November 22, 2021

Financial Aid Administrator Group Questions Policies Aimed At Curbing Predatory Colleges

Financial Aid Administrator Group Questions Policies Aimed At Curbing Predatory Colleges

In recent weeks, the National Association of Student Financial Aid Administrators (NASFAA) — whose members are financial aid professionals from colleges and universities across the country — has lent its prestige to supporting policy positions similar to views being pushed by the for-profit college industry, a higher education sector where many schools offer a toxic mix of deceptive recruiting, high prices, financial aid abuses, low-quality instruction, and poor outcomes for students. 

On November 3, NASFAA’s president and CEO, Justin Draeger, sent a letter to the U.S. Department of Education appearing to question the value of a new provision of law, passed earlier this year by Congress with bipartisan support, that closed a critical loophole in the federal 90-10 law.

The long-standing 90-10 rule has provided that for-profit colleges may receive no more than 90 percent of their revenue from federal student grants and loans. It’s a measure aimed at ensuring that for-profit schools offer sufficient quality that they can attract some upfront money — at least ten percent — from sources like employers, states, scholarship funds, and students themselves, rather than just federal taxpayers. But U.S. government aid from sources other the Department of Education, most importantly education grants from the Defense Department and VA, has not been counted on the federal side of the ledger — a state of affairs that has motivated for-profit schools, many of whom struggle to meet the 90-10 benchmark, to target veterans and military service members for especially heavy and often deceptive recruiting.

The bipartisan measure President Biden signed this year — strongly supported by a wide range of veterans organizations — aims to close this loophole, and make VA and DoD money count as federal dollars. But a last-minute compromise obtained by Senate Republicans and for-profit colleges delayed implementation of the law and required a rule-making process at the education department before its provisions are applied.

Draeger’s November 3 letter echoed for-profit college lobbyists who claim the 90-10 reform law is counterproductive; he warns the law could increase college tuition charges and lead to disruptive and expensive school closures. While Draeger responsibly asks the Department to consider new measures to help students when schools close, his warning that “[p]recipitous college closures harm students and taxpayers” in the context of 90-10 reform suggests it’s better for the government to prop up poor-performing school chains than to implement reforms, like the new, modified 90-10 law, that can drive out such schools. 

Worse, Draeger, on behalf of NASFAA, urges the Department of Education to “consider carefully” in its rule-making process what sources of funding should be considered on the 90 percent federal side of the equation, because putting more funding sources on that side of the ledger “has the potential to push an institution out of compliance.” He seems to be saying: Are there ways that the new education department regulations can weaken the law to make it easier for some for-profit colleges to stay in business?

Draeger’s policy suggestions on 90-10 appear to go beyond concern about sudden “precipitous” closure of schools — which lock out students and put their educational futures in doubt, and leave taxpayers to pass for the mess — into expressing doubt about closing these schools generally. 

By contrast, many advocates for students and veterans have urged that the Department implement the 90-10 reform law without any new loopholes, carve-outs, or exemptions that could undermine the purpose of the measure.

A few days before he sent his 90-10 letter, Draeger issued a statement, later quoted in the New York Times, casting doubt on a provision of the Build Back Better bill that would increase maximum federal Pell grants, currently set at $6,495, by $550, but would exclude for-profit colleges from the $550 increase. Congressional Democrats included this provision in order to target scarce education resources to the most valuable uses and thereby help students. Research shows that if the government increases Pell grants at for-profit colleges, owners just raise their already-high tuition prices, leaving them richer and students no better off. 

Draeger offered a different view. He said that NASFAA was “concerned to see these funds parceled out by institutional sector, which will add new complexity to a financial aid system on the verge of much-needed simplification.” He added, “The best place to address concerns about institutional quality at some proprietary institutions should be in the institutional eligibility and accountability provisions in the Higher Education Act, not by making programmatic changes that add complexities to students.” In other words, he opposed Congress denying the Pell grant increase to for-profit colleges.

Why would the organization that is supposed to represent financial administrators at all colleges, including public colleges, community colleges, and non-profit schools, repeatedly reinforce the arguments of for-profit college owners, who generally seem to put their concerns for revenue over the interests of students and taxpayers?

