Education Secretary Arne Duncan, the oft-criticized former head of the Chicago Public School System, has a new nemesis. This time, it’s not teachers unions lambasting the Education secretary for giving them the cold shoulder. Nor is it a mutant cohort of politically diverse education advocates howling about Race to the Top’s alleged politicization.
Duncan’s new nemesis is a coalition of Florida congressional representatives. Backed by an army of lobbyists and paid for with campaign contributions, Florida’s congressional delegation is fighting the secretary’s plan to regulate for-profit colleges.
The regulations, which could go into effect as soon as July 2011, are a response to increasingly bad news from the for-profit industry. The default rate on federal loans taken out by students at for-profit colleges is now twice the combined default rate for private and public non-profit colleges and universities.
A far-reaching investigation conducted by the Government Accountability Office (GAO) revealed one culprit behind the disastrous numbers: “Aggressive” and “dishonest” tactics used by recruiters at for-profit colleges, such as the University of Phoenix Online and Kaplan Higher Education. The GAO investigation found that recruiters encourage low-income and non-traditional applicants to borrow tens of thousands in federally subsidized loans in order to pay their tuition, while misleading them about the total costs of the programs, as well as job placement rates. (In reality, the former is often higher than anticipated; the latter is almost always lower).
With the support of the White House and a handful of Senate Democrats, the Education Department proposed new regulations that would require for-profit institutions to meet certain standards in order to remain eligible for federal student loans.
Many Florida politicians, however, say they are reticent to sign off on any new rules that would prohibit schools from accepting federal financial aid. Their argument is that Florida is run — from the kitchen to the IT office — by graduates of for-profit schools.
On Aug. 31, Florida Reps. Ander Crenshaw, Alan Grayson, John Mica, Bill Posey, Jenny Browne-Waite, Jeff Miller and Thomas Rooney submitted a public comment objecting to the proposed regulations.
“We share the department’s goal of protecting the return on investment of higher education for the student and the taxpayer,” reads the letter. “However, we do not believe that this rule is the best possible solution,” because the “proposed rule would dramatically limit” the number of available programs for students.
“In Florida, more than 300,000 students attended proprietary colleges and universities in 2009, an increase of 63 percent over 2004, according to the Commission for Independent Education,” the letter goes on to say. “These colleges and universities provide a unique educational option for students who are not well-served by traditional higher education. Proprietary colleges and universities offer customization and flexibility to students who are single parents, have a lower income, work at a full-time job while pursuing an education, or are otherwise at-risk for successful completion. The department’s proposed rule will single out these students, despite the fact that degreed graduates of these institutions have highly marketable skills that enable them to improve their lives.”
The letter asks the Ed. Dept. to “consider delaying further consideration of the proposed rule” until the GAO weighs in on the for-profit sector writ large.
While many for-profit colleges have promised to voluntarily reform their recruiting divisions, the Education Department plans to move ahead with the regulations, despite concerns from Florida politicians.
NEXT: Why are Florida Democrats opposed to regulating predatory lending?
“In general, we think for-profit schools will help play an important rule in meeting the president’s goal in making the U.S. No. 1 in college graduates,” said Education Department spokesman Justin Hamilton. “But far too many for-profit schools are saddling students with debt they can’t afford in exchange for certificates and degrees they can’t use.”
Independent analysts have said much the same thing.
“The basic issue here is there a number of training programs get people ready for professions that are low paying, but also necessary,” said Ben Miller, a policy analyst at Education Sector. “The cost for many of these programs is just too high. And that’s a problem that would be reflected not just in the gainful employment issue but in the high cohort default rates as well. If you’re training people to go into a job that they can’t even earn enough to pay for that training, then you’ve done them a disservice. That’s especially sad because those people have done everything right — they worked hard, sacrificed time, and graduated.”
The Education Department has made a point over the last two months of reminding taxpayers that many for-profit colleges derive as much as 90 percent of their profit from federal subsidies. The department also points out that the regulations wouldn’t unfairly target low-income or minority students, contrary to claims by the opponents of the new rules. “Our proposed regulations don’t affect whether or not students can get money to go to school,” Hamilton said. “They affect whether the worst programs can continue to defraud students and taxpayers.”
In addition to the aforementioned representatives, Florida Democratic Reps. Alcee Hastings and Debbie Wasserman Schultz have also written Duncan’s office disapproving of the new “gainful employment” regulations. Both also sit on the House’s education committee. According to sources in the education industry, Democratic Rep. Kendrick Meek, who’s making a run for U.S. Senate, also wrote Duncan’s office objecting to the regulations.
With so many low-income students defaulting on their loans and sinking into crushing debt, why haven’t Florida Democrats taken this opportunity criticize the for-profit industry’s predatory behavior?
An investigation conducted by ProPublica found that many of the Democratic opponents of the Education Department’s new regulations are the recipients of campaign funds and intense lobbying by the for-profit sector.
“Collectively, members who signed the letters received nearly $94,000 from the for-profit college sector between the beginning of 2010 and late July, according to the most recent available campaign finance data reviewed by ProPublica. Most of the donations flowed after March 22 — the date the first letter was written to Duncan,” reports ProPublica.
“The for-profit industry has not been shy about using its financial weight to lobby for what it wants. The founder of one for-profit chain, Arthur Keiser, has become a major national donor, according to campaign finance records. Keiser is also the current chairman of the Career College Association.”
Keiser, whose company is based in Florida, has contributed $31,600 to members of Congress — many of them from Florida — who signed letters to Duncan.
While the Education Department under Duncan was likely prepared for a war with the for-profit industry — it’s a multi-billion dollar business, after all — it didn’t likely expect to go to war with its own party.