cash and had multiple ties to the notorious for-profit FastTrain College, raided by the FBI last year in a criminal fraud investigation. A larger group of Democratic House members are circulating their own letter calling for the gainful employment rulemaking to go forward in order to protect students, and Senate Democrats, led by Tom Harkin (IA) and Dick Durbin (IL) have also been strong advocates for reform of this troubled sector.

The for-profit college barons, believing they are permanently entitled to federal billions regardless of the outcomes for students, are never gonna play nice or accept reasonable accountability measures.  The truckloads of cash they receive every year from taxpayers allows them to hire the most expensive lobbyists, lawyers, and spinmeisters, buy friends on Capitol Hill, and co-opt non-profits and media outlets. They are going to respond only to tough measures.  The Justice Department, Securities and Exchange Commission, Federal Trade Commission, Consumer Financial Protection Bureau, and a bipartisan group of 32 state attorneys general have started to get tough, issuing rules and pursuing enforcement actions. President Obama himself has issued tough statements, warning the industry to end their deceptions.  But the Department of Education’s rules are an essential piece of the puzzle if the for-profit college industry is going to be straightened out, taxpayers are going to be protected, and students are going to have a fair shot at building careers, instead of being scammed. The Administration’s new rule must be fair, but tough.

UPDATE [2:20 PM] The letter from Democrats supporting a gainful employment rule, organized by Representatives Elijah Cummings and Mark Takano was released a few minutes ago. No sign yet of the anti-rule letter organization by the industry’s paid-for friends.

Also, Representative Cummings came to the negotiated rulemaking session at the Department of Education today and spoke with negotiators during a break.

I will add that today’s rulemaking session, still in progress, is bringing out the deep flaws in the latest draft regulation. Negotiators representing students, veterans, and others have expressed sharp disagreement and disappointment with the changes in the latest draft. You can read more in Ben Miller’s blog account or see my tweets. It remains to be seen what the Department of Education will do with these comments when it issues a proposed rule and then, after public comments, a final rule. No doubt the for-profits will keep lobbying hard to destroy the rule, and then likely will once again seek to overturn it in Congress and the courts.

This article also appears on Huffington Post.