January 18, 2022

As Key Meeting Starts, Biden Team Must Keep Promise to Curb Predatory Colleges


As Key Meeting Starts, Biden Team Must Keep Promise to Curb Predatory Colleges

Today, the U.S. Department of Education begins a new round of negotiation sessions with a group of higher education stakeholders as the start of a process of creating new rules to hold colleges accountable for predatory abuses. The Department last week released a series of papers aimed at starting debate on issues related to student debt and college performance measures. After three weeks of talk and negotiations spread out over a few months — a process required under the peculiar rules of the education department — the Department is expected to craft a series of regulations, mostly to replace toothless non-regulations issued under Donald Trump and Betsy DeVos, which in turn replaced earlier regulations promulgated during the Obama administration. I signed up to provide comments at the end of today’s session, and here’s about what I plan to say:

I want to offer four points.

First, an accountability rule-making should proceed from the reality that a decade after the shocking revelations of the Senate HELP committee investigation, and more than five years after the collapses of predatory Corinthian Colleges and ITT Tech, there remain many schools, like the Perdoceo and IEC schools, that use roughly the same business model as those shut-down institutions – deceptive ads, bait and switch websites, coercive recruiting, financial aid abuses, high prices, low spending on instruction, low quality, falsifying job placement rates, concealing conduct from regulators. I’ve spoken with scores of industry whistleblowers who have evidence that these practices continue.

When one of their brands or companies becomes associated with misconduct, they simply change the name. And now they’ve taken advantage of people’s fears in the pandemic. As you meet here more people are being misled into enrolling in programs that will destroy their financial futures and shatter their dreams. These are veterans, single moms, immigrants, and others – people who just wanted a chance to improve their lives through education.

President Biden made a promise in 2020, on his campaign website: For-profit colleges should have to prove their value before getting federal aid. That’s the right approach, and THAT concept should guide these proceedings. Students are tired of being scammed. Taxpayers want an end to the waste, fraud, and abuse.

Second, seeking to block a new gainful employment rule, the for-profit college industry again pushes its old mantra: treat all schools the same. At one level, it’s hard to know why they are saying that when the industry is now actively blurring the lines between for-profit and nonprofit through false conversions and online program manager companies, moving many of their operations to the nonprofit side of the ledger. But they know that pushing to subject all programs to GE could mobilize the powerful traditional higher ed lobby against the rule and paralyze the process.

For better or worse, the source of authority for the GE rule is the GE provision of the statute, which covers for-profits and also career education programs in other sectors, so that’s as far as the GE rule can go. Also, evidence shows job placement, debt, and defaults are worse, and predatory abuses occur mostly, in programs where a profit-driven entity calls the shots. Nonprofits theoretically at least are constrained by other rules requiring them to act in the interests of students, not owners.

Third, the for-profit college industry uses misinformation, and financial contributions and other appeals to self-interest, trying to get other institutions on their side. But traditional higher ed, and, especially, effective, ethical for-profits should support rules, like GE, that identify and penalize the worst-of-the-worst schools. Otherwise they must compete for students with unethical competitors. Otherwise, they harm the reputations of their institutions and higher ed generally. And for the for-profit college industry, blocking rules that separate good schools from bad ones invites more blunt instruments – like the Pell differential in Build Back Better, and Rep. Jayapal’s bill to eliminate federal aid for for-profits entirely.

Fourth, when these negotiating sessions end, and the Department crafts new regulations, it would be a terrible mistake for the Department to negotiate with itself and issue weak rules. The previous secretary, Mrs. DeVos, didn’t compromise – she completely gutted the borrower defense rule and simply erased GE. In particular, don’t be afraid of the courts, and don’t make the error of believing that a weaker rule is more likely to avoid or survive a legal challenge. The second, 2014, GE rule was somewhat stronger than the first one, yet it was the one the courts upheld. And remember what happened in 2020 when a federal judge actually heard from students, testifying live, about their experiences with predatory schools. He threw out the borrower defense proposed settlement reached by DeVos, because it didn’t help borrowers enough.

The negotiators here, and the Department, have the power, and the duty, to advance stronger accountability rules. Please do that.