June 8, 2017

For-Profit College Barons in Vegas: Have They Hit the Jackpot?

For-Profit College Barons in Vegas: Have They Hit the Jackpot?

While everyone else is glued to Comey TV, the discredited for-profit college trade association CECU is meeting this week in Las Vegas. Last year’s CECU convention, held in Orlando, found the once-buoyant for-profit college owners, who have been pulling in billions in taxpayer dollars, in a sadder mood, as the weight of revelations about predatory practices in the industry had finally produced law enforcement investigations, tougher Department of Education regulations, and plummeting enrollments and revenues. CECU itself was depleted of members, staff, and budget after its strategy of aggressively fighting against basic accountability measures had failed miserably.

Then, a miracle happened: The President of Trump University was elected President of the United States. Tied to Trump by mutual friends like Newt Gingrich and Betsy Devos, and by a love of luring anxious people into predatory deals, the for-profit colleges may have gotten a remarkable reprieve.

With the Trump/Devos Department of Education staffing up with for-profit college executives, and giving numerous indications that it will trash carefully-crafted Obama rules to curb industry deceptions and abuses, and weaken efforts to give debt relief to defrauded students, the worst of these taxpayer-funded barons may be hoping for a new era of unchecked bad behavior.

But they know they still have challenges: the horrible record of many for-profit schools, publicly exposed by government and media investigations; the continuing probes and determination of numerous state attorneys general; and the vigilance of champions in Congress like Senator Dick Durbin (D-IL), Senator Elizabeth Warren (D-MA), and Representative Maxine Waters (D-CA), as well as student, veterans, civil rights, and other advocacy groups.

There are decent programs, and many good teachers, in this industry, but too often for-profit college owners have cynically separated students and taxpayers from their money, with deceptive recruiting, sky-high tuition, and underfunded teaching, resulting in dismal job outcomes and enormous debt that ruins students’ financial futures.

So what are the for-profit colleges owners and executives talking about in Vegas this week, after their annual golf tournament? Here are some hints from the conference program:

1. The conference keynote speaker is former Representative John Kline (R-MN), who retired from Congress last year after serving as chairman of the House Education and the Workforce Committee, and as one of the for-profit college industry’s most obedient cheerleaders, and one of the biggest recipients of its campaign contributions. Not as glittery a keynote as the industry used to pay for in its heyday, when their schools were less publicly toxic, and Colin Powell, Bill Clinton, George Bush, and others graced their convention podium. But Kline is someone to whom the industry owes a big thank you, and a decent sized check, for shielding its abuses for years.

2. There was a Tuesday conference session called “Don’t Leave Your CDR to Chance! Tip for Taking Control of Your Cohort Default Rate,” featuring Lynda McNair of a company called Student Connections. By law, high rates of former students defaulting on their federal loans can get for-profit colleges kicked out of the lucrative federal student aid program, the main source of income for most for-profits.  There are basically two ways for schools to reduce these rates: (1) offer students high-quality, affordable programs that help them get good jobs; or (2) pay boiler room operations that offer gift cards and misleading pitches to convince students on the brink of default to put their loans in meaningless “forbearance” status that does nothing to help the students but improves the school’s default score. Which strategy does this CECU session emphasize?  I don’t know, but Student Connections is a new division of USA Funds (now called Strada Education), which used to boast that it provided such forbearance advising or debt “aversion.”

3. Another Tuesday session was “Online Reviews – How Schools Are Boosting Admissions and Marketing Results with Them.” In this session, Chris Linford and Cole Ashby of the Utah-based lead generation company Oozle Media advised college executives on “how to change your school’s reputation online, and how to do it the right way.” One topic: “We’ll discuss how to turn negative reviews into actually helping you get more leads.” Leads meaning students.

4. Yet another Tuesday session was set to “explore the Borrower Defense to Repayment regulations” – the new Obama rules to provide federal loan forgiveness to defrauded students and increase financial integrity obligations of schools — “and strategies to mitigate the impact to member institutions.” One strategy might be to convince the Trump administration to delay or block the rule, which it appears to be on the verge of doing.  One of the speakers at this panel, Dennis Cariello, represented the for-profit college industry in the Department of Education negotiated rulemaking sessions that produced the new regulation.

A Wednesday session on the same topic, presented by lawyer Aaron Lacey of Thompson Coburn LLP, was to “review any pending challenges to the rule (e.g., congressional action, suspension order, rulemaking, lawsuits).” I don’t know if Lacey mentioned to attendees that congressional Republicans apparently did not want to use their power to overturn this new Obama rule, as they did this year with a number of other Obama regulations, perhaps because of concern that the for-profit college industry has become a noxious political liability. Instead, the industry and its GOP supporters seem to be hoping they can gut the Obama rules more quietly through a new Education Department rulemaking process.

5. A Wednesday session addressed the issue of the Department of Education’s incentive compensation rules, which are supposed to prevent colleges from paying sales commissions to recruiters, in order to curb deceptive and coercive pitches. The rules were loosened under President Bush and then, eventually, tightened under President Obama, whose Justice Department, along with state attorneys general, secured a $200 million settlement from for-profit giant EDMC for alleged violations of the rule. Among topics to be discussed, by Blain Butner, a lawyer at for-profits friendly Cooley LLP, are “how this important area of institutional operations could change further under the Trump Administration.” Wink.

Similarly, there’s a session Thursday featuring lawyers from firms — Gibson Dunn, Duane Morris, and Ritzert Leyton — with deep experience in advising and representing poor-performing for-profit schools. They plan to address “The New Regulatory and Legal Enforcement Regime: The First Six Months Of The Trump Administration,” covering topics including the borrower defense rule and another Obama rule that the industry wants to kill: the gainful employment regulation, aimed at cutting off federal aid to programs that consistently leave students with debts they cannot afford to repay.  The session “may also discuss the background and potential trajectory of ED-appointed officials, as appropriate.” In other words, guess which of our pals are getting big jobs with the Trump Education Department! And, “How do we anticipate the change in administrations affecting
litigation against the sector, including via judicial appointments?” And the semi-coherent “How state attorneys general have or have not modified (or may or may not modify) their enforcement practices from the prior administration’s hostility of the sector will we see increased activity at the state level, or less activity?”

6. Finally, there’s a session by Elizabeth Herron of Collegiate Admission and Retention Solutions, called “Preventing Placement Rate Misrepresentation.” Allegations of deceiving students and regulators about job placement rates have recently put a number of for-profit colleges in hot water, notably huge for-profit DeVry, which agreed in December to pay $100 million to settle a case brought by the Federal Trade Commission. At least this session is described in terms of preventing bad behavior, whereas often these meetings are described more in terms of not getting caught.

This article also appears on HuffPost