For-profit colleges work to head off tougher regulation

The Hechinger ReportNovember 7, 2010 

Fast-growing for-profit colleges, under fire for saddling students with unmanageable debt, are rolling out new policies aimed at raising graduation rates while also hoping a Republican-controlled House will block unfavorable legislation.

"We have a great opportunity to educate (the newly elected representatives) on the value our sector plays in the higher education system and the economy," said Harris Miller, president of the 1,800-member Association of Private Sector Colleges and Universities (APSCU). Miller is hoping President Barack Obama's push to get more Americans to complete college could mean education will become an area of bipartisan agreement in a divided Congress.

The Republicans' pledge to cut federal spending also could mean less money for student loans and grants, which could hurt for-profit colleges that are heavily dependent on federal aid for their professional, technical and vocational training programs.

Days before the election, the Obama administration announced regulations banning bonuses for recruiters and requiring the disclosure of graduation rates at for-profit schools. But it delayed a decision on regulating "gainful employment" that potentially could deny loans or limit program enrollment if students end up with high debt and low wages.

U.S. Education Secretary Arne Duncan has attacked what he calls "bad apples" in the for-profit sector, while acknowledging that for-profit institutions are key to achieving the president's goal of creating a highly educated workforce and becoming the world leader in college graduates by 2020. Representatives of for-profits schools — whose stocks have been battered in recent months — argued in hearings at the U.S. Department of Education last week that enforcing a gainful employment rule would unfairly limit choices for students.

"The Department's proposal will deny access by shuttering programs and putting millions of students out of higher education," the APSCU said in a statement.

Soaring growth at for-profit schools — from 673,000 students in 2000 to 1.8 million in 2008 — has put the sector in the spotlight. In Senate hearings this summer, for-profit colleges were accused of soaking up a disproportionate share of federal loan money, recruiting students with inflated promises, fudging financial-aid applications and leaving graduates with crushing debt and bleak job prospects. Eleven percent of all higher-education students are enrolled in for-profits, but they receive 26 percent of federal student loans and account for 43 percent of defaulters.

The schools have gained popularity at a time when the recession has driven up demand, leaving community colleges and state universities reeling from budget cuts and struggling to make room for students. For-profits enroll and graduate high percentages of low-income, minority, older and first-generation college students.

Some for-profit schools are responding to critics and to the new regulations by pledging to raise graduation and loan-repayment rates. Kaplan Higher Education, which enrolls 112,000 students, announced it would let prospective students attend the first five weeks of class without charge.

The University of Phoenix, the country's largest for-profit school, recently introduced a mandatory three-week orientation to screen out unprepared students before they borrow. In the free program, prospective students must complete assignments on time using the university's writing center, library and e-book collection and get feedback from instructors.

"They're very grateful to get a feel for what it's going to be like," said University of Phoenix President William Pepicello.

Students also get access to a "responsible borrowing calculator" to estimate their future debts. About 20 percent in pilot orientations decided not to enroll, Pepicello said.

University of Phoenix serves 476,000 students both online and at more than 200 locations across the country. Last month, the Apollo Group, the University of Phoenix's parent company, warned investors new enrollments could fall by 40 percent.

Overall, the stocks of for-profits are down by 35 percent in 2010, with several investigations still under way. On Nov. 4, the U.S. Education Department announced it would review financial-aid practices at the University of Phoenix. Florida's attorney general also is investigating the University of Phoenix and seven other for-profit schools for alleged financial-aid and recruiting misrepresentations.

Sen. Tom Harkin (D-Iowa), who has held three hearings critical of for-profit schools, has said he intends to introduce legislation that will crack down on abuses.

In response, the for-profit industry has launched a multimillion-dollar public-relations campaign, stocked with lobbyists from both political parties, including Democrats such as Lanny Davis, an aide to Bill Clinton, Richard Gephardt, the former House Democratic leader, and Anita Dunn, former communications director in the Obama White House. The industry also hired Margaret Spelling, former education secretary under President George W. Bush. The campaign resulted in a record 90,000 comments on the proposed new regulation.

Rep. John Boehner (R-Ohio), expected to be the next Speaker of the House, has advocated treating all higher-education sectors — for-profit, nonprofit and public — the same when setting loan rules. Rep. John Kline of Minnesota, the likely Republican chair of the House Education and Labor Committee, opposes tying federal loans to student default-rates or debt-loads.

Higher education watchdogs say they are hoping the momentum to ease student debt-loads remains strong. "Curbing fraud and abuse has always been a bipartisan issue," said Pauline Abernathy, vice president of The Institute for College Access and Success, a California-based nonprofit. "We hope that these newly elected members who ran on curbing big government spending and abuse will take a fresh look, no matter what their party."

(Liz Willen of The Hechinger Report also contributed. The Hechinger Report is a nonprofit, nonpartisan education-news outlet affiliated with the Hechinger Institute on Education and the Media, based at Teachers College, Columbia University.)


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