New Bill Would Create Warning List of Shady For-Profit Colleges

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A trio of Democratic lawmakers want to arm prospective students with a warning list of for-profit colleges that engage in illegal activities.

Senators Dick Durbin (D-Ill.) and Tom Harkin (D-Iowa) introduced a bill last week that would create a committee specifically to handle oversight of for-profit colleges. Rep. Elijah Cummings (D-Md.) will introduce a similar bill in the House.

For-profits are a key component of any conversation around the nation’s soaring student debt problem and the topic of college affordability. The schools rely heavily on federal financial aid to run, but, as an industry, have lower graduation and job placement rates than other, nonprofit universities. Critics like Durbin and Harkin say the schools need to be held more accountable.

For-profit colleges rely disproportionately heavily on federal aid…

Right now, federal regulations say that up to 90 percent of the schools’ funding can come from student loans, and students at for-profits have seen the largest increases in student debt in recent years. The schools receive about $25 billion in federal money. While they enroll about 10 percent of college students, they get 20 percent of federal student aid and account for nearly half of all student loan defaults. In 2001, 62 percent of freshman at such schools took out student loans. By the late 2000s, that number was 86 percent.

“For many years, for-profit schools were allowed to operate relatively freely and often one step ahead of regulators,” Durbin said, according to a statement. “I’m hopeful that with the investigations I already mentioned and the many more that are occurring, means we’re starting to turn the corner – to better hold these schools accountable to taxpayers who often subsidizes up to 90 percent of their operations and to students who ultimately are the victims.”

Durbin isn’t alone in his criticism. As The Chronicle of Higher Education pointed out, more than 20 state attorneys general are investigating for-profit colleges for things like pushing students into private loans with high interest rates they are likely to default on to pay for their education. A handful of for-profits are under investigation by federal agencies.

…without many consequences

Why would schools push students into loans they know the students won’t be able to afford? Because right now, they don’t face consequences. Right now, their access to federal aid does not hinge on things like graduation rates or job-placement rates. The loan money they pull in hinges on the students they admit and whether they qualify for loan money. Essentially, students are currently left to decide whether the school they’re enrolling in is a sound investment. But they’re not given many tools to make that decision.

The Obama administration wants to increase regulation…

The Obama administration is working to develop a new college ratings system and would like to put some of those restrictions in place with a gainful employment rule. But for-profits say those are unfair and that they offer education to students who might not be able to attend traditional, nonprofit institutions.

“Instead of offering solutions for all of higher education, and addressing the needs of all students, Senators Durbin and Harkin continue their effort to undermine the value of higher education earned by millions of hard working Americans,” Noah Black, a spokesman for the Association of Private Sector Colleges and Universities, wrote in an email.

Ryan Rauzon, a University of Phoenix spokesman, cautioned in a phone interview against lumping all for-profits together and said transparency is key, but that he hopes “it will apply to all institutions.” He criticized the government’s method for tracking completion rates, and said it neglects to factor in students who come with prior credits.

This new bill would create a new committee made up of representatives from different federal agencies. The committee’s job would be to hold a series of regular meetings with state attorneys general to coordinate state and federal oversight of for-profit colleges, to publish a report of student complaints and data on for-profits, such as student graduation rates, and to publish a warning list of schools that have violated rules.

From a student’s perspective, there’s very little not to like. The information the bill would generate if it became law would give students the information they’d need to avoid enrolling in schools engaging in sketchy practices.

But in reality, the bill’s passage is anything but guaranteed.

…but faces pushback

Why?

Lobbying. For-profits have money and lots of it. They spend millions of dollars each year lobbying both Republicans and Democrats to support for-profit companies. And that’s not likely to change anytime soon.

As David Halperin, founder and former director of left-leaning Campus Progress, wrote recently for The Nation:

Eventually, the predatory for-profit colleges may be forced to curb their egregious behavior as more of it comes to light. Enrollments and share prices have plummeted in recent years as the public has gotten wise. But their aggressive advertising and recruiting continues, and thousands more students will sign up this week for programs that will wreck their futures.

As a newly elected president, Barack Obama pledged to take on the special interests. He has also launched initiatives to ensure that more Americans can successfully train, at affordable prices, for real careers. And he has specifically promised to protect veterans and other students from predatory practices by career colleges. All of these goals will be undermined, and additional hundreds of billions in taxpayer dollars will be wasted, and the lives of countless more students will be ruined, unless his administration issues a strong gainful employment rule.

But whether the president will act decisively remains to be seen.

The same goes for Congress. The bill does not have any public Republican backing yet and it’s not guaranteed to be a winner among Democrats, either, particularly in the run-up to tough midterm elections. In the meantime, many students are left struggling to navigate a confusing and convoluted higher education system that often rewards the college or company that produces the shiniest marketing packet, regardless of how well they prepare students for the workforce.

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