One would think conscientious financial aid officers want to protect students from deceptive and predatory practices and poor quality schools. Indeed, starting in 2011, when I met Rashidah Smallwood, a financial aid administrator at for-profit ITT Tech who was forced out of her job for refusing directions from supervisors to falsify student financial aid applications, I have spoken with dozens of financial aid staffers at for-profit colleges who are troubled by abuses at their own schools.

But NASFAA’s support for higher education special interest institutions goes way back.

In 2007, NASFAA resolved an investigation by New York’s attorney general by agreeing not to let student loan companies use the annual NASFAA conference “as a promotional vehicle to recruit financial aid officers – a practice that had become routine in recent years,” as a press release from the AG’s office described the settlement. Reporting by Stephen Burd and his colleagues at the organization New America around that time highlighted that NASFAA regularly shared policy views with the student loan industry and that NASFAA affiliates shared leadership with and received extensive financial support from the industry.

Regular participants in negotiations over Department of Education regulations say that NASFAA and some of its members have frequently supported the position of the student loan companies in these rule-making meetings.

To be fair, a range of interests in the education establishment — traditional colleges, accreditors, and others — often support the same positions as do the lenders and for-profit colleges in these meetings, united in the principle that government should get off their backs, even though government is effectively providing much of the funding for higher education. 

Another veteran higher education observer said that after the group’s controversies 15 years ago, “under Justin, NASFAA has tried to be kinder and gentler than it used to be at least in appearances. But they always go where the money is.” 

Justin Draeger, who joined NASFAA in 2006 and has been CEO since 2010, was himself earlier in his career a financial aid director at the Douglas J. Aveda Institute, a chain of for-profit cosmetology schools. After that, he worked at the Michigan Guaranty Agency, a state student loan operation.

A long-time higher education association official told me, “The broad mainstream membership of NASFAA has the right policy instincts. They work with and care about low-income people.” But he said it often feels like the NASFAA leadership has “representation of special interests in its DNA.” He said NASFAA has long “taken its membership and their dues for granted and regularly aligned itself with special interests, like lenders and for-profit schools.” This expert said this was so even though such special interests’ financial contributions to NASFAA were actually “meager.”

“How is it,” this expert asked, “that you advance the views of a minority of bad schools over the overall interests of the majority of your members that are legitimate institutions serving students?” He charged that over decades NASFAA has had a “complacent” board of directors that at times “delegates its governance prerogatives to the staff, and a membership that is too busy to notice what is being done in Washington with its dues and in its name.”

Another Washington higher education expert said that NASFAA can take pro-student positions “in the thin part of the Venn Diagram where student and institutional interests overlap,” but otherwise, especially where they identify any “regulatory burden,” NASFAA’s positions align with other profit-minded and institutional interests.

None of my sources wanted to be quoted by name criticizing Draeger and NASFAA, whose cooperation they continue to seek.

A NASFAA spokesperson, responding to my request to speak with her or Draeger, offered to review specific written questions while determining if Draeger was available. I sent some detailed questions and received this email response back from Draeger:

From the sound of your questions, it seems like your blog post is already written. Our letters and statements — all of which are distributed to 26,000 financial aid administrators and other subscribers through our daily newsletter — are quite transparent and clear. Raising legitimate policy implementation questions, which is the nexus of where financial aid administrators work every day, is well within our expertise.

For example, there is no statutory definition of “federal education funding,” so our Nov. 3 comment asks the Department of Education to establish a clear regulatory definition that applies in this context, specifically surrounding co-mingled federal and other funding sources. And yes, we are concerned about federal action that would suddenly disrupt the educations of thousands of students without a transition plan. We have first-hand experience supporting students through a transition like this, as NASFAA previously partnered with Beyond12 and Lumina to provide hands-on help to displaced students from Corinthian, ITT, and other for-profit closures. This isn’t an argument to not hold for-profits accountable, it’s a call to think about what happens next.

As our statements make clear, we have not opposed greater accountability for for-profits, or higher education at-large for that matter, but it’s imperative that we consider both the short- and long-term impacts of those policy decisions and have a plan on how to help students transition. Others may have a different take, and we’re very open to hearing those perspectives, but I trust that you’ll not intentionally and/or unethically misconstrue NASFAA’s positions.